Monday, August 30, 2010

To Succeed, It Will Take A Whole New Mind

For the last several months, we have been exploring the economic and social changes of the early 21st century. You may recall my stating that those changes, unsettling as they are, may eventually lead to a better world.

Some readers take exception to that view, which they consider overly optimistic. But I firmly believe that nothing can reverse the course of history, so we might as well try to understand it and make the best of it.

One very helpful book in that endeavor is 
A Whole New Mind: Why Right-Brainers Will Rule the Future by Daniel F. Pink.

Pink says that, just as the Agricultural Age gave way to the Industrial Age, the current Information Age is, as we speak, giving way to the "Conceptual Age." This change is in large part due to the triple influences of Abundance (we're used to having virtually unlimited choices at our fingertips), Asia (the outsourcing of what Pink characterizes as "knowledge work"), and Automation (thousands of tasks once performed by humans can be performed better and cheaper by machines).

Those trends are combining to eliminate many jobs that were based on rational, analytical, and logical thinking skills -- thought processes controlled by the left side of the brain.

Pink postulates that, in order to succeed and prosper, American workers and entrepreneurs will need to master and incorporate the six right-brained senses of Design, Story, Symphony, Empathy, Play, and Meaning. These are all intuitive and emotional skills that, when combined with the still-important left-brained skills, will address the emerging needs of consumers (and in our case, clients) as we move steadily into the Conceptual Age.

More importantly, many of the tasks performed using those right-brained skills cannot be done by a computer or sent to a remote worker in India, because they involve human feeling and emotion combined with direct personal interaction.

This brief introduction only scratches the surface; there's a lot in this thought-provoking book to stimulate ideas and discussion. I find that many of the concepts and suggestions can apply to my work with clients, and I'm looking forward to incorporating them as we march forward into an uncertain future.

Enjoy the week!

Sunday, August 22, 2010

Video: How I Spent My Summer Vacation

My wife, son, and I recently spent a wonderful vacation in London and Paris. It has nothing whatsoever to do with financial matters, but if you're interested, here is a brief video summary:

One Policy for Two Jobs?

     As a participant in the Financial Planning Association's Ask the Planner program, I occasionally get requests for information from consumers with financial questions.
     A recent inquiry came from a couple in their early 60s who were trying to determine whether to buy long-term care (LTC) insurance or, alternatively, buy life insurance policies with LTC riders attached to them. In my response, I discussed the trade-offs involved in purchasing a single product to perform two functions.  Here's the question along with the response:


My wife and I are worried about the potential future cost of long-term care. We would like to have long-term care insurance, but it seems so expensive. Our life insurance agent suggested buying life insurance policies with riders that cover long-term care. Is that a good idea? 

It has been my experience that financial products are usually good at doing one thing (i.e., life insurance is good at insuring your life, long-term care insurance is good at insuring against long-term care costs). However, when you purchase one product to handle two very different risks (life and log-term care), it may not cover either one as well as you would like.

I don't know about the specific products you're considering, of course, but this is just a word to the wise. I suspect that a straight long-term care policy would do a much better job of dealing with that issue than would a life insurance rider. And, of course, if you were to purchase the life/LTC combination, there would be a good chance that a nursing home stay would use up all of your life insurance, so that when the insured dies, there could be nothing left to pay out as a death benefit.

Not knowing the specifics of the situation, my advice would be to buy separate policies for life and long-term care. One way you could reduce the LTC premium is by extending the "elimination period," which is the time period during which you would have to pay for your own nursing care before the insurance kicks in and begins to pay.

If one of you has to spend a significant length of time in nursing care, a good LTC policy could cover most, if not all of the costs associated with that stay. Thus it could possibly reduce the need for life insurance.

Obviously, if we knew today which of you would need nursing care, and when, and for how long -- and we also knew when each of you would die -- I would be able to give you much better guidance! That's precisely why they have these products -- because we don't know.

Enjoy the week!

Tuesday, August 10, 2010

Dealing with stress in your portfolio

Have you ever felt anxious about your investment portfolio?  Who hasn't?  A recent presentation at one of our professional conferences pointed out that five out of every six years will produce a stock market return sequence that either triggers anxiety or smacks your portfolio so hard that you wonder why you ever trusted the markets to begin with. 

This is normal.  Many people simply cannot handle stock market volatility, which is why the people who can have historically tended to make more, over multiple ups and downs, than the people who kept all their money stashed away in Treasury bonds. 

The question is: is there a better way to handle the inevitable anxiety that comes with buying stocks?

Psychologist Ken Haman, who now works at the investment firm AllianceBernstein, says that the key is to stay rational.  He points to studies of the human brain, which show that all of us actually have two brains.  One is the neocortex, where all of your higher thought processes take place.  Below the neocortex is a primitive brain which is about as smart as an alligator; and this lower brain happens to be where all of our survival instincts are housed. 

Whenever you experience panic, the primitive brain immediately takes over and shuts down the neocortex--which allows you to respond instantly (rather than thoughtfully) on those many occasions when a saber-toothed tiger is running in your direction. 

So when the markets have spent the past quarter giving up all the gains they generated in the first quarter, what do you do?  First, talk with somebody who actually listens to you about how you're feeling.  Then start to engage your neocortex.  What do you imagine is going to happen in the future?  Then move to: is that what you think, or how it feels?

If you're talking with a professional advisor, the advisor can guide you through this process, and then, when your neocortex is functioning again, you can look at some of the past market declines and see what happened next, or look at your financial situation and take stock of your progress toward your financial goals.

People who can handle the stock market roller coaster without getting sick seem to have an unfair advantage over everybody else in the investment world.  It seems to depend on which part of your brain is in control.

Have a great week!

Sunday, August 1, 2010

New name, but not much is changing for now

Monday, August 2 marks the first business day of Millard & Company. As of August 1, our split-off from Main Street Financial Group became official.

All our clients were very supportive and helpful during this process; it gave us an opportunity to speak with almost all of them within the span of just a couple weeks, and it gave both Juliet and me a renewed appreciation for both the clients themselves and our responsibilities to them. Our clients are the best!

As we have said several times, nothing is really changing in the way we do business. You may notice the new logo and the new-look blog page, but essentially everything else will remain the same. Renovation work is progressing on the depot building, and we expect to move around the end of the year.

My contractor and buddy Mike Karaman and his team have removed all the asbestos siding from the building. They also removed creosote-treated planking that was underneath the siding. As you can tell, there's no insulation at all, so Mike's team will be adding it. The windows and doors (inside and out) will all be replaced as well. Here is a recent photo of the old station master's office, which will soon become, appropriately, Juliet's office:

Not much to look at now, but give us a few months!

Although we’re excited about the future, we’ll still be conducting business as usual. We have some ideas in the works, which we will be firming up in the next 6 to 12 months. In the meantime, we’ll be focusing on servicing our clients and moving into our new home (in that order, of course).

I must take this opportunity to express the deepest gratitude and appreciation to my former partners at Main Street Financial Group. Stephen, Rhett, Cooper and Tripp have been stellar in their support over the years. It is a privilege to be associated with them

Enjoy the week!