Word leaked last week that Apple is in the process of breaking up it’s (formerly) popular iTunes platform.  My first reaction to this was “WTH?”  After a few minutes of thinking about it, it dawned on me that I haven’t downloaded anything from iTunes in probably 5 or 6 years.  The speed with which streaming replaced downloading is remarkable.  This is true of music, movies, TV shows and podcasts. I have no clue what comes after streaming but some new technology will likely come along and revolutionize this process.

I’ve always loved music.  My first record was Elton John Greatest Hits Volume 1 which I got at age 6 or 7.  Being a child of the 80’s, however, most of my musical preferences lean toward British  New Wave, Punk Rock and Post Punk music (and yes I became a CPA some years later).  I still listen to a lot of  newer indie music in addition to the classics of that 80’s and 90’s era.  Anyway, I was a voracious consumer of music…first vinyl records and 45’s, then cassette tapes, and finally CDs.  I thought CDs were the best thing ever and probably were the end of the line for music distribution.  I owned several hundred CDs at one time.

Sure enough I was wrong.  MP3 downloads emerged in the early 2000’s and I purchased several thousand songs from the iTunes store.  Finally, in about 2010 or 2011, I cut the cord and started to stream music.  Now I put on Spotify whenever I can and listen to whatever music strikes my fancy in that moment.  I have rediscovered some old music that I had forgotten about, found some music that I otherwise probably wouldn’t have found and generally increased my music consumption many times over.  It’s a simpler, easier distribution method and now I couldn’t live without it.  This simplification was not easy for the music industry.  It was a huge win for consumers but took a while for the industry to figure it out.

So what does this have to do with accounting or finance you ask?  Well, a parallel evolution has occurred in virtually every business, not least of which is the financial advice business.  When I first started in the early 90’s, financial advice was still largely based on the old stockbroker approach.  A client would come to us seeking advice.  We would provide some guidance by building elaborate spreadsheets that likely were of very little use in hindsight.  But ultimately we were paid by generating commissions through trading.  To be fair, we thought that was the best we could do for our clients.   This is how the industry was built and not many knew better.  It was the era of money management superstars like Peter Lynch, Bill Miller and Bill Gross.  The thinking was, invest with these titans of the industry and big returns followed.  This worked for a while…until it didn’t. Sure the internal fees in these funds are laughably high in retrospect.  Paying nearly 2% for a basket of US equities?  No problem, Peter Lynch will earn us so much money it won’t matter!

However,  increasing competition, more technological resources and better research availability stripped these superstars of their Midas touches and demand waned (there is a case to be made that reversion to the mean is the real issue).  Whatever the reason the academic research slowly began to expose the truth that consistently beating the market indices over the long term was difficult, if not impossible.  And more to the point, picking the one asset manager that is going to beat the markets AHEAD OF TIME is even more difficult/impossible.

So I (and other like minded advisors) pivoted.  We gave up on the folly of trying to beat the markets year in and year out.  Instead, we build diversified and balanced portfolios consistent with the goals and objectives of the investor (our clients).  We focus on the planning process and helping our clients understand their goals and objectives.  We focus on helping clients understand the risks associated with their financial lives and how to mitigate those risks.  We accept market based returns as acceptable and plan around those return expectations.  We are cognizant of fund and investment costs that can drag on client performance and growth.

In short, we try to simplify our clients financial affairs so it is one less thing they have to worry about.  Simplification in investing has saved clients time, worry and money.  Our lives are cluttered with other stresses and concerns but financial affairs should not be a source of MORE frustration.  My guess is if I look back at this post in 5, 10 or 20 years it will seem quaint.  Something will change so dramatically that how we do business now will seem antiquated.

If you are overwhelmed by the choices in your financial life and like the idea of simplifying those decisions, please contact us.