Paul Meloan – Vested Interest

I have been engaging in an informal dialogue with Gordo Byrn regarding the critical questions I think everyone needs to answer with regard to their personal finances. Gordo and I come at this from different perspectives: his is closer to that of an individual client I might work with, and mine is from that of a professional seeking to guide a client.

To that end, it is more important for me to ask the right questions than have the answers. Since my questions provoked thoughtful responses that Gordo was willing to share with the world, I will take that as a sign I am on the right track.

I’ll save you the hunting and restate the Five Questions (seriously, how do I trademark that?) here:

1.  How large of a pool of assets do my significant other and I require in order to live in the manner which we desire for the rest of our lives?

2. What should be the composition of that pool of assets, and how should they relate to each other in terms of risk and expected returns?

3.What are the other things in life that are critically important to me, and for which I will be financially responsible?

4.What are the risks in the universe which may prevent me from fulfilling my responsibilities to myself and to others, and how might I defend against them or at least mitigate their impact?

5. If I have accumulated wealth that exceeds all of the above requirements, how might I best utilize that wealth to derive the most personal satisfaction available from life?

If I can put words in Gordo’s mouth, he comes at this from the perspective that people would be much better off managing their desires than accumulating assets (question #1). That is certainly a fair point of view.  My position as a professional is not to tell a client where to place this balance, but to offer dispassionate guidance so they can make their own thoughtful decision.  Simple but not easy. Clearly, much of the noise of daily life focuses on the accumulation of things, even when most people know (yes, know) that the path to happiness is much more contingent on positive relationships and experiences.
Gordo makes a good point about knowing your financial domain.  He defines his domain as himself, his wife, and minor children.  Many successful people I work with also care for siblings, parents, and organizations that matter to them.  “Care for” does not mean these beneficiaries are solely dependent upon them, but rather that my clients have elected to make a meaningful impact on their quality of life.  The point remains: make a thoughtful choice that is sustainable and enriching (in every sense). 
Risk mitigation takes many forms, only some of which are financial.  Most people have some sort of toxic relationship in their lives they would be better off without.  Some of those relationships are with people, others are with non-productive vices (substances, time-wasters).  Sometimes the best addition is by subtracting liabilities.  The classic risks are premature death and disability, both of which can be mitigated by the proper insurance as well as a healthy savings rate relative to your lifestyle.  Another point of agreement: insurance is purely the mitigation of known, quantifiable risks.  Any attempt to make it more than that invariably leads to a transfer of wealth from the customer to the provider of the product.  Opacity and complexity have never been the friend of the consumer.  Never.

Paul Meloan is the co-founder and co-managing member of Aegis Wealth Management, LLC, in Bethesda, Maryland USA. Before Aegis Paul was a practicing attorney as well as working in the tax practice of Ernst & Young, LLP.

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