What if I am wrong? DIY wills gone wrong

Sean and Ben often ask themselves if they're actually helping their clients, or if they may have made a mistake. Ben had a client who was certain he could handle his estate planning needs on his own, without Ben. Spoiler alert: He didn't. 

Transcript

Sean 0:03

All right. So today we're going to talk about one of the questions we ask ourselves often as we're doing financial planning or any decision making for ourselves or helping our clients. So Ben, you had a good story that related to this question.

Ben 0:17

Yeah. So good to be here with you, Sean. And uh I know crazy story from today, actually, that I'm just blown away by. So to kind of introduce the topic, this is an account, really good size account, really um good client until he passed away two years ago. And he was an attorney and he made a big deal about being an attorney. And so he he felt like he got his estate planning done, you know, kind of just right. So I'll handle that. Thank you very much. I don't need your help with it. And it turns out two years later, as we're trying to get the estate settled, and the the two-year delay had nothing to do with us, but um trying to get everything settled out and the estate planning isn't done just right. So you know, there's a thought leader in our industry that says, I may be wrong, but I'm never in doubt. And I that's how I think about this guy, where it's like, you know, he he certainly had strong opinions about a lot of things, but you have to ask yourself, what if I'm wrong? So I think that uh introduced the topic well.

Sean 1:31

Yeah, I agree. And in this case, um, if you're not getting things checked or reviewed by another professional who specializes in the uh discipline that you're talking about, just like um, you know, when you need a knee surgeon, if you go to a heart surgeon, they may be really good at surgery, but it's the wrong kind, right? Um, you don't want a heart surgeon working on your knee and vice versa. Um, you worked in an ER. I don't know if is that right? That that holds up, doesn't it? Yeah, okay.

Ben 2:00

That definitely holds up. Certainly, you do not want to go to a pediatric specialist if you're having a heart attack. So it's like people stay in their lane. I try to stay in my lane, I know you do too. I try to under promise over deliver. Certainly, not every attorney knows any, you know, um knows a lot about estate planning. Um versus estate planning versus criminal versus uh contracts, you know, first like you know, coming to me for student loan help. Like that's not my niche. I don't know. Yeah.

Sean 2:35

So, you know, there's in the financial arena and in helping people with their their uh financial planning, retirement planning, investment planning, getting the arms around the rest of the the things that we try to touch on insurance planning, uh state planning, uh long-term care, risk assessments, etc. Yeah, what if I'm wrong? What are the stakes? Is a great question. Uh sometimes um if you're gambling on a stock and you know, which we don't really do, but someone has a wild hair of an idea and they want to go on their play account, usually somewhere else, but they want to spend, you know, if they have a multi-million dollar net worth and they want to spend a thousand dollars on a flyer of a stock just for the heck of it, and they're wrong, well, the worst that can happen is they lose a thousand dollars, which in this situation it's probably okay. Maybe it's worth a thousand dollars of entertainment, just like a lottery ticket or or going to a casino or anywhere else where you you're probably risking all your money, all the money that's exposed. But so how much you put at risk is is a big part of that question. Um, but if it's an irrevocable decision like uh how your beneficiaries are named or how your estate plan, and we use that term loosely in this case because um he wasn't up for much help and it wasn't a real thorough plan. Um so what's happened because of that, because of him being wrong? Can you give a sense of uh what the what what's that what that's cost?

Ben 4:08

Well, he didn't list the the transfer on death, the beneficiary was not listed correctly. There is no transfer on death beneficiary, and so legally we're not sure exactly what's gonna happen, but it's holding up money moving. So, you know, uh I think his wishes may not be carried out exactly how he wanted. And so, you know, it would have been a whole lot better if we had been kind of brought into the the estate plan to kind of consult and help and say, okay, what is this entity? What is that entity? But you know, he didn't do it. And so I think um when you're going through matters that that involve your your legacy, it really helps to get it right. You got to get it right.

