Mary Lago, CFP®, CTFA
Chief Wealth Strategist
Principal
We can frame risks through many lenses, but the most common interpretations relate to insurance to mitigate the cost of low frequency, high severity events and managing the downside risk of investment assets. Most of us insure against losses such as car accidents, home damage, liability risks and unexpected death. A more progressive view of portfolio management frames risk as the likelihood of not being able to achieve your financial goals.
The advantage of this more progressive view is the recognition that accepting a tolerable level of risk may significantly improve the likelihood of achieving highly critical goals as time progresses. Fiduciary law has evolved dramatically over the last 30 years in recognition of Modern Portfolio Theory driving total return investing. These insurance and portfolio risks are well recognized by both clients and advisers.
Our experience suggests that there is a risk that is both high frequency and high severity that often goes unrecognized. This is the risk of misaligning our financial life with our deepest values. Are you underliving, undergiving or misaligning your financial future? What would you regret if you died tomorrow? These are risks worth managing.
Underliving: Ask yourself, what is your vision of your best life? What do you envy when you hear others are doing? You may say with a laugh, I would like to be on a beach in Hawaii, spend more time with the grandkids, take my adult children to Africa, retire, remodel, etc., but are you focused on achieving your dearest goals? Many have the financial ability to live their vision of their best life if they pause, evaluate and plan.
Under-giving: Do you watch your community or your family struggle and think to yourself that the resources they’ll receive after you die will improve their circumstances? Have you considered gifting more now? When it comes to philanthropy, tax-wise giving can greatly reduce the financial cost, often to less than thirty cents on the dollar (depending on applicable tax rates), and structuring your gift for current impact, mission impact or an endowment into perpetuity can be deeply satisfying. Family giving requires thoughtful planning in terms of the life impact and motivations. Warren Buffett has shared that we often give to our children to create independence and gratitude, but careless giving can create dependence and resentment. Thoughtful family giving can allow you the pleasure of watching your family enjoy the bounty of your stewardship, increase the skills of future heirs and mitigate taxes.
Misaligning: Are you confident that all your financial accounts and estate planning documents are in order? As we begin relationships with clients or review their details, it is not uncommon for us to hear who their successor trustee will be, how their assets will be split or their understanding of the tax structure, only to see something quite different once we read the documents. Not only is it worth reviewing your documents to ensure things are aligned with your understanding, but it is worth asking yourself if any evolution is appropriate. Plans have stages and while some plans are designed to function differently during different phases (e.g., while our heirs are minors versus adults), our perspective can also change and so do the available financial structures.
One of the most rewarding aspects of our work as investment advisers is to help families align their lifestyle, giving and legacy with their values. Few of us could quickly recite the vision of our perfect life or the exact impact we want our wealth to have on our community and family now or our precise legacy. Given the frequency of misalignment and magnitude of the impact, we encourage you to reflect on whether your financial life is fully aligned to your values. We are here to help you evaluate your financial capacity, structure smart giving and facilitate your legacy.
Disclosures
The views expressed represent the opinion of Ferguson Wellman. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Statements of future expectations, estimates, projections and other forward-looking statements are based on available information and Ferguson Wellman’s views as of the time of these statements. Past performance may not be indicative of future results. Ferguson Wellman, Octavia Group and West Bearing do not provide tax, legal, insurance or medical advice. This material has been prepared for general educational purposes only and not as a substitute for qualified counsel who can determine how this information applies to you. We believe the information provided is from reliable sources but should not be assumed accurate or complete.
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