I recently attended the Muster 005 in Washington, DC, a leadership conference hosted by Jocko Willink and his company Echelon Front. Their ethos demands we take extreme ownership of all things and apply unmitigated discipline to achieve our objectives in business and in life. Their extreme ownership doctrine consists of the four laws of combat. Developed on the battlefield, under the most stressful of circumstances, they can be applied to any aspect of life requiring leadership and accomplishment of a mission. The four laws of combat are: 1. Cover and move, 2. Simple, 3. Prioritize and execute, and 4. Decentralized command.
As a financial planner (not nearly as awesome as the Navy SEALs in Echelon Front), the laws of combat apply to my relationship with clients and our mission to work towards their financial planning objectives, and ultimately, their financial freedom.
1. Cover and move.
A gunfighting tactic employed on the battlefield, cover and move refers to the importance of team work. Every member of a team must work together, mutually supporting one another for the singular purpose of mission accomplishment. The client/planner relationship is a team and we are tasked with accomplishing the mission of financial freedom.
Recently, a client called me with two employment scenarios. Stay at his current job with no benefits, but higher pay, or accept an offer with lower pay, but greater benefits including a stock compensation plan and opportunity for career growth. Together, our mission was to balance his current income needs and potential for career advancement and evaluate how each option affected his long term financial savings objectives. I provided cash flow and stock compensation projections comparing the options and how each impacted his long term objective of financial freedom in retirement. He communicated non monetary factors such as career growth and job flexibility and confided about the negative factors of his current job environment. Working together, we evaluated the key aspects of his choices and determined the best path moving forward. Because I understand his goals, and he understands it is my job to “cover” him with information, data, and advice to accomplish the objective, he was able to make a decision that would best move us forward to his financial freedom. Spoiler alert: he took the new job opportunity.
The client/planner relationship is a team working together towards the singular purpose of accomplishing the financial planning mission and ultimately the client’s financial freedom.
Simplifying a plan as much as possible is crucial to success. When a plan is too complicated, people will fail to effectively execute the strategy. The world of financial planning is complex; there are countless strategies touted in the media through ads, books, gurus, and the internet. To effectively navigate, your financial plan must be simple, clear and concise. As with any plan, if you cannot understand the mission and its required tasks, you will fail to accomplish your objective. Moreover, when things go wrong (a market correction, an unexpected loss of income, etc) the lack of understanding the plan will exacerbate the situation.
Oftentimes, my clients have worked with a prior financial planner and have an outdated financial plan or purchased a financial product. In these cases, I ask the client to explain the aim of the plan or product and if it advanced their financial planning mission. I have yet to find a client who can clearly explain the basic steps in their prior financial plan or the purpose of the product. My guess is if they could explain, they would still be working with their previous advisor. My rule when putting together a plan, or explaining a task moving towards a client’s goal is they must understand the specific steps and how they will move them towards the main objective. As a leader on our financial planning team, my job is to educate you and provide my expertise and analysis in a format that you will readily understand. Or if you do not, that you feel comfortable asking me questions until you do. (This also touches on rule one, cover and move, teamwork.) If you cannot understand the plan or task involved with your financial plan, something must change. You will not achieve a successful outcome if the actions along the way do not make sense.
Financial plans must be simple, clear, and concise if we are going to be successful in accomplishing our mission of your financial freedom.
3. Prioritize and execute.
To accomplish our mission we must prioritize among the numerous and competing goals and execute a plan based on priority. My clients routinely have multiple goals with varying timelines and required capital; college planning, purchasing a new home, retirement, paying off student debt, cashing out company stock, etc. We must work together to prioritize what goals are the most important and need immediate action, and which ones can wait until the high priority tasks are executed.
A doctor client, with over $300,000 in student debt, hired me to help her accomplish her primary goal, retirement. Before working together, she was obsessively saving all her extra cash flow towards retirement and paying the very minimum on her student loan debt. In her mind, she was executing a successful strategy by saving aggressively towards retirement. However, by only paying the minimum on her student debt the principal balance would continue to increase because of its high interest rate and this would eventually derail her primary objective of a successful retirement. Working together we reduced her current retirement savings rates and increased her payments towards her student loans, putting her on track to achieve a successful retirement. We built a plan that achieved her main goal by prioritizing the greatest threat to her financial freedom, her student loans. Within the realm of financial planning, oftentimes the actions we are taking to accomplish one financial goal will help accomplish multiple goals.
A note on prioritize and execute: Many of my clients will often achieve a tactical victory at the expense of a strategic win. I will discuss this more in a later blog, but when it comes to prioritizing and executing your financial planning mission, do not look for quick tactical wins at the expense of accomplishing your overall strategic victory. Here, my client modified her plan and goals away from the tactical win of building up her retirement savings rapidly and towards a strategic victory of long term retirement success.
For success in your financial planning mission we must prioritize and execute your goals.
4. Decentralized command.
Simply stated,everyone on the team leads. For the success of a plan all parties must understand the mission, our individual responsibilities, and have the ability to execute our roles. I provide education, briefs, training, advice, and other materials and support giving clients the ability to make financial decisions to accomplish their financial mission.
Many of my clients manage their own investment portfolios. Under those circumstances, my role is to provide them an overarching investment strategy, and explain how that fits into their financial planning mission. We both consider timeline, risk tolerance, and client’s level of comfort with investments and work together to achieve the objective of building and managing their investment portfolio. I provide constant advice, monitoring, and supporting documentation and they physically transact the investment decisions required to accomplish our investment management plan.
For maximum effectiveness the client and I must both understand our roles and be free to make decisions and execute the tasks necessary to accomplish our mission.
Employing the laws of combat to my client/planner team provides me a framework to evaluate my process in leading clients to accomplish their goals. It demands I take ownership of my role on the team, and that I empower the client to do likewise.
Most importantly, if you are a client, I hope it creates an understanding of how I approach my role and our relationship as we work together towards your financial freedom.