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Values-Based Planning

Values-Based Planning

September 05, 2023

Over the summer, I started coursework for a new designation: Behavioral Financial Advisor (BFA). As technology continues to improve and aid our ability to help clients achieve their financial goals, I want to ensure I am growing and differentiating myself from other advisors and new technology.

Vanguard publishes a series called Advisor Alpha, which looks at the value that financial advisors provide to their clients. Advisor Alpha quantifies behavioral advice at a 1-2% per year value. Look at the chart below to see the difference in returns over 10 years and in a calendar year (2020). Many times this discrepancy is caused by emotional decisions based on fear or greed. Morgan Housel, author of The Psychology of Money (highly recommended), says, "Napoleon’s definition of a military genius was, 'The man who can do the average thing when all those around him are going crazy.' ”  Our goal as financial advisors is to help you stay on track amidst the noise around us.  The orange bar below is 2020.  Between the pandemic and one of the most contentious elections in recent memory, the S&P 500 increased by over 15%! The average investor underperformed in a cautious allocation by over 1.5% likely because emotions drove their thinking, not their values and their goals. 

Behavioral financial advice revolves around helping clients stay on track and helping them make decisions that align with their goals, not what's on the news that day. By understanding our clients' values we can work with them to make sure their decisions are congruent with what is most important to them. 

I can't define your values for you. What I can do is help you stay accountable to them once you have identified them. Here's a great, free online tool to identify your top 5 values. Brene Brown suggests narrowing your list down further to 2 or 3. My values are Faith, Family, and Intentionality. A former football coach of mine had a creed: faith, family, football. My mom loved that the coach understood some things are more important than football. I've adapted that and replaced football with intentionality (Except for Sundays between September and until the Packers are done playing for the season).  

In my next three blog posts, I will write about my values individually to show how these impact our lives, illustrating how I implement values-based planning in my own life.