Uncertainty is Certain!

It is fair to say that the world is very different to where it was at the start of the year. Back then Government was relatively stable, inflation was at a much lower level and there was peace in Europe. Fast forward to today and the picture has changed dramatically.

These unexpected events also reflect our own lives. Life equals unpredictability and uncertainty. Many of us crave for certainty, which is compounded by the media’s obsession with trying to predict the future. Certainty can’t be delivered.

And this also applies when it comes to financial planning. The plan will always be wrong because unexpected events will happen. Plans should be loosely held because they will be blown off course; the landscape ahead of us is constantly moving and changing.

Planning, therefore, is about making course corrections in the face of uncertainty and taking small regular steps to get back on a chosen path. It is a process which never ends.

Although I’m no aviation expert it is my understanding that most pilots prepare a detailed flight plan for every flight (and I would definitely only want to fly with those that do). How often does the flight go according to plan? Apparently, never! And when you think about it that makes sense. They are constantly course correcting. If everything did go according to plan we wouldn’t need pilots in the first place and they would be outsourced to robots.

The same goes for financial planning. It’s about the ability to adapt when the flight doesn’t go according to plan (which is always going to be the case).

I believe the traditional financial services industry tries to “sell” certainty. It’s easy to say, but impossible to deliver. For example, comparing investment returns this year versus last year the range of outcomes have been extreme to say the least. The average targeted rate of return will never be achieved in a given year within an investment lifetime. The performance line will never be straight. It’s not how the investment markets work. The journey will always be squiggly. There will be peaks and troughs, just as in life.

Financial planning is a never ending process. The plan is never done. It’s not about being right today or trying to predict the future. It’s about being less wrong tomorrow and making regular course corrections in the face of uncertainty.