It can be tempting to gravitate toward simple plans.
They're quick to generate, easy to understand, and they feel comfortably familiar - especially because they tend to resemble what you've already heard so many times.
We see this in all parts of our lives. The bit of parenting advice dropped in a 30-second Instagram clip that's so obviously correct - until the reality of a live human 3-year-old and hundreds of variable real life situations remind you that of course it had never been that universally simple. And why would it be? Life is messy.
Why You Do It
People can fool themselves into thinking the easiest thing for them to grasp intuitively must be the correct answer, the best available idea. You probably notice this when you disagree with someone about a political issue. People are drawn to what feels most like what they already thought, and they love to have it appear to be supported.
Deep down, and intuitively, you already know this can't be the case. The best strategy can't always - or even often - be the one that happens to be the easiest one to understand.
Choosing the next most intuitively obvious move in a chess game can't actually equate the decision a master chess player would make in the same situation. It wouldn't make any sense if the only driving force in decision-making among the differentiated "best in class" was to do what anyone else would do without any training or depth of understanding.
Yet we make this mistake over and over again, because we like to be comfortable and have our lightly supported beliefs confirmed back to us.
Recognizing It in Your Own Field
Michael Chrichton once ingeniously coined the "Gell-Mann Amnesia Effect"1, which describes the ability of a person to trust the newspaper on most topics, despite realizing the reporting seems wildly inaccurate and amateurish when it pertains to the person's own area of expertise.
Regardless of whether this matches your experience with the news specifically, I think most people are familiar with some version this effect. A person looking to run digital ads might Google to find out some best practices, and in turn they might feel newly educated about how this business gets done. Maybe it's not so difficult after all! But, of course, a digital advertising professional would likely recognize the advice from the first page of Google results as overly simplistic and lacking the nuance and depth required to succeed consistently at a professional level.
It might get you up and running, but getting effective results for businesses in different categories, industries, sizes, and geographies necessarily calls for more than one "best" approach.
Ask a doctor how they feel about self-diagnosis and patient education via WebMD, to get another example. Whatever field you work in, you've probably encountered the simple one-paragraph summary of your industry, and you're well aware that it doesn't capture what it really takes to succeed.
Why Advisors Do It
The kicker here is that, for people in the advice business, cookie cutter, easy to understand, one-size-fits-all plans really are the best plans - for the advice practitioner. It's a lot harder to dive into the details of each person's case and consider all of the variables before making recommendations. It's especially hard to educate someone on new and difficult ideas when it would have been so much easier to avoid complexity and tell them what they already know (and, ideally, collect a check).
Easy is scalable. It only takes a few minutes to give an easy-to-understand plan to someone, especially when that plan matches the previous 100 plans you already built, client specific needs and situations disregarded.
Complex is Hard
The first page of Google results is easy. The Quick Setup Guide for beginners is easy. Getting to know and understand when the basic rules no longer apply, and what to do in exceptional and edge cases is hard work. Committing to something outside of your initial comfort zone (and expanding that comfort zone) is HARD.
But as Ryan Holiday has said: "Not everything that’s hard is good...but almost everything good (and worth it) is hard." It's hard and worth it. Fight the urge to get overwhelmed, bogged down, or discouraged.
Equally relevant, Mike Tyson once famously said "Everyone has a plan until they get punched in the mouth." While he was speaking literally at the time, this applies equally well figuratively. The simplest plan so often just doesn't stand up to a pummeling, and life has a way of throwing those complicating punches.
Of course, it isn't just you who may want to avoid the hard thing. So too might the people responsible for guiding you. Many of our clients have heard something to the effect of "sorry, that's just the way it is" to a binary set of two bad options. But it's often simply not true, if one is willing to look deeper and work a little harder to know all of the available tools to make and execute better decisions.
It's not unusual for people in the business of churning out advice to simply tell you what suboptimal result you've gotten, rather than doing the hard work of sorting out the facts and solutions to find the optimal result instead. It's much harder, for example, to arrange an intelligent tax transition of a client portfolio from an inappropriate one to a more appropriate one, than it is to just brute force one into the other and inform the client of their tax bill.
But the difference between the two is everything.
What Would You Do?
As you might expect, what a "complex plan" means and the impact it could have on you is strictly a custom question, not a general one. It wouldn't make much sense to try to use a blog post to explain what's best for you. But here are some (not so imaginary) hypotheticals, and I think it's useful to think through the impact of simple and complicated approaches to handling each.
- On the one hand, you want to achieve maximum growth in long-term retirement portfolios, but you want to avoid exposure to downside in the interim, even though those two things seem to work somewhat at odds with each other in practice. What do you do?
- Due to the success of a single investment or equity compensation from an employer, a too-high percentage of your overall portfolio is allocated to just one or a handful of stocks. You're aware that over the past 36 years, 42% of the stocks in the Russell 3000® went down by at least 50% and never recovered3, so you find this risk of being beholden to the performance of a single stock to be generally unacceptable. But selling that position in pursuit of increased diversification (which you want) would come at the expense of a hefty capital gains tax bill and increase in taxable income/tax bracket this year (which you don't want). What do you do?
- You've been invested in the market for a long time now, and due to changes in your age / time horizon and general life circumstances, you now realize you're uncomfortable with your existing investment allocation, since it no longer suits your needs. Similar to above, though, large scale changes to your allocations might be taxable due to growth over time. Living with an inappropriate allocation vs paying a large capital gains tax bill is an unappealing choice. What do you do?
- You've had real estate investments for decades and have done well, growing your weath over time. But now your life circumstances have changed, and you realize you'd strongly prefer to exit holding hard real estate assets, but either the tax bill from taking years of depreciation expenses and equity growth must come due, OR you'll have to face the prospect of having tenants for the remaining years of your life while you wait for your heirs to receive a step-up in cost basis on the properties. What do you do?
- You're aware that once you stop working, you'll have to live off of the combined portfolio you've accumulated throughout your life. And you're eager to finally reap the reward. But you also know you need to balance risk against growth and inflation, all while worrying about withdrawing money during down markets and leaving enough to make sure you don't outlive your money and/or the ability to leave the legacy behind that you intended. What do you do?
There are, at least potentially, answers to all of these questions. And, yes, they are all more complicated than going to the bank and accepting the same 60/40 portfolio they hand out to you and everyone else. But you're going to have to reach outside of your comfort zone to understand the solutions, and you should. It's worth the time, because you are worth the time.
These are big questions with critically important ramifications, and you shouldn't take the impact lightly. If you've ever checked 6 websites to save $50 on your plane tickets, take a second to think about the relative effort you want to give to the biggest financial decisions of your life. Don't walk away from complexity just because it's hard and overwhelming.
Why Complexity is Worth It
Complex doesn’t mean complicated for the sake of it; it means comprehensive, thoughtful, and custom-tailored.
True holistic wealth planning demands a depth of understanding and a willingness to embrace new ideas. It requires us to peel back the layers, analyze your complete financial picture, and thoughtfully construct strategies that seamlessly integrate every moving part.
Complexity allows us to unlock opportunities and circumvent pitfalls that a simplistic plan would overlook. It enables us to leverage sophisticated strategies that optimize your overall circumstances, mitigate unnecessary risks, and enhance the long-term sustainability of your financial structure.
The good news is that there are people here to help you understand the tough answers. Don't be afraid to accept that help and get the best solutions, instead of just the simplest.
Sources:
1: Goodreads
2: Always Try To Do It The Hard Way
3: Source: Aperio, MSCI. Data from January 1987 through February 2023. Never recovered is defined as the stock remaining below the 50% impairment level in price.
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