Maybe it was my recent writing about the late Dick Wagner (the driving force behind the notion that financial planners need to understand their clients’ relationship with money) that renewed my interest in the more philosophical aspects of financial advice. Or perhaps it was citing Jim Schwartz’s seminal 1992 financial planning book “Enough” in my May 3 blog, “Strike Three: Is Index Investing Really a Swing and a Miss?”
But regardless of my motivation, I read with great interest Schwartz’s latest email blast based on a December 1999 piece he wrote about the dark side of “Enough,” titled “The More Matrix: Controlling More-Ons.” As the title suggests, this missive is about the human craving for “more” and why financial advisors need both to understand it and to help their clients overcome it.
“The fear of extinction feeds the overriding cultural matrix of the ‘More Messiah’ — regardless of communist, capitalist or socialist orientations,” Schwartz wrote. “As Dennis Prager once stated: ‘The first word out of a baby’s mouth is ‘mama’ (love), the second word is ‘dada’ (security), and every other word thereafter [is about] more.”
As the title implies, Schwartz’s first book is about the need for financial planners to help their clients determine how much “enough” money in their lives would be so that together, they can create a financial plan to get there. It was Schwartz’s book that led me to realize that those still popular “risk tolerance” questionnaires are asking exactly the wrong questions. The key question is not how much risk clients can bear, but rather, how much risk they need to take to reach their goals — to get enough.
It is the force of the delusion of “more” that drives us to ask the first question — and to take as much risk as possible. Therefore, it follows that clients need financial advisors not only to help them determine how much “enough” will be, but also to overcome their instinctive drive for “more.”