TGBA #36: Underdogs to Champions - Seeing the Whole Board

Welcome to the 36th edition of #theGoalsBasedAdvisor Newsletter!

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The Cinderella Story of the Las Vegas Golden Knights

What do sports underdogs-turned-champions and savvy investors and advisors have in common? Both know that winning strategies come from seeing the whole board, planning moves in advance, and ensuring every piece works in harmony. From the rinks to investment portfolios, let's dive into how strategic choice bracketing can transform underdogs into champions.

In 2017, Las Vegas welcomed its first professional sports team, the NHL’s Golden Knights. Assembled from a pool of players deemed surplus by other teams, expectations were modest. Yet, against all odds, this group, nicknamed the "Golden Misfits", stunned the hockey world. In their inaugural season, they didn't just compete; they contended, reaching the Stanley Cup Finals. Their story wasn't about individual heroics but about how well each player's skills complemented the other, crafting a formidable team dynamic where the whole was indeed greater than the sum of its parts. They went on to win the Stanley Cup in 2023 — six years after entering the league!

Greece’s 2004 Euro Victory: A Lesson in Unity and Strategy

Similarly, the Greece national soccer team in Euro 2004 exemplified how strategic foresight and cohesive teamwork could lead to extraordinary outcomes. Lacking star players, coach Otto Rehhagel focused on a disciplined, collective play that leveraged each player's strengths in a unified strategy. Their victory over the host nation, Portugal, in the finals was a masterclass in achieving greatness through teamwork, underscoring the power of a well-orchestrated plan coming to fruition.

Financial Strategy: Building a Portfolio Greater Than Its Parts

These inspiring sports narratives parallel the principles of effective financial planning. Just as a sports team might fail if composed only of stars without synergy, investment portfolios too can falter if overly concentrated in the latest market trends, like tech or meme stocks, without regard to how they fit into the broader financial goals. A well-rounded portfolio, like a successful sports team, requires a balance of assets that work together to achieve long-term objectives. This is where comprehensive planning and strategic choice bracketing become invaluable.

Erika Kirgios and Katy Milkman's research on choice bracketing illuminates how considering decisions in a wider context can lead to better outcomes. Choice bracketing? is the grouping of individual choices together into sets. This principle is crucial in financial planning, where a holistic view helps maintain balance and alignment with long-term goals, akin to planning meals for the week to ensure dietary balance and budget efficiency.

Three Key Actions for Financial Advisors Working with Clients:

1. Develop a Comprehensive Plan: Start with broad goals and work backward, identifying the steps needed to achieve them. Like assembling a team, tailor investment choices to fit the client’s overall financial strategy rather than chasing short-term gains. Ensure that each investment decision aligns with the client's long-term goals and contributes to the overall portfolio strategy.
2. Encourage Holistic Decision-Making: Help clients see beyond the allure of trending investments. Use tools like scenario analysis to demonstrate how different choices can impact their long-term financial health, promoting decisions that fit their overall objectives. This involves looking at the bigger picture, much like how a coach assesses the strengths and weaknesses of the entire team rather than focusing on individual players.
3. Foster Teamwork and Trust: Just as a coach builds a team, advisors should cultivate relationships based on trust and mutual understanding. Engage clients in the planning process, making them active participants in shaping their financial futures. This involvement can lead to more committed and informed decisions, paralleling the cohesive teamwork seen in successful sports teams. Regular communication and updates help maintain this trust and ensure that clients remain aligned with their financial plans.

Chasing excellence at the expense of executing a well-thought out plan can backfire spectacularly. Legendary investor Howard Marks tells the story of Dave VanBenschoten, head of the pension plan at General Mills. Dave's 14 years in the job saw the fund's equity return consistently between the 27th and 47th percentiles annually. But over the full 14 years of these “non-stellar” returns Dave’s performance ranked an impressive fourth percentile overall! Most investors aiming for top-decile performance stumble, but Dave never did!

The triumphs of the Golden Knights and Greece's national team teach valuable lessons in strategy, synergy, and the importance of the bigger picture — principles that are just as applicable in financial planning, or practice building, as they are in sports. Consider your approach to your practice as you would a championship-winning sports team — strategically, with an eye on the end goal. Are your current strategies setting you up for long-term success? Apply the lessons of the Golden Knights and strategize for a winning future.

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