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Financial Planning


The following is a reprint of an Article written by Vern Hayden in March of 2011 for The Journal of Financial Planning


Our Highest Value to Clients

A colleague and I were discussing what we do for clients. I asked the question, “What is the most important thing we do for a client?” The answer to some degree depends on what a client is seeking. Some situations are pretty simple and come close to a commoditized answer. Some want portfolio management, a core profit center for many of us. In that case, it is also somewhat dependent on client perspective. Performance may or may not be the main issue. I realize many financial planners suggest that performance should never be the issue if you are doing everything right, but we don’t live in a perfect world and portfolio management and client behavior are filled with ambiguities and inconsistencies and don’t lend themselves to simplistic absolutes.

Ultimately, many clients are looking for something very serious from us. Perhaps that great western writer Louis L’Amour (300 million copies of his books in 20 languages and the only American novelist to receive both the Presidential Medal of Freedom and the Congressional Gold Medal) said it best in one of his last novels Last of the Breed (1986). He said, “What is wisdom? …I have often wondered…It goes beyond mere knowledge, as knowledge goes beyond information.”

Joel Jones, Ph.D., president emeritus of Fort Lewis College in Durango, Colorado, and one of my handball buddies, has an aphorism that blends importantly with L’Amour’s question. He says “Data by itself is not information, information is not knowledge and knowledge is not wisdom.”

Webster defines wisdom as “accumulated philosophies or scientific learning, good sense, a wise attitude or course of action.” Many times clients want us to be wiser than we are or even can be. We play a multitude of roles with clients and they are forever asking us questions. We of course encourage them to ask questions in our role as financial planners, advisors, wealth managers or whatever else we may call ourselves. Sooner or later many clients will put us into a classic King Solomon- type predicament. They want us to sort through all the variables of an issue and give them a great judgment call. Some even say, “I need your wisdom on this.” The older I get the more I seem to hear the word “wisdom.”

This has caused me to wonder what wisdom really is and do we have it. My inclination is to say that wisdom comes from a synthesis of life experiences and our ability to think and construct a lesson from those experiences. When we answer the tough questions, these cognitive experiences become our basis for judgment calls for clients.

As. Jones says, wisdom is beyond and above knowledge. When a client brings an elderly parent to our office and informs us that the parent has just been diagnosed with Alzheimer’s, what do we do? At his point, it doesn’t help to say, “Let me power up my computer and we’ll find an answer for this.” Technology is of no help on this issue. In fact, I believe technology should always play a subordinate and supportive role to the financial planning process. We must constantly remind ourselves that the planning process, and certainly life planning, is a human process - technology should support it but never dominate. Our world is being de-humanized; to the extent we humanize what we do with clients, we enhance our ability to bond with them.

In August of 2010, Jones and his wife took me to breakfast just outside Durango, near the home of Louis L’Amour’s widow. At breakfast he gave me the book entitled Wisdom: From Philosophy to Neuroscience by Stephen S. Hall. This is one of the most profound books I have ever read. In many situations where we give advice and/or make judgment calls for clients we cannot get all the facts we want or need. The book says, “One of the hallmarks of wisdom, what distinguishes it so sharply from “mere” intelligence, is the ability to exercise good judgment in the face of imperfect knowledge.”

Another interesting aspect of wisdom comes into play when we have to restate an issue or problem for a client. Stephen Kosslyn, Ph.D., head of the psychiatry department at Harvard, discusses a relatively recent concept in cognitive psychology known as “framing” which refers to the way we conceptualize a problem. He said, “People who are wise can interrupt, take a step back, and reframe, and a lot of wisdom probably has to do with looking at a situation differently and reframing.” An example of this would be when we know a client cannot retire on their current path we must “reframe” the situation for them.

Another of Stephen Hall’s points is expressed as follows: “One of the most appealing things about wisdom is the elevated form of self-awareness it inspires….When I consider ‘socio-emotional selectivity theory’, which describes how a person’s emotional priorities change with shrinking time horizons (due to age, illness or unsettling external events like the September 11 tragedy), I can’t help but think about my own station in life…Thinking about wisdom almost inevitably inspires you to think about yourself and your relationship with the larger world.”

