Rational Advisor

THINGS I’D SAY TO MY GRANDMOTHER ABOUT INVESTING

Sometimes we get caught up in trying to talk about wealth planning to the younger investors, to prepare them for their future. Well, probably of more concern is the senior investors, for whom the world has changed.

Their secure GICs are barely paying above inflation, stock markets have become too volatile, and the media puts more fright into them.

So, here’s where I decided to talk to my Grandmother about investing.

Now, imagine this conversation: “Grandma,” I began, “here is what you need to do. Take your entire portfolio of investments and put it into a simple portfolio of managed assets, they can be strategic or tactical. Make sure that all streams of income should be as tax effective as possible, so that you can maximize the government programs. Sell the shares that have poor fundamentals, or that are illiquid. Look at investment that will pay you income for the rest of your life. Make sure you have good estate planning. You’ll be better off – and we’ll be better off. What do you think?”

Her eyes would probably squint and her would head tilt as she looked at me wondering about the third head sprouting from my shoulder. “Who is this alien in front of me” she’d be thinking.

Here are some key points I’d have to realize when talking to her:

Number one, I must make sure that I am speaking in a language my grandmother understands. Number two, even worse, I need to take the time to ask her what she wanted. As a result of that, guess what she would do? Absolutely nothing!

And who suffers is not the grandmother as they live, but their children and grandchildren (me). For at the death of the senior we realize too late all the mistakes and the taxes paid that did not need to be paid.

I used to think that the CRA was the biggest villain when it comes to preserving and ultimately transferring wealth. But there is an even bigger villain than that: procrastination. Like gravity, it holds us to a course of action that is no good.
So if I could I would tell my grandmother? These five things.

First of all, I’d tell her, “Grandma, start today. Make a commitment to start today.” It is a decision. Simple, right? Simple yet very powerful. The Chinese have a proverb concerning this. Do you know when the best time to plant a tree is? Twenty years ago. The second best time is today. Today. So, I’d tell her to start today – break free, break loose. Make a commitment to start today, number one.

Number two, I’d tell her, “Hire a specialist – a wealth preservation specialist.” Going through the process of settling someone’s estate, you’ll realize the difference that a specialist can make.

Thirdly, I’ll tell her, “Write down what’s important to you.” In 1957, a study followed the Harvard graduating class for 20 years. At the end of 20 years, they found that three percent of the graduates had out-accumulated the other 97 percent combined. Do you know what the three percent had that the 97 percent didn’t? Written goals. There is power in writing down what you want.

I’d also tell her that you need someone to help you get clear about what you really want from your wealth. You know, it’s like a fish in water. They don’t really know they are in water. It’s hard to gain clarity about what you want without the aid of someone else, someone to facilitate the process for you. Someone neutral from your own emotions.

So start today; hire a specialist; write down what’s important to you.

Fourthly, I’d tell her is to get a written, integrated wealth plan. Some of the times that I would visit my grandmother, I would notice that she had a new medication. I would say, “Grandma, where did this come from?” She would reply, “Oh, a friend of mine recommended it;” or “A doctor told me to take this.”
So I would say, “Who is figuring out what happens when you take them all together?” That is how it is with most people’s wealth planning. Nobody is figuring out what happens when you look at everything together. Every planning technique, and there are a number of different techniques including doing nothing, has side effects. So you need a written integrated plan – to see the effects of your current plan on your lifestyle, your future independence, your taxes and your heirs.

I once asked a senior executive at a company if he had ever made a significant decision in business without a simulation of the impact of that technique on the future. He of course told me “No!” It’s the same thing with life, if you’ve never made a significant decision in business without a clear understanding of the future consequences, why would you make decisions about your personal wealth without the same scrutiny?

Get a written integrated plan before you make a decision.

Fifthly, I would tell her, “Just do it. Take action. Implement the recommended plan.” As good as a plan may be, if you don’t take action, nothing changes. You may know the unusual definition of insanity: doing the same thing you have always done and expecting different results.

So, I’d tell her those five things: Start today. Hire a specialist. Write down what is important to you. Get a written, integrated plan. And lastly, just do it.

Now, if you are like most people, you might be saying to yourself, “What should I do next?” Well, take my advice to my grandmother. Start today and hire a wealth preservation specialist. Hopefully, you can avoid the worst two words in our vocabulary,

“If only!”

If only I could have told my grandmother those five things; If only she would have listened.

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