Sean 4:55

Yep. There's only there's only you gotta get it right the first time because there's only a first time in the it doesn't matter until it matters. Yep. I'm all for uh being able to update beneficiaries and and make changes as as time evolves, but um sort of that just in time um planning because especially you know most people at most ages assume they have time to update things. Um, and I've done I've been guilty of that personally so far. I have not been wrong that I have had time because I'm still here, but if I had, you know, now I feel like I'm in a good spot, got my red folder here at the at the office. Um, so if my wife Erica knows that to call Ben or to find the red folder, Ben knows to find the red folder. So what if I had been wrong? It could have been it could have been bad. And so for anyone that who's got dependence, for example, in the life insurance and state planning situation, if you're wrong and something happens, um, and we read about this in the news all the time with uh famous people uh that wealthy people that leave kind of a mess of of things because they haven't planned for it. Um so that's an important thing, and and I know there's some peace of mind to get that done, that have it squared away and have it.

Ben 6:10

Well, I mean getting getting back to the investment piece of it, you know, as you were talking about having a play account, which I think is a great idea to have a play account where you can kind of sort of scratch that itch of maybe wanting to gamble or roll the dice a little bit. I think men do that in my experience. Men do that more than women. Certainly it's a personality type that I see where men are betting on football and betting and betting on anything. Uh in golf. Golf. Um I I got a question the other day about water stocks. Ben, what's your take on water stocks? I was like, I don't even know what the guy was talking about. Now, in a in a conversation later, it was it became more apparent and it kind of made more sense. But I'm like, regional water stocks? I don't know what you're talking about. Great guy, I want to help him. I think you know, if he wants to play with those, or if he wants to buy water stocks with the majority of his account, that's fine. It's my job to tell him you're making a huge gamble with this, and this is not my recommendation, right? So um, yeah, and it just happens a lot with individual stocks, and I can't hammer this point home enough. Like, you know, there are so many stocks that look like great buys at the time. Like it's going up, it's going up, it's gonna continue going up. Well, yeah, that doesn't always work out.

Sean 7:46

Um I saw a truth the other day that Disney has underperformed the market averages by over the last 30 years now from the recent uh relative performance. Phenomenal company makes billions and billions of dollars, very popular. But you know, just because you're it's a very successful business doesn't mean it's going to be a better than average investment over long periods of time. So even if you get it right of the durability of a franchise and a brand doesn't necessarily mean it's it's better than average uh over the very long term, which is kind of counterintuitive, but a lot of it goes to expectations and what are, you know, if everyone knows it's a great company, then you sort of you pay for that. If if it's a someone that's in the dumps and a turnaround story, uh if you buy Apple when Steve Jobs was coming back in 1997, um then maybe you can you can have that amazingly crazy outperformance that happened um when he came back. But if everyone knows it's a great company making lots of money, that's what we call priced in. And then and what happens if you're wrong, then it's gonna be a great investment. Well, it can lag, even though the company's doing doing well from a business standpoint.

Ben 9:00

And to your point, the the more you minimize that, you know, the what if I'm wrong question, if you ask yourself that, minimize the downside. If you're if you're fine with however much you're gonna lose, that that's good. But minimize that the what if I'm wrong question doesn't matter as much. Certainly uh trying to factor in how much you're willing to risk is important, right?

Sean 9:25

And in broad decision making, my kids are 16 and 12, so they love to hear me in the car espousing my opinions and knowledge and teaching them concepts to use. This is a great one. So uh 16-year-old's driving, right? So if she is going to make a left turn on a somewhat busy road and she's learning to gauge those distances, and if she makes the turn and it's fine, great. But if she sees a car coming, if she's not sure about the distance and how long it'll take her, if she's wrong, that could be really, really bad, right? So um any kind of decision where it's a a significant loss, uh, or if nothing else, even if it's a minor accident in that case, a significant inconvenience and and still you know probably shakes her confidence in driving, um, you know, better safe than sorry and defensive driving is probably the answer there. Um if the answer is uh you know you are gonna, you know, if the if you're wrong and you get a sprinkler, spray sprays water on you as a drive by it, big deal. Or you uh there's no one else around and you roll a stop sign and you get a ticket. Well, that's not good either, but it's it's not as permanent of a potentially permanent damage, right? So it's hard to make those calculations when you're 16, but that's the kind of thing I'm trying to get her to think through. Uh and and my 12-year-old as they are, you know, eventually gonna make their own decisions. Uh what about market trying to time the markets? I think that's another time this really rears its head in terms of what's the market gonna do in the next three, six, twelve, eighteen, three hundred and sixty-two months. We get that a lot, right?

