When my Oma and Opa Mueller moved from their orchard into town, they bought a new house with central air-conditioning, and they very much looked forward to the cool comfort in the peaks of the Okanagan summer. But the system was finicky. Always spiking from too hot to too cold, the house would never seem to settle into a constant temperature. In an effort to keep the house and her family feeling comfortable, Oma was relentless in her adjustments to the temperature setting. When it was too hot, she would turn the thermostat down, pumping in the AC so they could escape the sweltering heat. After not very long the house would turn cold, so again she would make her journey down the hallway, turning the AC off and turning the heat up, lest the next ice age don.
Opa is a very agreeable man, and was an electrician by trade. He always supported Oma whenever she wanted to change the temperature in the house. Oma, in return, appreciated the full control over the thermostat settings. They lived well enough this way, but I think it’s mostly because Opa never told her the thermostat was a decoy. You see, after they moved in, Opa installed a new thermostat in the garage, and kept it programed to a consistent room temperature.
It can be hard to hold your ground and not react when faced with discomfort. Harder still is making decisions that conflict with the environment around you. But the best time of year to buy snow pants is the spring, and the best time for flip-flops is the fall. Often, it’s the contrarian processes we build into our lives that create the most emotional stability, and make the most financial sense.
A thermometer is a great and valuable tool. It tells you a snapshot of the most immediate past, and that can give you great insight into the present moment; a foundation on which to build. It’s currently 18 degrees inside. Are you warm or are you cold? How would you be at 10? What about at 25? Knowing your range of temperature tolerance is key to understanding how you’ll react as the temperature changes, and what you can do to maintain your comfort during this time.
But thermometers have a significant flaw. They have a time delay during sudden temperature changes. One of the first places I worked was at the bakery at the co-op in Stony Plain. If the general temperature of the store was 18 degrees, and I stepped into a walk-in freezer, my thermometer would still show 18 degrees. And then 17. And then 16. And then 15. If I had stepped out of the freezer, frozen dough in hand, and looked down at my thermometer, it would still be reading 15 or 16 degrees. That’s too cold for me, but that doesn’t mean I should be running to crank up the heat. Thermometers take a while to catch up, and they’ll still tell you that it’s cold, even if you’re not in the freezer anymore.
A programmable thermostat can help you take the emotions out of your temperature decisions. Constantly rebalancing to meet the goals that have been programmed into them, the thermostat will strive to build to a level of comfort in anticipation of when you need it. The days of running to the register vents and building a heat-tent out of your nightgown are over. Our house is cool for sleeping by 10:00PM, but warm for waking by 6:00AM. Our thermostat builds towards what we need for the time that we need it, removing the emotional reactions that are driven by discomfort.
So now this is the part of the column where I uncover the hidden analogy – it’s really about financial planning (shocked gasps!) and building in goals-based strategies. The thermometer is the markets; the programmable thermostat is your advisor.
The financial industry has loads of studies designed to quantify the value of advice that a goals-based advisor can bring. Some of these common and often-touted statistics say that, on average, advised investors have more growth-oriented investments (mutual funds and stocks) than those without advice (71% to 51%). This could be one of the reasons that advised investors demonstrate 3% higher investment returns, net of fees, than non-advised counterparts, or why they, on average, have 2.7 times as much financial wealth after 15 years of advice than their non-advised counterparts.
More likely, however, I think it’s because of the softer skills. Not the help with the good decision making, but more importantly help with bad-decision stopping. The assets and wealth statistics are the readings of a thermometer. Stability and confidence statistics are the work of a good thermostat. These values relate directly to more thoughtful actions, which have positive tangible consequences.
Imagine relief from knowing that you’ll be warm again soon. Imagine the security of your spring-purchased snowsuit well before autumn frost laces the ground. Imagine being at peace when you go to bed at night, assured that in the morning a cool rested sleep will give way to a warm floor for your bare toes. No more winter nightgown register-tents, no more summer basement campouts. The true value of advice comes from providing stability and predictability to your world, increasing the value of your time, and the quality of life that you can give back to the things that you care the very most about.
If you are looking for a written financial plan that focuses on your comfort (stable income) instead of the temperature (investment assets), or for more information on fee-based financial planning for a transparent and sustainable relationship, speak with a Certified Financial Planner today.
Written by Meagan S. Balaneski, CFP, R.F.P CERTIFIED FINANCIAL PLANNER®
Advantage Insurance & Investment Advisors
Manulife Funds Representative
Manulife Securities Incorporated
The opinions expressed are those of Meagan S. Balaneski and may not necessarily reflect the views of Manulife Securities Investment Services Inc.