The best way to plan for the future is to prepare for the worst. That’s why we wear seat belts and carry spare tires. When planning for retirement, we should expect to live into our 90s in an era of high inflation, low returns, and high market volatility. A lot can happen in the 25 or so years after we retire and much has changed in the 20 years that I have been counselling families through some of the most important financial decisions of their lives.
During a lifetime of uncertainty and change, we get only one chance to make a series of successful decisions for our long term goals of comfortably transitioning to retirement and passing our financial legacy to our families and heirs. Because of the importance of these decisions, I must know my clients as well as I possibly can; their hopes and fears, values and goals, and all that is important to them. The path of those decisions is influenced by the unpredictable nature of our lives and the ever-changing economic environment in which we live.
We have seen markets and the global economy significantly change in the last 20 years. Coming changes will significantly influence planning for our individual futures. Climate change is affecting global GDP with more destructive weather patterns, extreme drought, and record breaking high temperatures. The scarcity of resources that this will create may be the source of an inflation that has yet to be recognized. Wages have stagnated for all but the top 1% for the last 30 years. As a majority of wealth is transferred to the top, those in the middle and lower classes do not have the discretionary income to spend which drives economic growth. With the declining diversity of investors, market volatility has significantly increased leading to greedy boom and bust cycles that affect us all. Add to this a very large aging population that will be leaving the workforce in record numbers over the next couple of decades who will spend less and require more public services. Our individual retirement savings depends as much on a growing global economy as it does on our personal ability to save.
Unwittingly, as investors, we are responsible for promoting extraction and exploitation based capitalism that has set in motion a changing climate, stagnant wages, and a rise in slavery. At the same time, capitalism has provided a means to develop the solutions for the environmental and social problems that we face. Without capital markets, the scaling up of renewable energy and energy efficient technology would not have been possible. Constructive capitalism is providing the means to research and develop the tools we will need to provide clean water and nutritious food for the burgeoning population this planet will be supporting in the coming decades.
It is my personal mission to make a positive difference in the lives of my clients through careful planning, informed decision making, and quality investing. It is also my mission to make a positive difference in the world through selective, quality investing in constructive capitalism. For example, divesting from fossil fuels and investing in energy efficient and renewable technologies will support the transition to a sustainable energy infrastructure while eliminating exposure to a commodity that has a limited future and will eventually become a stranded asset. Investing in companies where the internal culture promotes long term value creation through strong environmental, social, and governance policies has been shown to reduce the risk of loss due to a corporate culture that exploits its customers, employees, and communities for the purpose of short term gains.
We must become investors vigilant in the quality of our investments. We can invest in the companies that are working toward a better future for all of us and as shareholders, positively change corporate behavior from the bottom up, or simply divest from those companies that are destructive to us all. As investors and shareholders we are making a difference in the world, and now more than ever, it is important that we are conscious of and intentional in the differences that we make. The shareholder activist movement is rapidly growing and making the world a better place for all of us. Join me to become a part of it. For yourself and your heirs; plan like you care, and for the world; invest like you give a damn.