July 2020

Have you ever participated in one of those “strategic” company planning sessions? You know, the one that asks where you want the company to be five, ten, and fifteen years into the future?

A senior executive at a Fortune 500 company recalled the effort to formulate a five-year plan for the business. When the plan was completed, the chief executive officer told the team, “If we execute this plan exactly as we have laid it out, in five years we will be out of business.”

Having deflated the egos of those who labored to produce a creative plan, the executive explained that the world and marketplace in five years would be totally different. If they did not change the plan as they went along, they would be left behind, becoming obsolete and less profitable.

We have seen examples in the stories of:

• Microsoft, one of the glowing success stories of the last century, now competing with Apple and Google. Personal computer sales, containing their software, were the historical mainstay of Microsoft, have been eroding for years as users switch to smartphones and tablets.  As a result of Microsoft’s newfound flexibility and focus on the cloud, they are back near the top of the software industry.
• Canada’s Research in Motion was a global leader in wireless innovation, having revolutionized the mobile phone industry with the introduction of the BlackBerry in 1999. The company, now known as BlackBerry, is mostly irrelevant as the iPhone became the “must-have” new device.
• Sears was an appliance sales leader with its Kenmore brand. For a myriad of reasons, Home Depot, Lowe’s, and a host of other competitors cut into Sears’ profits. Last year, Sears filed for Chapter 11 bankruptcy protection.

The message? Flexibility counts.  A plan, whether a business plan, career plan, a financial plan or a life transitions plan is a road map. Every road is subject to disruption, forks, detours, potential dead ends, and rabbit trails.  Yes, you want a concept of where you will be in one, five, ten years, and beyond, but any plan must be dynamic, fluid, and adaptable. You cannot set it and forget it.

A proper financial plan builds on the foundation of the present, but the framework should be adaptable, accounting for the dynamic nature of your life.  Any number of potential life changes or a simple re-assessment of your current situation can change the needs of your plan considerably at any time.  Some examples include:

• The purchase of a new home
• The addition of a child to the family
• A career change
• Healthcare or medical issues
• An unexpected inheritance
• Divorce
• Taking care of loved ones

Your plan should also be “stress-tested” to account for the unpredictable nature of the financial markets, which can throw a well-developed plan off course and require adjustments.  All plans should be stress-tested to account for:

• A low return scenario, which assumes, a more conservative rate of return than might be expected given the historical returns of stocks and bonds.
• A multitude of potential investment return scenarios that are above-average, below-average, and everything in between.
• “Sequence of returns” risk, or the risk that the market experiences a sharp decline at the inception of your retirement, which leads to the double-whammy of having to withdraw money as your portfolio declines in value.

Everyone, whether a breadwinner, a stay-at-home parent, a retiree, or an investor, should have a plan flexible enough to deal with personal setbacks, career reverses, and market disruptions because stuff happens. Flexibility in financial planning means having the ability to react as life events occur but also pro-actively re-assessing your plan each year as your life, the marketplace, or the world around you inevitably changes.  Change is the only constant, and your plan should be ready for it.

Important Disclosure Information

This report is provided as information and commentary on various topics. The views expressed in this report are as of the date of the report, and are subject to change based on market and other conditions. This report contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.

Please note that nothing in this report post should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax or legal advice. If you would like investment, accounting, tax or legal advice, you should consult with your own financial advisors, accountants, or attorneys regarding your individual circumstances and needs. Advice may only be provided by AtwoB after entering into an investment advisory or financial planning agreement. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment and/or planning advice from AtwoB.  If you are an AtwoB client, please remember to contact AtwoB, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. 

Past performance is not a guarantee of future returns. Investing involves risk and possible loss of principal capital.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by AtwoB, or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Historical performance results for investment indices and/or categories have been provided for general comparison purposes only, and generally do not reflect the deduction of any fees or expenses, transaction and/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results.  It should not be assumed that your account holdings correspond directly to any comparative indices and/or categories

AtwoB is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice.  A copy of the AtwoB's current written disclosure Brochure discussing our advisory services and fees continues to remain available upon request.