One of the most common descriptions of financial planners and advisors is that we are problem solvers. But while it is certainly true that advisors need to be able to solve problems for clients, we would argue that the value of problem solving is not what it used to be. The greater value an advisor can provide is to correctly anticipate problems before they occur. We call this “upfront hindsight.” In his book, To Sell is Human, Daniel Pink notes that, in the past, the business culture had consisted of “information asymmetry.” What he means is that the seller has historically had more information than the buyer. Decades ago, financial advisors had access to information on investments and trading systems not available to clients. As a result, they were primarily product-focused and transactional. No More Gatekeepers To use Pink’s terminology, we have moved from “information asymmetry” to “information parity.” Now that information is ubiquitous, the value of problem solving is not what it used to be. The world of insurance and investments is now longer a sort of black box with gatekeepers of information. Instead, people can now become reasonably well-informed if they choose to do their own research. What that means is if you know you have a problem, you can find answers. For instance, if I think I need more life insurance coverage, I can pretty easily search for information about how much insurance I should own based on the specifics of my situation. The same is true for someone who knows they have a problem in their savings for retirement. They can go online to find a calculator as well as recommendations about ways to allocate their investments between different asset classes. As a result, wealth advisors who perceive themselves to be problem-solvers may not be providing as much value as they used to. But there’s an even bigger issue with problem solving. By definition, it is essentially reactive. Reactive or Proactive? If your car’s motor locks up and there is smoke billowing out from under the hood, changing the oil is a good idea. However, it would have been a lot better to change it before your car started to break down. Likewise, the best advice is that which addresses a potential issue before it becomes a problem. There is substantially more value in identifying problems clients don’t realize they have as opposed to solving existing problems. For complex situations, the goal of a wealth advisor should be to “stress test” a client’s plan to look for factors that could cause major problems. To do that thoroughly, subject matter experts (such as estate attorneys, business advisors, and CPAs) need to work together to review the details of all aspects of a financial plan to identify various risks which are not obvious. What happens if (fill-in-the-blank) happens? Everything from a future market downturn to a premature death or disability should be anticipated and evaluated. Estate planning is one example. Do you fully understand the roles and responsibilities of a guardian for your children or a trustee for your estate plan? If not, you are not alone. More often than not, we have found that people do not fully understand the implications involved in appointing friends and family members to serve in these roles. Anticipating Problems There are all sorts of ways in which you may simply be unaware of the consequences of your current situation. The unique value advisors can provide is largely dictated by the extent to which they uncover these potential pitfalls which can jeopardize your goals before they happen. A good advisor will help you think ahead several years and imagine possible negative scenarios; the types of things you could really regret not having anticipated. Hindsight is defined as “the ability to understand an event or situation only after it has happened.” But a forward-looking team of advisors can often leverage their collective experience and wisdom to anticipate and avert various risks in advance. We don’t know what we don’t know. This same concept is universally true in different aspects of life. I am thankful for a 50-point car inspection because I don’t know the first thing about how a carburetor works or how to spot a problem with it if there is one. The goal is to have an advisor who will insulate you against problems no one else is thinking about and you don’t even know you have. The main reason people lie awake at night worrying about stuff is fear of the unknown. To the extent that an advisor surfaces the unknowns ahead of time and considers the implications of all the various components of clients’ plans, (s)he is providing a sense of relief. The Value of Prevention Consider the health care industry… If the goal is not just to treat sick people but to avoid sickness as much as possible – in other words, to be healthy – then it’s increasingly about prevention. At Brown and Company, the clients we are working with are generally not in a state of financial sickness, but tend to be pretty “healthy” financially. Therefore, it is more about ensuring our clients’ financial health. In other words, it is preventative. Being preventative means we’re anticipating bad things that could happen by considering all the different ‘what-if’ scenarios and guarding against those. All that to say, the essence of the value proposition that we provide our clients is problem finding rather than problem solving. To do that, we want to have “upfront hindsight,” which is the ability to spot problems and uncover opportunities that are not even on our clients’ radar.