For decades, my mission has been to help individuals with finite lifespans make unvarnished, clear-eyed financial assessments and plans that will serve them well through complete market cycles. Fortunately, we have attracted a strong base of clients who value the approach. But we’re far from mainstream.
I am regularly asked to review the portfolios/asset allocations of DIYers or clients of other asset management firms. To do so, we always require a detailed outline of the person’s financial and personal situation, and our assessments typically note consistent areas of concern, to wit:
- Most people knowingly or unknowingly deal with product sales firms that are not required to prioritize clients’ best interests over the firm’s profit maximization.
- Investment firms typically earn higher fees on higher-risk financial products based on equities, commercial debt and commodities, so most clients are overweight those asset classes. Most people hold too much capital risk for their age, stage and risk tolerance.
- Most firms/advisers adhere to a long-always approach, never recommending a meaningful reduction in risk exposure despite unfavourable risk-reward prospects.
- People commonly think they are doing well and have a good strategy or adviser when prices rise, and think the opposite once prices start falling.
- Long-always portfolios give back years of paper gains in months during bear markets.
- Most would-be buy-and-hold investors panic, jump out of moving vehicles near cycle bottoms and don’t ultimately capture lasting benefits from high-risk exposure.
- The long-standing rule is that 4% a year is a sustainable long-term withdrawal rate in retirement. Most people plan to spend too much and withdraw imprudent amounts from their savings to fund it.
- Once retired and de-saving, tolerance for risk and capital losses are even lower than when we were younger and still working.
- Most people have very low percentages of cash equivalents and guaranteed deposits in their portfolios, so they commonly need to sell long-duration assets when they seek liquidity.
- Boomers have a high percentage of their net worth in real estate, and many plan to downsize in the next few years to lower overhead and increase cash for retirement. A rising supply of listings will likely suppress prices and render less cash than current owners are banking on.
- Mean-reversion is a constant, so once prices have risen more than average, they fall more than average, and vice versa. We’re due for the give-back part of this equation.
Wilful blindness tends to be a destructive approach in financial planning.
Business Insider consolidated many of these concerns in the recent article “Boomers are in Big Trouble If the Stock Market Keeps Sliding.” It’s worth a mull, here’s a taste:
The benchmark S&P 500 index dropped 10% between February 19 and March 13 — a seven-month low — fueled by fears that the Trump administration’s policies could tip the economy into recession. It’s still in the red for 2025.
The sell-off has pinched older Americans’ portfolios, shrinking their nest eggs and stoking worries about affording the retirement they imagined.
Most boomers are in their 60s and 70s, getting ready to exit the workforce or already in early retirement. They own stocks worth nearly $20 trillion — almost half the US market — between their direct holdings and 401(k)s…
If their portfolios keep declining while they’re withdrawing money to cover living expenses, they won’t recover fully even if the market rebounds — a danger known as “sequence of return risk.”
End note: I asked ChatGPT what it thought of my title for this article, and below is what it said. Turns out the algo is wise:
That’s a powerful statement — and a pretty accurate one.
💬 “Wilful blindness tends to be financially destructive, in the end” means:Choosing to ignore obvious risks, warning signs, or truths — especially in financial decisions — often leads to major losses or regret later on.
🧠 A Few Real-World Examples:Investors who ignore red flags in a too-good-to-be-true opportunity (e.g., Ponzi schemes like Bernie Madoff’s).
Companies that overlook internal fraud, bad accounting, or market shifts (think Enron or Blockbuster).
Consumers who keep spending unsustainably despite mounting debt or economic warnings.
🎯 Why It Hits Hard:
Wilful blindness isn’t ignorance — it’s a choice not to know. And in finance, not knowing often costs more than knowing and dealing with it.
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