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For centuries, we believed that Earth was the center of the universe. Nicolaus Copernicus had an epiphany and suggested a simple, but logically superior model of the universe which placed the sun, rather than earth at the center. This was a paradigm shift that launched modern scientific discovery and led to an intellectual revolution which forced entrenched ideas to change.

I want to tell you a personal story about a Copernican shift that I experienced when I discovered that much of what I thought I knew about helping clients invest was WRONG.

Hi I am Luke Kratz vice-president and portfolio manager with CIBC Private Wealth. My story begins in the early 1990s. I was just starting out as a financial advisor. I worked for an admired world-class firm and was put through an extensive training program. My job was to use the market outlooks and economic forecasts produced by the firm’s gurus to find fresh investment ideas for our clients.

Things were going really well. My clients were happy, I was getting recognition and accolades from the firm. I figured that I was good at my job because my clients had really good returns, but it was the 1990’s and markets were booming.

One day, I was scheduled to meet my best client for lunch. His name was Gary. Gary and I got along great. He was in his 50s and a very successful business owner. He’d built a global business making custom packaging. Products from store-brand macaroni and cheese to high-end Italian designer products were in packaging produced by Gary.

Gary and I had become pretty close. We chatted often. We knew each other so well that we could just about finish each other’s sentences. Everything had worked out for Gary, he and his wife Sandy shared a great marriage and two daughters of whom Gary was especially proud. I had never spoken to Sandy for more than a minute or two at a stretch… She was always in the background somewhere during our calls, but Gary made it clear, HE makes the financial decisions.

Well, Gary didn’t show for lunch… When I returned to the office I called Gary… Sandy picked-up and I immediately  could tell that something was wrong. She fell apart as she tried to tell me that Gary was in an accident that morning and died instantly.

In the aftermath, I met with Sandy. It seemed that she held me indirectly responsible for her being in the dark about money. Sandy glared at me and said: “Luke, Gary died without a will. I thought you were our financial advisor? – What did you guys spend all that time talking about?”

I was taken aback by what she had said. It hurt me but I accepted it because I knew she was right. I was in the best position to have helped Gary prevent this mess… I knew how important Sandy and their family was to Gary, I just didn’t make the connection or attempt to coordinate Gary’s overall situation to what mattered to him.

I thought that what I was doing was helpful… but once we started talking about markets and economic issues, we never really discussed goals much.

The fantastic returns that Gary got didn’t matter. GOOD RETURNS don’t overcome BAD PLANNING. If Gary had a GOOD PLAN, he could have put his money under a mattress and done better. Gary didn’t need me to make him rich, he was already rich. He needed my help to make sure that Sandy and their daughters were never poor.

I thought about my well-intentioned focus on investment outcomes. For the first time, I had the perspective to see that when it comes to your complete financial life, your investments are only a small part …

This is when it hit me. My industry, the media and I had it the wrong way around. This was my Copernican Shift. I realized that putting a client’s portfolio at the center of their financial universe was wrong. The client – and the people they care about – belong there. 

I realized that my clients weren’t going to get better outcomes unless and until I gave them better advice. So I decided to develop a framework that would help me guide clients to make truly great decisions that led to the financial outcomes they wanted for themselves and the people they cared about.

I worked many nights reading, thinking - committed to finding out how to close the gap between investment outcomes, and CLIENT outcomes. I read decades of studies and research on evidence of what worked. The cornerstone of this was built on the belief that the dominant determinant of real-life financial outcomes is not what your portfolio does, it’s what you do – your decisions and your behavior.

It starts with goals…

Studies show that people who physically write down their goals do better than those who don’t… and people who physically write out a plan to achieve their goals do substantially better.

No airplane takes off without a flight plan, no ship can set sail without a plotted course and I firmly believe that no family should contemplate taking a multi-decade financial journey without a formal plan.

Whether you are trying to win an Olympic medal or just lose 10 pounds, all evidence demonstrates that the most consistently successful method is to become goals-focused and planning-driven.

When we are not goals-focused and planning-driven, we get ahead of ourselves and jump straight to tactics. Is a hammer better than a screwdriver? Is a screwdriver better than a saw? Tools are highly-specialized for specific purposes. When you’re working on a piece of wood and you need it cut in half, you don’t reach for a hammer. See, I’ve got ALL the tools to help clients but I have to be clear on what we’re building before I start pulling them out of the toolbox. When you’re clear on your goals, and have a realistic plan, portfolio decisions become pretty straightforward.