Ben 11:05

Yeah, it's really dangerous to try to go down that road. And you know, we sometimes try to make some we don't always drive with kind of looking in the rearview mirror, but sometimes we try to do that a little bit because you can identify trends. I'll tell you, it's very dangerous. I'll give you a real world example. So back when uh the 2020 election was going on, Trump loses. In January, the Georgia runoff elections were happening and happening in the Senate. And so uh the the presidency goes Democrat, uh the Congress goes Democrat, or um yeah, Congress goes Democrat. So they're trying to to hash out the Senate to see if that's also the third going to be the third branch of government that goes Democratic uh versus Republican. And it seemed like, or at least from the commentary at the time, and I I don't always try to you know read what's going on, but at the time I'm interested in politics, as you know. Uh I lean more conservative, I'll just say it. And so I was thinking at the time, if the Senate goes Democrat, then the market's gonna react negatively to that. Now, there's a lot of assumptions that go into that, a lot of biases probably on my part that go into that. But my thought process at the time was we need divided government at this point, and so you know, if the third branch goes democratic, the market is going to tank. They are not going to like that. And that seemed to be what the commentators at the time were saying, too. Well, what happened in 2021, 2021? What happened with the market then?

Sean 12:55

Looks like the SP 500 was up about 27, 29, somewhere in that neighborhood.

Ben 13:01

Now, I knew because, probably because of you asking this question, because this is this is a Sean question to ask you, what if I'm wrong? Uh I didn't make moves based on that. That was just my private thoughts. That I thought, boy, this this could get really ugly in 2021, especially through the pandemic and the mask mandates and all the stuff that was going on. I just thought, this is bad for business, this is bad for education, this is bad. And so I thought markets are gonna tank. And I would have been way wrong if I'd been making moves in client accounts with that. So, you know, a good reminder for me all the time that I was wrong.

Sean 13:44

Yeah, that's one thing that I probably should hammer on since we talked about that in previous episodes. You know, just when we when we kind of uh uh mock the failure of other predictions, it's not because we think we can predict well. It's that's right, we're trying not to predict at all, especially in relatively short windows of time. We hope over the over the longer periods of time, five, seven, 10, 15, 30 years, that the the economic growth in the country and the world will drive the value of our investments higher, right? Or we wouldn't make them. We probably wouldn't be in this profession if we didn't believe in that. But in the short term, and we can define that in many different ways, but really anytime under five years, it's hard to predict. Even in five years, it's hard to predict, but it's hard to so we're not saying that that we can predict better, we're saying it's it's kind of a loser's game. Um it's just easy to see when people try it, and they apparently this is this is I guess a follow-on is if you watch CNBC or other financial uh media and you say, okay, if these people making the predictions, if they ask themselves, what if I'm wrong? And as we've demonstrated, we can demonstrate all day long, they're wrong a lot. What happens? Well, they get asked back to predict more stuff. So nothing happens, that's why they keep doing it because they're still asked to go on TV. If you get it right one time, you're held up as this example for this one time. Um, I might have used this example before, but my my young my son, when he was nine or so, new team, little guy, likes to shoot from way too far, hits a three-pointer in the first game early in the game. And I thought, that's not good because now he thinks he can, you know, he's kind of lucky. It's a good shot, but you know, lucky. And so later in that game, his coach is like, all right, no more threes, no more threes. You're fooled by the randomness of it going in.

