Control What You Can Control

I do my best not to worry about issues I cannot control or affect.  This approach comes originally from my faith.  So, how does this philosophy guide how I run my firm?

We emphasize being responsive, forthright, and transparent in all communication.  When we consider bringing on a new client, we use our proprietary “SmartFit Analysis” to assess their current financial situation.  This analyzes their current allocation, fees and expenses, tax efficiency, estate planning and other facts specific to each prospective client.  This is a very fact-based evaluation based on historical facts.  Therefore, control is not an issue because the past is the past.

If we believe we can provide exceptional value, then we invite the prospective client to move forward with our proprietary planning process; “Discovery Process”.  Our Discovery Process is typically 4-6 independent visits taking a deeper dive into the issues uncovered in the SmartFit Analysis, significant questioning and listening, then explore and educate on a variety of strategies that may improve the client’s financial, tax, and estate planning outcomes.

This is what we control, our process, communication, and how we treat people with respect and empathy.  We cannot control the stock market.  No person or firm can see the future and control the stock market.  A client’s rate of return cannot be controlled if they choose to take investment risk.  A client’s rate of return is primarily driven by their risk tolerance and asset allocation that aligns with their risk tolerance.

Let’s look at four hypothetical clients in the recent past.  All four clients received a SmartFit analysis and worked with us through our thorough Discovery Process.  We don’t cut corners or invite clients into our firm until we and the client are both confident we would have a mutually beneficial partnership.  Now, what if the four clients opened their investment accounts with PCA on the following days.

Client A: February 9, 2020: The S&P 500 closed at 3318 and five weeks later the S&P closed at 2304 on March 16th.  A 30.56% decline!

Client B: March 16, 2020: The S&P 500 closed at 2304 and less than six months later the S&P closed at 3508 on August 24th.  A 52.22% increase!

Client C: December 26, 2021: The S&P 500 closed at 4733 and less than six months later the S&P closed at 3674 on June 13, 2022.  A 22.37% decline!

Client D: October 10, 2022: The S&P 500 closed at 3583 and the following summer the S&P closed at 4582 on July 24, 2023.  A 27.88% increase!

Same PCA team and process, yet how might these four hypothetical clients be feeling and thinking shortly after joining our firm?  Clients B and D may think we are geniuses, while clients A and C think we are incompetant.  This is what happens when you run a planning firm in the financial industry.  Clients join our firm for varied reasons but they certainly hope their circumstances will improve.  However, the stock market cannot be controlled and the shorter the time frame, the more random the outcomes.

In my view, focusing exclusively on historical rate of return, especially in the short term (less than five years) is not helpful to any client.  As a Fiduciary, my focus is on the future.  Discussing why a portfolio has a positive or negative rate of return over a time period can be helpful in understanding more about investing.  I use the S&P 500 in the example above which is 100% domestic, large cap stocks.  The S&P 500 is not a diversified portfolio and therefore, will likely perform very differently than your investment accounts.

You control how much of your money you choose to take investment risk with.  You do not, and I do not, control how investments perform.

Disclosures: The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Past performance does not guarantee future results.