Have you ever wondered what’s really happening in a specific zone of your field of vision situated at an angle of about 15 degrees temporally (meaning towards your ear), slightly below horizontal, with a diameter of 1.5–2.2 mm? Do you ever worry that you can’t be absolutely sure that a physically small but potentially lethal hazard isn’t approaching you from precisely that angle? No? Then either you’re a natural optimist, or you have nerves of steel – or you’re simply (and perhaps tragically) unaware that you can’t actually see or perceive anything located in this physiological gap in your field of vision.
Most of us fit in the last category, because for practical and aesthetic reasons, our brain simply fills in this undetectable gap by replicating the things that immediately surround it. As a result, this hole in our visual content is perfectly camouflaged – its existence masterfully concealed. Our ignorance of this gap in our defences protects us from anxiety, but not from the possible consequences. As we all know: Ignorance is no defence – neither in life, nor in law, and certainly not in financial planning.
The financial advice “blind spot”
Figuratively speaking, this minor design flaw, known as our blind spot, is apparent not merely in our eyes, but in many other parts of our lives. Apparent, of course, only once we become aware of the (un)fortunate and unexpected outcomes of hitherto unknown variables.
In our financial lives, some of the most common examples of suddenly revealed blind spots might sound like this:
“Dear Testator, many thanks for the entirely voluntary, oversized donation you made in your will in the form of an inheritance tax payment to the state. Sincerely, your local Tax Office.”
“Dear Involuntary Sister-in-law, I’m so grateful that your late husband remembered me, too. I look forward to jointly managing his business with you and administering our shared wealth.”
The frequency with which I hear the resulting exclamations of (horrified) surprise already implies an answer to the question I’m really asking here: “Do we really still need financial advice and financial planning?”
Let’s go back to the blind spot mentioned above. As you might have guessed, the problem with needing financial advice and planning is that at times of information overload, automated advice and sophisticated online banking systems, we all feel ridiculously well-informed, regard finance as straightforward and user-friendly, and are unaware of the existence of unsuspected or unknown risks and opportunities… hidden from us by that 15-degree gap in our (figurative) field of vision.
Effective financial planning is always important and always up to date
My hypothesis: That clients, especially those who are generally described as wealthy and/or live in complex financial and family circumstances, would be well advised to uncover the interdependencies between all aspects of their finances and associated “blind spots”, and based on this, draw up a strategic plan for achieving their purely personal, individual goals. Do I spend my hard-earned fortune right now? Or do I leave it to my descendants? If the worst came to the worst, would I have sufficient liquid assets to live on, or would my substantial – but illiquid – wealth ultimately collapse? Will I be able to afford the retirement benefits I want for myself and my family? Do I have a definitive understanding of – and, as far as possible, control over – all the risks threatening my asset structure? You’ll notice that I’ve been unable to resist making brief references to further blind spots – I know every financial adviser will sympathise.
My conclusion: Financial consulting and financial planning are neither unnecessary nor outdated. On the contrary, they’re more important and useful than ever – especially at a time of low interest rates, increasingly volatile markets, geopolitical risks and (sadly) declining retirement benefits in Germany.