Financial PlanningLeadership

Forecasts are not political opinions or endorsements

A financial planner’s success in fields like taxes, healthcare planning and investments revolves around the ability to make accurate forecasts about future events. The ability to identify and analyze trends is the key to profitability. Success in forecasting is required if the expected result is to exceed industry average performance. I find that accurate forecasting is not difficult but that it does require a substantial investment of time in reading, classroom time, travelling and speaking with people outside of my normal circles.  I’ve also learned that I am far more successful in learning to forecast results than in forecasting the timing of future events.

Some of the key forecasts that form the basis for my professional recommendations are:

    • The largest macroeconomic and political issue we face is addressing the impact of global climate change.
    • The second largest macroeconomic and political issue we face is addressing the impact of the widening wealth and income gap. 
    • The U.S. and worldwide economy will slow down and enter recession this year or early 2020. 
    • Middle-class investors will increasingly seek to match their values with their money. High impact community based investment programs will increase.
    • Income tax rates will increase. It will increasingly important to seek tax-free and tax-efficient financial management strategies.
    • The Tax Cuts and Jobs Act will substantially weaken the U.S. economy and make it more difficult for our nation to operate in the future.
    • The Affordable Care Act will survive as the basis of our health care legal system but control will of more details till return to the states until we eventually pass a centralized national health care plan, aka “Medicare for all”. In the meanwhile, state jurisdiction shopping will be the dominant health care planning tool in the next few years.
    • Trumpism will eventually be viewed as a black mark in global history yet the levels of tension between individuals and governments will increase as natural resources decline relative to the cost of maintaining a sustainable environment.
    • Jobs are no longer a reliable path to or measurement of economic well-being. We will adopt some form of a universal basic income program to adjust for this fundamental change that came as a natural result of exploited capitalism.
    • The United States will soon be a “minority majority” nation. This will cause increased tensions, hate crimes and violence.
    • Responding to the disruptive changes triggered by technology will continue to be a major factor for us worldwide, including a dominant factor in operating my professional practice and nonprofessional businesses.

Too many people operating at the retail level of the advisory industry pretend that forecasts do not matter. Most people using the title “financial planner” actually focus on eliminating any risk from change. The core industry concept of diversification is an effective way to avoid or minimize variation from past performance or results. Yet it ensures that performance will be mediocre.

Forecasts are important. Yet a forecast is not an expression of opinion on how we hope events will turn out. A forecast is not an endorsement of the predicted outcome. Some of the forecasts that form the basis of my practice are not optimistic and are not things that anyone hopes will occur. In too many cases the forecast is the opposite of what we hope will happen. Unfortunately too many people, especially on the low end of social media communications, apparently do not understand this concept.

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