Personal Benchmark was Made for Days Like This

Crosby_2015Dr. Daniel Crosby, Executive Director, The Center for Outcomes

Chuck Widger and I released our New York Times bestselling book, Personal Benchmark: Integrating Behavioral Finance and Investment Management, on October 20, 2014. Although the book was published in 2014, the writing process began in 2013, and Chuck’s original idea for a goals-based investing system is much older still. Both 2013 and 2014 were great years to be invested, with the S&P 500 returning 32.39% and 13.69% respectively. But although Personal Benchmark was crafted in a time of prosperity it was created with an eye to days just like today.

What is needed during times of fear is an embedded solution that helps clients say “no” to short-termism and say “yes” to something bigger.

As we wrote in the book, “While investor awareness and education can be powerful, the very nature of stressful events is such that rational thinking and self-reliance are at their nadir when fear is at its peak.”

Financial advisors do their clients a great service by educating them about investing best practices, but at times of volatility, logic is often thrown out the window. What is needed during times of fear is an embedded solution that helps clients say “no” to short-termism and say “yes” to something bigger.

When presented with an extremely complicated decision, it is human nature to seek simplicity, something psychologists refer to as “answering an easier question.” Rather than deeply consider and weight the relative importance of social, economic and foreign policy positions, voters tasked with choosing a Presidential candidate tend to instead answer, “Do I like this person?” Confronted with a complex dynamic system like the stock market, the easier question that we ask ourselves is, “Am I going to be OK?” Part of the power of the Personal Benchmark solution is that it helps clients answer this important question in the affirmative.

bookOur book discusses the human tendency to engage in “mental accounting”, the psychological partitioning of money into buckets and the corresponding change in attitudes toward that money depending on how it is accounted for. Page 154 features the story of Marty, a Philadelphia-area gang member who separated his money into “good” and “bad” piles depending on whether it was honestly or ill-gotten. Marty would tithe to his local church using the good money, but reserved his bad money for reinvestment in his criminal pursuits. Although we are hopefully all more civic-minded than Marty, we are no less likely to label our money and spend, invest and think about it relative to that label. One huge advantage of Personal Benchmark the solution is that it sets aside a dedicated “Safety” bucket for days just like today. When a client asks herself, “Will I be OK?” she can take comfort from the fact that her advisor has accounted for her short-term needs. Being comforted in the here-and-now, she will be less likely to put long-term capital appreciation needs at risk.

“While investor awareness and education can be powerful, the very nature of stressful events is such that rational thinking and self-reliance are at their nadir when fear is at its peak.”

Besides helping clients say “no” to short-termism, Personal Benchmark also helps advisors paint a more vivid, personalized picture of return needs. Page 203 of Personal Benchmark tells the story of Sir Isaac Newton, who lost a fortune by investing in what we now refer to as the “South Sea Bubble.” Newton invested some money, profited handsomely and eventually sold his shares in the South Sea Company. However, some of his friends continued to profit from their investment in South Sea shares and Newton was unable to sit idly by and watch people less gifted than he accrue such fantastic wealth. Goaded on by jealousy, he piled back in at the top and lost almost everything, saying after the fact, “I can calculate the movement of the stars, but not the madness of men.” Newton’s failure is a direct result of anchoring his benchmark to keeping up with his friends instead of attending to his own needs and appetite for risk. If Personal Benchmark’s Safety bucket is for providing comfort today, then the Accumulation bucket is a vehicle for rich conversations about the dreams of tomorrow. As clients simultaneously manage their short-term fears and identify their long-term goals, they are able to experience the best of a goals-based solution.

Personal Benchmark was created in a time of comfort and even complacency on the part of some investors, but was done so with a perfect knowledge that there would be days like this. At Brinker Capital we believe that an advisor’s greatest value is providing “behavioral alpha”, increasing returns and mitigating risk through the provision of sound counsel. Our goal is to be your partner in that sometimes-difficult journey and Personal Benchmark is evidence of that commitment.

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, Inc., a Registered Investment Advisor.

The Price of Ownership

Sue BerginSue Bergin

One of the first things that an advisor does when working with a new client is to find out what is important to that client. It helps pinpoint values and gives a good idea of where the client’s money will naturally flow.

In trying to find out what is important to clients, advisors typically ask about children, parents, siblings and charities.

Recent trends would suggest that dogs and cats should be added to the list.

The following stats will help demonstrate the economic paw print and why you might want to dig a little deeper and include four-legged friends to your intake questionnaires.

  • 62% of households, nearly 73 million American homes, have at least one pet.  This is up from 56% in 2008.(1)
  • Americans spend over $50 billion on their pets a year.
  • Americans will spend approximately $310 million on Halloween costumes for their pets.(2)
  • Veterinary expenses account for 65% of our pet care spending.
  • Pet services like grooming, pet hotels and doggie day cares are experience rapid growth, rising 8% from $3.51 billion in 2010 to $3.79 billion in 2011.  The APPA predicts that pet services will grow another 8.4% in 2012 to an estimated $4.11 billion in 2013.
  • Last year, Americans spent nearly $7 billion dollars on pills for their pets.  This is up 35 percent in just four years.(3)
  • 42% of dogs sleep in the same bed as their owners (up from 34% in 1988).(4)
  • A third of dog owners buy birthday gifts for their pets.
  • Less than a decade ago, there were just a handful of pet aftercare facilities.  Now there are approximately 700 funeral homes, crematories, and cemeteries.(5)

While pets might not warrant line items on a client’s budget, it is helpful to know if the client is a pet lover.  Dropping Fido’s name every so often is a great way to demonstrate that you care.


1. American Pet Products Association, Industry Statistics and Trends.
2. Consumers Eager To Have A Frightfully Good Time This Halloween, According To National Retail Foundation.
3. Prozak for Puppy?  More American Pets are Prescribed Psychotic Drugs, ABC News, February 10, 2012.
4. The Pet Economy: More than Movies, Music & Video Games Combined, October 20, 2010, Global Animal.
5. There’s Never Been a Better Time to Be a Dead Pet, September 7, 2012, Bloomberg BusinessWeek.

In Search of Someone

Stan Warchol, Brinker Capital 

As the director of Brinker Capital’s client services department, I made it my personal mission to smoke someone out.

“Someone” is that elusive figure that makes mistakes. It’s that anonymous person that gives clients inaccurate, incomplete and sometimes out-and-out false information.

Here is how “someone” invades an organization.

A client at the other end of the phone says he spoke to “someone” and was told that he didn’t need to submit one of the required forms. “Someone” assured another advisor that her request could be processed immediately, when in fact her forms weren’t in good order. “Someone” confirmed for a different client that “it” was done yesterday, when in fact “it” hadn’t been done at all.

No matter how good an organization, “someone” can bring it to its knees.

The only way to make sure “someone” doesn’t invade your firm is to demand accountability from everyone. No matter how brief the interaction, anyone who talks to clients should document the call. They should give their name and contact information so the person knows whom to call with future inquiries. No one should have the luxury of anonymity, particularly when their role is to answer clients’ questions and help you succeed.

With an easily accessible record of all of clients’ interactions, “someone” will be forced to find shelter in the firm down the street.