Sometimes when we think we are looking at “facts” our sense of wisdom often overrides the information we thought was there originally. For instance, the myriad of questionnaires that are used to determine a client’s tolerance for risk becomes a fantasy that fades in the face of a deteriorating market. Perhaps wisdom would suggest that we recognize that a client’s interpretation of most things in life is dynamic and subject to radical change. Consequently, if we do planning based on a static interpretation of a client’s situational “facts” we may become part of the problem, rather than part of the solution.

A final note from the book Wisdom: we have all met people that give the impression they know everything. These people, of course, are dangerous in the face of wisdom. The book points out a situation with Socrates, known for his famous statement, to “know thyself.” The situation related to a discussion he had with a politician. Hall relates: “Socrates concluded that the politician ‘thinks he knows something he does not know, whereas I am quite conscious of my ignorance. At any rate, it seems that I am wiser than he is to this small extent, that I do not think that I know what I do not know.” With this remark, Socrates defined an essential and indeed profound aspect of true wisdom: recognizing the limits of one’s own knowledge.”

We all gather data and facts and they become information, which forms a certain knowledge base to work with our clients. We translate all of that into our style of financial planning. Regardless of our style of implementing a planning process, the most valuable benefit to clients may be whatever wisdom we can bring to their situation.

So as to the question that opened this article, I told my colleague that wisdom is what I thought was the most important thing we could bring to a client.


Many years ago a friend gave me some great advice. He said, “Know what you don’t know and don’t pretend you know it.” So here’s what I don’t know about China’s stock market – I don’t know exactly how the Chinese government runs it. I don’t know how much I can criticize it without going to jail as some outsiders recently have. I don’t know exactly why and how it affects our market. I’m sure there is a lot more I don’t know but this is supposed to be a short blog so –

Here is what I do know about the China stock market - I know it is not a free market. I know the government encourages the Chinese to not only invest in the market but I am told they encourage people to borrow money to invest in the market. I also know the China market was up about 130% over about a 14 month period to June 13, 2015.

So here’s a little personal story about the Chinese stock market. Chengdu has a population of about ten million people and is the center of a lot of business activity. It is about a two and a half hour flight west from the coastal city of Shanghai. .The city has an annual exhibition in June. It has 15 – 20 thousand visitors. Chengdu is also known worldwide as the home of the unique and cute Panda Bears.

I was invited to be the opening Keynote Speaker for the exhibition. I had never been to China before so to be invited for this and have my way paid for business class round trip and a five star hotel was to say the least a very special treat.

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Warren Buffet, the famous American billionaire said, “I have never made a dime trying to predict the future.” There is a well known economist by the name of John Kenneth Galbraith that made the following statement, “The function of economic forecasting is to make astrology look respectable.”

To further emphasize how important it is to not rely on short term predictions, I found an article published in Barron’s dated January 6, 2003. In those days, there was a popular program on television every Friday night, called “Wall Street Week”. The popular host, Louis Rukeyser had a rotating panel of twenty two well-known investment experts. These names were some of the most respected in the business of investing. In the article, Barron’s showed what these experts predicted the Dow Jones Index and NASDAQ Index would do for the years 2001 and 2002. These predictions were made one year in advance. These were two significantly negative years in the market during the technology crash. Here were the highs, the lows and actual results of the predictions:

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Once when I was a kid and on vacation with my parents they told me not to climb on a beam that had been placed between two trees. They said I could get hurt. Well for two days I looked at that beam and when nobody was around I climbed up to it. I decided I could go hand over hand across the beam. Sure enough, half way across I slipped and fell and broke my arm. I can still hear the echo of my parents saying, “We told you! You never listen….” After that, I listened a lot more closely, but that was an example of self-destructive behavior. There are lots of examples when it comes to investing. Most of these examples fit into four categories:

• Timing the market
• Chasing hot investments and tips
• Getting scared and selling at the bottom
• Not sticking with a good investment plan

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Regulatory Disclosure: The information on this website has been obtained from sources considered reliable, but its accuracy and completeness are not guaranteed. This website is neither an offer to sell nor a solicitation to buy any securities. Vern Hayden and Gerard Gruber offering Securities and Investment Advisory and Financial Planning service through Geneos Wealth Management, Inc, Member FINRA/SIPC.  Investments are not FDIC insured. Investments are not deposits of the financial institution and are not guaranteed by a financial institution. Investments are subject to investment risks including loss of principal amount invested.