So the natural progression of my process would be goals-plan-portfolio…

Note that I didn’t mention “current events” or “market outlook” anywhere in that progression… that’s because there’s NO evidence to suggest that changing your portfolio in response to short-term current events or a market outlook is going to actually improve long-term outcomes… It’s goals-plan-portfolio. Where the goals are date-specific and dollar-specific and the plan a realistic, written plan to achieve those goals. When we follow this progression, the goals inform the plan and the plan informs the portfolio… Because every flight plan ever filed required course correction, we repeat the process, but we don’t change it for change’s sake. Because if the train you’re on is going to your destination, our job is not only making sure that you get on that train… but to sit with you through the long journey because when YOUR train finally rolls into YOUR station… we want to be sure that YOU’RE still on it when it gets there… that’s when our job is done!

It was time to sit down with each and every client to tell them about my experience with Gary and Sandy, what it taught me, and that I had found a better way. I couldn’t defend an outdated map anymore. From now on I would accept no portfolio without a plan, and for clients with a significant other, I would only work with both people.

As I conducted these meetings, I learned a lot. my process is simple, but not easy… not a lot of people are really clear on what they want, and need help in setting goals.. In my training as an advisor, I was never taught or encouraged to do this – and I can see why most advisors still don’t do this – it’s waaaay easier to just talk about markets and the portfolio… so I developed fun and engaging ways to help people get clear on what they want.

I learned about my clients’ dreams, their values, their hopes for their families, or institutions that they cared about. REAL THINGS that take time, money and ongoing planning to accomplish.

Of course, I learned from Gary that things don’t always work out like we would like them to, so a big part of my process was to make sure that my clients were prepared for when unforeseen events occur. Because a plan that’s unsinkable UNLESS it hits an iceberg is NOT unsinkable.

Sandy was my motivation as I reviewed each client’s existing planning. I discovered outdated and incomplete wills, inappropriate powers of attorney, inconsistent beneficiary designations and people taking more financial risk than was necessary.

Overall I learned that clients enjoy reviews a lot more when they are about THEM What they are trying to achieve and what we are doing to move them closer to that future – instead of the next short-term move in the market.

In the many years that have followed, my world-class team and I have continually refined and improved this unique process. We call it Financial Life Navigation.

There are many advisors offering basic services such as financial planning and investment advice, but Financial Life Navigation takes everything to a much higher level and is available only from my team and I.

Our clients tell us that Financial Life Navigation gives them a feeling of clarity, confidence and control over their future because they know WHAT they are doing, WHY they are doing it and WHERE it will lead them.

To learn more about Financial Life Navigation, request a copy of our booklet that explains step-by-step how it works so you can determine what the probable value might be for you. It‘s called “Investing for Outcomes: A goals-focused and planning driven approach to making truly great financial decisions.” We would be happy to send you a copy.

Luke Kratz is an Investment Advisor with CIBC Private Wealth in Victoria, BC. The views of Luke Kratz do not necessarily reflect those of CIBC Private Wealth. This information, including any opinion, is based on various sources believed to be reliable, but its accuracy cannot be guaranteed and is subject to change. Clients are advised to seek advice regarding their particular circumstances from their personal tax and legal advisors.

“CIBC Private Wealth Management” consists of services provided by CIBC and certain of its subsidiaries, through CIBC Private Banking; CIBC Private Investment Counsel, a division of CIBC Asset Management Inc. (“CAM”); CIBC Trust Corporation; and CIBC Wood Gundy, a division of CIBC World Markets Inc. (“WMI”). CIBC Private Banking provides solutions from CIBC Investor Services Inc. (“ISI”), CAM and credit products. CIBC World Markets Inc. and ISI are both Members of the Canadian Investor Protection Fund and Investment Industry Regulatory Organization of Canada. CIBC Private Wealth Management services are available to qualified individuals. The CIBC logo and “CIBC Private Wealth Management” are registered trademarks of CIBC. If you are currently a CIBC Wood Gundy client, please contact your Investment Advisor.