Written by Lee Stoerzinger, CFP®
We are living in a world of truly unprecedented change. The amount of information coming at us each day is said to be more than our ancestors received in their entire lives. Leisure television, the Internet, news, gaming, and social media all compete for our brain power. Every text, tweet and message cause us to take in information and decide whether it is something important to our lives, simple data consumption, or our new favorite pastime: “following” other people. One could say this all started when 24-hour news channels entered the scene and we could view the world at every moment. Today, we can see that virtually everything in our lives is becoming inner-connected and we are probably still in the early stages.
So here are some things to think about: How much of everything going on in the world at any given time do we need to know about? Does someone in Wisconsin need to know immediately when a farmer in China has a devasting accident? How much data can we efficiently take in daily? Are trivial things competing for items which we once considered important? Can our brains tell the difference? Sometimes I wonder what all of this is doing to our ability to decipher what’s truly valuable.
The reason the above paragraphs are important to money management and financial planning in general is that the fast-moving train of information lives in this world as well and cannot be separated from the rest of our lives. When we think about investing, it is stunning to see the sheer amount of data available. Which money manager is the best? How much are the fees? What are the returns of the past week? What is the Fed going to do next? And on and on. The question is, how much of this can be converted to knowledge and how much is noise? Therein lies the gap. While all these pieces can be important separately, they don’t become valuable until they are pieced together into a bigger and individual picture. The problem is that this is a very complex industry, yet it deals with something relevant to all of us; money. After all, it’s easier to talk with your neighbor about the stock market over a beer than it is to build and monitor a complex financial plan. But what matters more?
It is quite an exciting time to be alive this time in history, as we are moving toward many advancements. However, we feel that one of the most significant improvements we could make to the financial industry is to flip the way people receive information on its head. Instead of chasing returns, we need to learn more about how money works in our lives. While we focus on fees as primary importance, we need to help people see the damage poor behavior causes in our investment plans. And as we measure our retirement plans based on short-term information, it would be extremely helpful to understand how time is more important than timing. When we have a handle on these things, only then can we understand how managers, performance or current markets apply to our overall plan. It may not be as exciting or flashy as the latest news headlines, but we truly believe it is something we all need to know.