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In my previous four posts I introduced my guiding principles of wealth management, along with the first three principles (links to one, two, and three). Today I will discuss the fourth guiding principle, which is one of the most enjoyable for me to use as a financial advisor while helping clients:

Know what is holding you back, spurring you forward, and serving you best

Road cartoonThis kind of self awareness is essential to have the energy, confidence, and focus to support your financial plan. Wealth mastery cannot be pursued with out a degree of self-mastery and self-knowledge. You need to know what is working against you and deal with it. You need to know what you have in your favor and use it to the best possible advantage.

In my experience as a financial advisor, I have found that people often lack such self-awareness. So, I have made it one of my guiding principles to take proper time for reflection. With weaknesses especially—habits of mind that can hold you back—people often need a third party or a sympathetic ear to surface issues.

In my last few posts I have discussed my first few guiding principles for wealth management: make your balance sheet your friend and compare your financial plan to standards of excellence. Today I will discuss the third principle:

Back-test and stress-test your financial plan under various scenarios to further reveal strengths, weaknesses, and possibilities.

Checklist

The “Elastic Limit” is a term I’ve borrowed from engineering because it has tremendous relevance in wealth management and financial planning. It refers to the amount of stress a material can withstand before undergoing permanent deformation. For example, if you stand on a wooden bench, the wood may sag a bit and bounce back when you jump off. However, if several NFL linemen stand on the same bench, the wood will probably warp, crack, or break.

In a previous post I introduced my set of five guiding principles for managing finances, the first of which was “Make Your Balance Sheet Your Friend.” Today I will discuss the second principle:

Compare your finances to standards of excellence and use them to make enhancements

Apple Orange

When people with wealth describe to me how they view their current position, they use a wide variety of yardsticks to measure themselves. Some are troubled because they are comparing their finances to friends, family, or associates who appear to be much better off. Others are troubled because they have lost a large portion of their net worth through market declines, bad investments, or business setbacks.

It is more common, though, to meet people who feel quite confident and secure because they’re doing much better than they imagined they would when they were younger. Their confidence may be fueled by the good opinion of others around them, since wealthy, successful people are often accorded tremendous respect and kid-glove treatment.

There is nothing wrong with these benefits of success, but you can’t allow them to lull you into false assumptions about your financial position. If you want to know where you really stand in terms of financial strength, you need to employ objective standards of excellence.

Note: This Post will be updated by the author throughout the week ahead as developments unfold related to Brexit

Brexit: an example of creative destruction?

To understand the Brexit ‘Leave’ decision, you must understand one of the most powerful underlying forces shaping our world today: Creative Destruction. Understanding this concept can be the difference between tremendous investment success and failure in the years and decades ahead.

Creative Destruction, a term first coined by economist Joseph Schumpeter in 1942, is the continuous cycle of innovation and destruction behind all economic, business, and life cycles. This concept can be applied to businesses, careers, products…and yes…government organizations.

I have been a long time student of creative destruction and use it as a lens to view the world going through unprecedented levels of change. It’s a comprehensive way to assess perceived and real investment dangers and opportunities.

In business, when bright, creative employees sense they are in a “stagnation mode” organization, they naturally decide to leave the stagnant/status-oriented organization and are often attracted to a new up-and-coming organization that is gaining traction and growing (or promises to grow). Technically, this can leave the stagnant company with less creative talent which can accelerate the journey of the remaining company (theoretically full of bureaucratic, red-tape-type regulators) into a depletion mode. That company either rises to the occasion and reinvents itself or gets further entrenched into stagnation or depletion mode (see graphic).

The Brexit Leave vote can be explained by two words: Creative Destruction. In short, this powerful underlying economic force has a natural inclination to impact those in the stagnation or depletion mode to reinvent themselves (a move to traction) when they either see threats or opportunities. Copyright Joseph J. Janiczek 2016. All rights reserved.

The Brexit Leave vote can be explained by two words: Creative Destruction. Image Copyright Joseph J. Janiczek 2016. All rights reserved.

As for Great Britain and Brexit, could this country be one of the confident/talented equivalents in the European Union (EU) choosing independence and seeking traction and growth on its own terms? I think there is a possible correlation. When someone (or some company/country, etc.) attempts the breakout, they are seeking to gain traction in the new environment and they very naturally can expect to get push-back from the stagnant/status forces that remain. Look for evidence of this in the weeks, maybe years ahead but don’t take it as gospel (it could be fear based PR targeted at undermining the change or it could be a genuine critique). For instance, when electric light was the breakout solution from gas light, gas companies attempted to advertise the threat of being electrocuted as a form of resistance against the breakout threat. The real test for a company, employee or government is: do they have enough gusto and intestinal fortitude to make it through resistance and gain traction with the new idea?

Principles for Devising a Robust System

Henry Ford’s solution to paying workers for time spent “walking about” was a new system, the assembly line, an idea he adapted from the overhead trolleys used in the meat processing industry. “The first step forward in assembly came when we began taking the work to the men instead of the men to the work,” Ford later wrote. That slight but critical shift in thinking led to a huge leap in productivity. Average production times for a car fell from 21 days to 9 hours. The price of a Ford-made automobile fell from $950 in 1909 to $355 in 1921.†

Like any successful system, Ford’s assembly line was designed around guiding principles.

  1. Each worker would have one task and one task alone.
  2. The line itself had to be “man high” so that workers would not waste time and get fatigued by constant stooping.
  3. The speed of the line was calibrated to ensure that a worker was neither rushed nor left biding his time. “He must have every second necessary,” Ford wrote, “but not a singe unnecessary second.”

