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The One Page Financial Plan Synopsis Part 5: It is Difficult, if Not Impossible, to do Alone

In late March Balentine’s Director of Communications had the privilege of speaking with Carl Richards about his latest book The One Page Financial Plan. Carl Richards is an author and artist, perhaps best known for his napkin sketches. Balentine has long been a fan of Carl Richards’ message on overcoming psychological factors which oftentimes cause a disparity between returns earned by actual investors versus market benchmarks.

The One Page Financial Plan then is a logical next step for Richards, as it effectively counsels readers on how to bridge that so-called “behavior gap”. Over the course of five Market Notebook entries, we explain what our top five takeaways were from The One Page Financial Plan and our subsequent conversation with Richards.

1. Values should dictate how you spend your money.

2.  Awareness is key.

3. Not all goals are attainable. 

4. No one can predict the future.

5.  It is difficult, if not impossible, to do it alone. 

For a long-term and scientific approach to investing, Richards suggests investors follow three rules:

  1. Diversify
  2. Keep costs low
  3. Understand the correlation between risk and reward.

However, this is all much more easily said than done. Richards’ initial claim to fame was on overcoming the so-called behavior gap – those psychological factors which cause a disparity between returns earned by actual investors versus market benchmarks. Put more simply by Warren Buffett, investors should be greedy when others are fearful and fearful when others are greedy. In practice, however, this is extremely difficult for investors to do on their own, as it goes against every natural human instinct. After all, doesn’t it make sense to buy more of what is doing well and sell what is doing poorly? Not in investing. As Richards said in the original Behavior Gap, “buy high…sell low…repeat until broke.”

To stay disciplined, Richards suggests that investors get help. Though there are those who can overcome their emotional blind spots, Richards said it is best to operate on the assumption that you cannot. An objective third party can reflect back on conversations and hold you accountable to those initial goals when you are tempted to go off course.

However, it is important to pick the right advisor for the job. The single most important discriminating factor is the standard of care to which an advisor is held. In an Atlanta Business Chronicle op-ed, Robert Balentine suggests following the money to help navigate the overwhelming and confusing financial landscape by asking three questions:

  1. Are you held to a fiduciary standard of care?
  2. Are you fee-only or do you receive any other forms of compensation, such as commissions?
  3. Will there be any proprietary products in my portfolio? If so, will those be disclosed to me prior to purchase?

These five takeaways are just some of the nuggets from Richards’ latest book. Like Balentine’s investment philosophy, The One Page Financial Plan is not full of flashy advice or get rich quick schemes. Instead it focuses on goals, discipline and a long-term time horizon. Though not the stuff of prime time television or front page headlines, both are designed to help investors reach their individual goals taking the least amount of risk required. Richards sums it nicely saying, “We don’t hear much about the science of investing because, well, it’s boring, but what [financial researchers] have discovered can be an excellent framework for building your unique investment portfolio.”

Disclosure: Balentine was given an advanced draft of The One Page Financial Plan in order to complete the interview with author Carl Richards; however, all opinions expressed are those of Balentine and its Director of Communications alone.

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