Ben 15:34

So um and advisors are too. We know advisors from different sides of the political aisle, yeah. That basically come, they converge at the same thought process of I'm going to be out of the market. One that's been out of the market since 2019 mostly, another that you know really thought at the beginning of 2023 that the US dollar was going to collapse. And so, you know, both way wrong at this point on these has been spectacularly wrong this year.

Sean 16:07

Different, precisely polar opposite reasons or or thinking in terms of what they think is the right thing to do from a government standpoint. It's it's fascinating. It is fascinating. Um, and another time that rose its head very closely as the COVID uh was in its scariest time in the beginning when we didn't know what was gonna happen and we're having these shutdowns, and there's predictions of widespread and understandable predictions of depression, not just recession, depression. Look at all this unemployment, look at it's gonna be terrible, worse than the Great Depression. And again, it's fairly early in the history of the aftermath because again, we don't know the future, but so far, three and a half years into this whole thing, it doesn't appear we're headed for a Great Depression anytime soon, right? Just try to try to get on an airplane, they're full, go to the movie theater, go play golf. People are playing all the golf. So um making predictions is hard and being wrong about your long-term planning when it comes to like in your investments. If you if you say, I need to get out, and you say, What if I'm wrong? And the answer is, well, I'll get back in in uh a month or three months, you're probably gonna be okay. But if you're doing that and you stick to it's gonna tank, it's gonna tank, and you're not invested for the long run. What's what can go wrong is if you're wrong, is you you don't have the growth you need to be able to retire comfortably. And that's that's a pretty significant risk to consider.

Ben 17:36

Right. So the biggest risk to retirees is running out of money. They they think that the biggest risk is the market. It's actually not, it's running out of money. And uh I can't remember what the actual data says, but you could go back, I could go back and Google it about something to the effect of the market gains of each year are or losses are kind of like summed up in like maybe a week or two, like the you know, the largest market gains of that year, like in seven days or something. And so if you're out during that time, boy, you you just missed out on the majority of gains for the for the whole year. Yeah.

Sean 18:21

There are some interesting data uh charts that'll say that if you miss the best 10 days over you know, this 20 years. In fact, I think I was looking at one of those charts this morning, and all the games go away. Now, the the the catch to that chart is if you're out for the worst days, the best days, you're probably out for some of the worst because they tend to be clustered together in this last the 20-year period I was looking at, it was you know 2008 in the in the crisis 20 around COVID, 20 early 2020. So there was a lot of so it's it's a little bit misleading, but the point is um a lot of times the best return has come right after the worst. So at the bottom in in March of 2020, phenomenal rebound. Coincidentally, about in March of 2020, March 23rd, rebound, 75% gain in the first 12 months or so after from the worst point.

Ben 19:12

So um it's very dangerous to try and yeah, you can't wait on that you know, once in a decade collapse either, because think about waiting on the next one. Like if you'd kind of missed out in 2010 on that rebound, how long did it take to have another one where it's like you could reinvest at a market low? I guess there was some stuff going on in what 2015. The market also kind of tanked a little bit in 2018, but boy, I feel like 2020 was the next big one for you to kind of jump in at uh once in a generation or once in a decade price level. So, but but that is just incredibly difficult to do it because specifically, whenever you're you're thinking, all right, I'm gonna try to get in at this once in a decade level, that's when it's the scariest, and you're thinking it's not over.

Sean 20:06

Yeah.

Ben 20:07

Because you you never think it's over as it's going down. Very difficult to find it.

Sean 20:12

You know, we won't belabor this too much, but you know, and what we do with clients, a lot of what we do is is minimizing the the regret on that question. What if I'm wrong? So in the simplistic conservative and growth parts of the portfolio, we might want to have if we had 50-50, which would be a very simplistic uh model. But you know, if things go up, you're happy you have the growth portion. If things go down, you're you're happy you have the conservative portion. And so it helps you stay the course because you have a sense of what the, you know, what each piece of the plan does. And as you approach retirement, maybe your conservative stable bucket is there for income in the short run. Um and that way you know, okay, that's what you're going to lean on early on in retirement. And the the growth bucket is for even if you're 64 or 67 and you're planning for a 15, 20, 25 year time horizon for your lifespan, you need long-term money. And so um, a lot of what we do is helping put those plans in place so that you don't feel like you're just guessing on everything. And then if not, not if you're wrong, when you're wrong about something, you don't have this massive regret because then it's too easy to to uh jerk the steering wheel of the of the investment plan all over the map, and you know that's not good.

