Ask Nick Sample 2011

I don't think I have any insights beyond the painfully obvious, to wit: the current levels of their income and expenses are irrelevant to anything but their lifestyle in the current year. What a financial planner worthy of the name does is to estimate the trajectory of their living costs (rising at, say, three percent per year) as against the trajectory of their income. If a sufficient portion of the income is fixed, the living expenses will rise to, and then surpass, the level of the income. Thus, for people in their early to mid-60s, currently spending 80% of their income, the phenomenon of living costs surpassing the income at some point is (given normal lifespans) a mathematical certainty. At that point, they will have to begin invading principal in order to sustain their lifestyle; obviously, that's a death spiral.

The corollary question, of course, is why they are seeking—through their own quest for the illusion of "safety"—to impoverish their children and grandchildren. Because whether they're conscious of it or not, and whether they care or not, that's precisely what they're doing. In effect, they're living on their heirs' inheritance. That's because, to the extent that their assets are in bonds rather than equities, they're going to leave their heirs wallpaper rather than purchasing power (which is the only sane definition of wealth in the long run, and which only equities preserve and enhance).

The secularly rising dividends and capital values of equities are the only way a retiring couple of even average life expectancy can both match the trajectory of their income to the trajectory of their living costs, and preserve the purchasing power of their heirs' inheritance. Bonds do neither, and are thus a quintessentially irrational holding for the long-term (and especially for the multigenerational) investor.

I don't have any idea what we can or even should do "as an industry;" the question doesn't interest me and shouldn't interest you. The mainstream media are the mortal enemy of advice and the advisor, of a long-term planning perspective, and of the truth itself. (They cover the news, which is antithetical to the truth.) This is a constant; it will never change. You and I signed up for a calling which involves rowing true north for our entire lives—that is, rowing upstream against the current of filth flowing ever downstream from the media. My advice to you is simply to man your oar. I will man mine. I don't care what "the industry" does, any more than I care what the media do.

By the same logic, I'm not the least bit interested in "creating a more balanced conversation," nor am I even sure what it means. Media speak untruth. You and I speak truth. There is no balance to be struck; you can't make a deal with the devil. My attitude toward clients, whenever the mainstream media take a position opposed to mine on any subject, was (and is) essentially: you can choose to believe them, or you can choose to believe me. I who know you and care deeply about you counsel X. The media, which does not know you, does not care about you and wants only to keep you reading and watching it, appears to be counseling anti-X. It is not my job to refute this, nor does my perfect claim to your trust depend for its validity on my willingness or ability to refute it. My perfect claim to your trust is based on (a) my perfect trustworthiness, (b) my knowledge of your financial goals and capabilities, and (c) my education, training and experience in solving financial situations like yours. The choice of which of us to believe is entirely yours, and I would not seek to influence your decision, beyond stating the perfect truth as I am given light to see it.

It is a total waste of precious time and energy to get worked up over the media. It is almost literally getting worked up about water flowing downstream: this is a law of nature, and it has nothing to do with you. Work your little plot of ground. Speak perfect truth to your own prospects and clients. Show that truth to enough people, and you will, I am perfectly convinced, earn treasure on earth and in heaven.