Not Another Weather Forecast
In early August I flew to San Diego for Focus, LPL's annual conference, for the first time. I had heard about it for years, and I went in genuinely unsure what to expect from one of the largest gatherings of financial advisors in the country.
The Culture Question
What struck me first was how available everyone was. The executives were not on a stage and then gone. They were in the hallways between sessions, standing in the same coffee line as everyone else, engaging with advisors from all over the country. Home office staff worked the resource booths all day and were still there after the sessions let out, still answering questions with surprising enthusiasm.
I showed up with a list of feedback and questions. Many times it feels like feedback earns a polite nod and goes nowhere. That was not my experience at Focus. People asked me follow-up questions, they wanted the specifics, the actual workflow, the exact place it broke down. More than one of them made notes of our conversation to follow up after the conference. I was pleasantly surprised by the follow-through and care that seemed universal.
That matters to us for a practical reason. Legacy Capital is independent, and the decisions about how we serve you are ours to make. The platform underneath still has to work, and the people behind it still have to pick up the phone.
A Midwesterner thinks about the weather
Between sessions I would step out toward the harbor. Upper seventies, dry, clear, every single day. Four days in San Diego and not once did I have to think about the weather, a strange feeling for a Minnesota native.
On the flight home I thought of the weather and averages and of course found a way to connect it to investing.
Chicago and Seattle have almost the same annual average temperature. Chicago comes in around 51 degrees. Seattle comes in around 53. Two degrees apart. If the average told you what you needed to know, you would pack the same suitcase for both.
You would be wrong by roughly one winter coat.
Chicago's coldest month averages 25 degrees and its warmest averages 75. That is a fifty degree spread. Seattle's coldest month averages 42 and its warmest averages 68, a spread of about 26. Chicago's year is roughly twice as wide. Chicago also drops below zero and climbs past 95 in an ordinary year. Seattle averages about four days in the nineties and about one day at or below 20.
Similar average, completely different year.
Planning for the seasons
The same thing is true of a portfolio, and it gets considerably more true the day you stop adding money and start taking it out.
While you are working and contributing, a rough stretch is uncomfortable, but it is also a chance to buy at lower prices, and time does a lot of the repair work for you. Once you are drawing income, the order of events starts to matter on its own. Money leaving the account during a decline is doing something different than the same money leaving during a rise. Two paths that arrive at a similar average can feel nothing alike to the person living on them.
We cannot know the order in advance. Nobody can. What we can do is build a plan that does not depend on getting a favorable one. That is what the unglamorous conversations are really about.
In practice that turns into a handful of specific habits. We hold a known amount in cash and short-term reserves, sized to the spending you have planned, so a difficult stretch does not have to force a sale at the worst possible moment. We decide ahead of time which account a withdrawal comes from in a strong year and which one it comes from in a weak year, rather than deciding it under pressure. We look for the places in a spending plan that can flex, because a small adjustment made early tends to do more work than a large one made late.
We also put the plan under stress on purpose. What happens if the hard years arrive in the first five instead of the last five? That is not a prediction, it is a stress test. If your plan holds up either way, it is doing its job. If it only works when the good years come first, that is worth finding out now, while there is still room to change something.
Then we revisit it. A plan built around one set of circumstances is not automatically the right plan after a health change, a move, a business sale, an inheritance, or a shift in what you want the money to do. The framework stays put. The inputs move, sometimes a lot.
None of this is about predicting the weather. It is about not being surprised by January.
While not exciting, it is the financial equivalent of owning a good coat.
With gratitude,
Austin Bock
Partner, Legacy Capital Wealth Management
651-982-1115 · legacycapitalwealth.com
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All investing involves risk including loss of principal. No strategy assures success or protects against loss. Economic forecasts set forth may not develop as predicted.
Securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC. Legacy Capital Wealth Management and LPL Financial are separate entities.