Ben 21:27

I I don't think that you can overemphasize that enough, the point of the bucket, you know, because I I love using the bucket strategy because for this thing, um engineers that I've been working with lately seem to think that you're in or you're out. It's like this binary choice or a fool's choice of like we're all in on the market or we're all out. And it's like it it couldn't be further from the truth because you have this short term bucket. And then you have the longer term. You also have an intermediate term the way I do it. But that long-term bucket is not everything, it's not all of your net worth. It's a slice, and it's gonna fluctuate up and down, but there's gotta be a piece of that, like you say, that you ride out for the long term, and that bucket helps you kind of beat inflation, and that's what we're trying to do. Um, I like what you had to say there about the the buckets.

Sean 22:25

Thanks. Yeah, and a lot of the in you know, the risk management stuff we do with in different life insurance, long-term care insurance, um, getting the beneficiaries in place just in case something happens to you, your spouse, uh having contingent beneficiaries, getting the right insurance. So if you think you have time before you would need long-term care uh or an event that would cause you to not be uh qualified to get the insurance, you know, you're always a lot of what we do is an art, it's not a science. We don't know when you'll you won't qualify for that life insurance, what age, you know, depending on your health. Uh, we don't know when you won't be able to get that long-term care policy. So, you know, we help people figure out what do we work on now. Um again, we're gonna you're making educated guesses at all times, but um, and a lot of that's personal preference. I think I've told this story before, but my wife is thrilled to have long-term care insurance. I don't like paying for it because I think it should be a ways off based on math before we need it. But when is that time come? I don't know. And it gets expensive as you get older, more expensive. So, what if I'm wrong and something happens? I don't want to answer to her that, oh, whoops, I was wrong. So I we we got it taken care of, and therefore the what if I'm wrong is we're good. I can uh take credit for getting the insurance done.

Ben 23:45

Yeah, so when it comes to to your wife, very high. So you'd put that if you're trying to say what if I'm wrong, and the the the um consequences of being wrong, that you put that in the high bucket.

Sean 23:58

If yeah, the the payoff is for being right is zero, essentially. I save a few dollars, but you know, she I she's not gonna be that excited about it. And and the downside are are quite significant, right? So we all have relationships where we want to hold on to them, we want to keep them keep them intact, and so we do things to to manage risk.

Ben 24:19

And again, that's what happy wife, happy life, man.

Sean 24:23

23 years in counting, so uh so far, so good. Uh and that's again, we'll make when we make recommendations to clients, you know, not not everyone takes every recommendation. Um, you know, we we enjoy working with people who who know we're we're doing our best to dig in and and get to understand your situation as well as we can uh and make our what I we think are the best recommendations, but um you know we we're not here to force people to do anything either.

Ben 24:51

So and we're not here to have a crystal ball and and time the market, and a lot of people think we we should or could, or we're you know, sitting at you know, three screens here just watching the market movements and buying and selling.

Sean 25:04

It's like that's not what we do, but no, we we understand you know broad markets and and certainly are very locked into what's happening, but um a lot of it ends up being noise, and that's where the I think the professionalism and what a good advisor does uh comes in handy to to be in that noise and hopefully not be uh thrown off course by it, helping you achieve your goals um or at least increasing the odds as much as possible. Um so I think people will enjoy this, but what if I'm wrong? Well, oh well, we we enjoyed talking about this stuff, so no real downside, right?

Ben 25:41

Yeah, that's right. All right, good talking with you, man. Thanks.

Sean 25:44

Thanks. Until next time. See ya.