Lessons in Financial Strength

“A financially strong investor is a superior investor.” This observation, distilled from my 25 years in the field of wealth management, is simple and yet so profoundly true, I decided to make it the motto of my company. All too many investors learned this truth the hard way during the recent financial crisis: You do not become financially strong by achieving superior results; you achieve superior results by becoming financially strong.

Early in life, my family drove home the importance of strength. My family didn’t buy the home we lived in, we built it. My brothers and I helped my father pound in the nails that held the frame of the house together, and you can bet we didn’t just walk away from boards or joists that still felt rickety. My father built nuclear power plants and oil refineries, structures that must be built to last and able to weather hurricanes and earthquakes. His duties gave him a “stronger is better” way of looking at life, which rubbed off on me.

My favorite productivity coach of all time is David Allen, famed author of Getting Things Done.

Absolute Financial Freedom BookWhen you first work with David’s concepts and materials, you think it is all about optimal levels of productivity…but you soon realize his methods also have a wonderful way of unleashing you from all the complexity and worry that often accompanies high levels of achievement.

In one of his audio recordings, he says: “Too controlled is out of control” and this immediately resonated with me. Actually, it articulated the “sweet spot” I have always aimed for as I created (and ultimately patented) Systems and Methods for Optimizing Wealth and most all of the other wealth and investment management systems, structures, support and tools I’ve created over the years. I always have heard that you can have a form of “unconscious competence” that serves you, but you can typically build upon it at an even higher level when you become aware of it and it becomes “conscious competence” – this was the case for me with this concept.

Whether you are seeking to better invest your money or seeking to be a better “depletion-resistant” wealth steward, my advice is to keep the “too controlled is out of control” insight in mind. Here are some tips:

Joseph J. Janiczek, MSFS, ChFC

Joseph J. Janiczek, MSFS, ChFC speaks at Selling Your Business – How to Create the Perfect Exit event attended by large audience of business owners in Colorado.

Janiczek Wealth Management is proud to sponsor an Expert Panel on Life-Changing Liquidity Events. Experts from EKS&H, Minor & Brown, The Forbes MA Group, Business Enterprise Institute (BEI), Denargo Capital and Janiczek Wealth Management convened to share stories and best practice tips on creating “the perfect exit.”

The panel includes Joanne Baginski, CPA (partner EKS&H); Lisa D’Ambrosia, Director/Shareholder, Minor & Brown; Bob Forbes, President/Founder, The Forbes M+A Group; Joseph J. Janiczek, Founder/CEO, Janiczek Wealth Management; John Brown, Founder of Business Enterprise Institute; and Pal Berg, Co-owner of Denargo Capital. Kumar Dandavanti, Founder, Dandavanti Group is on the expert team but was excused due to overseas travel. Check out great video snippets, quotes, tips, article and an infographic at: www.janiczek.com/expert-panel/. Also includes resources from the Selling Your Business – How to Create the Perfect Exit event several of the Expert Team panel members put on in conjunction with the Denver Business Journal.

 

Janiczek Wealth Management has been named one of the Top 12 Financial Advisors in Denver, Colorado Springs, and Boulder (Colorado) by AdvisoryHQ. To read the full article/review “Janiczek Wealth Management – A Beacon of Light for High-Net-Worth Individuals” go to this link.

AdvisoryHQ Janiczek-Wealth-ManagementNow in our 25th-year serving high net worth investors (those with investment portfolios of $2- to $20-million) and ultra-high net worth investors (those with $20-million+ investment portfolios) in the Denver, Colorado Springs, Boulder, Aspen, Vail, Beaver Creek, Summit County and Snowmass areas of Colorado and in approximately 24 other States in the U.S.A., we our proud that our patented Strength Based Wealth Management (SBWM) and our comprehensive Evidence Based Investing (EBI) services helps to “unleash” our clients from the complexities of wealth and investing so they can flourish with their good fortune.

It’s been an annual tradition of mine to put something special together to share with clients and friends for the new year. This year, the theme is “The Big Breakthrough” and it includes three powerful tools for mastering time, focus and wealth. Watch the video presentation and download the companion worksheets below:



Big Breakthtrough Download now


*Ranked/Named among Top, Best and Most Exclusive Advisors sources: Barron's March 2016, 2015, 2014; Advisory HQ March 2016; Financial Times June 2015; Five Star Professional November 2015, 2013, 2012,2011, 2010, 2009; Mutual Funds Magazine January 2001; NABCAP September 2010, 2011, 2013; Worth Magazine July 2002, January 2004, October 2004, October 2008; Wealth & Finance International, October 2014. Rankings and/or recognition by unaffiliated rating services and/or publications should not be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if Janiczek & Company, Ltd. is engaged, or continues to be engaged, to provide investment advisory services, nor should it be construed as a current or past endorsement of Janiczek & Company, Ltd. by any of its clients. Rankings published by magazines, and others, generally base their selections exclusively on information prepared and/or submitted by the recognized adviser.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Janiczek & Company, Ltd.), or any non-investment related content, made reference to directly or indirectly on this website will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this website serves as the receipt of, or as a substitute for, personalized investment advice from Janiczek & Company, Ltd. To the extent that a viewer has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Janiczek & Company, Ltd. is neither a law firm nor a certified public accounting firm and no portion of the website content should be construed as legal or accounting advice. If you are a Janiczek & Company, Ltd. client, please remember to contact Janiczek & Company, Ltd., in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. A copy of the Janiczek & Company, Ltd. current written disclosure statement discussing our advisory services and fees is available upon request.

TM & Copyright 2016, Janiczek & Company, Ltd. All rights reserved.