The Personal Chief Financial Officer


With football season in full swing, last Sunday I was reminded of Vince Lombardi’s famous lament, “We didn’t lose the game; we just ran out of time.” If there’s a common complaint I hear from successful professionals and small business owners, it is that there’s not enough time in the day to pursue their career and enjoy their personal life. When you add managing money to ensure their family’s security and their own retirement into the equation, the stress really ratchets up, especially in today’s uncertain market.

That nagging feeling that you cannot spend the time you need to organize and tend to financial matters can be a drag on your productivity across the board, at work and at home. And in the wake of the recession, these increasing stress levels have caused many people to reevaluate their financial security and seek the help of an independent and trusted financial advisor, a personal chief financial officer—or a quarterback, to return to the football metaphor —who can help coordinate and prioritize conflicting needs and goals.

As our economy continues to climb out of recession, many investors are reevaluating their finances, asking, “How should I deal with market volatility going forward?” Plenty wonder if they will ever be able to afford to retire. In fact, according to a survey conducted by Barclays, 60% of high net worth people worldwide (54% in the US) are rejecting retirement. This new group, defined by Barclays as “Nevertirees,” plans to continue working for as long as they are able. Interestingly, just 48% of these high net-worth individuals classify themselves as “financially secure.” 

Like any other journey you embark on in life, saving for retirement goes more smoothly if you work with your personal chief financial officer to identify and prioritize goals and develop a clear plan—an investment policy statement—of how you will reach them. While your plan cannot control market swings, it can ensure that you have considered and prepared for inevitable market downturns.

Notably, although today’s uncertain market has resulted in investors’ interests shifting from returns to risk and from accumulation to preservation, a properly diversified portfolio is still your best defense against market downturns. As my clients’ personal chief financial officer, I ensure their assets are spread among stocks (large- and small-cap, growth and value, domestic and international) as well as bonds and cash according to their goals, risk tolerance and time horizon. Combining asset classes that historically have responded differently to market conditions tempers your total portfolio risk.

An observation I recently read in an essay by Mike Ervoloni, the founder of Cabot Research, a firm that uses behavioral finance to improve the performance of investment managers, further illustrates the benefits of working with a personal chief financial officer. Ervoloni writes, “Risk management is as much about emotions as it is math. Feelings of fear, anger and sadness can propel you toward risk-seeking or risk-averting behaviors, deftly overriding conscious intent. Emotions are one of many evolutionary gifts that have spurred mankind. Originally enhancing survival skills (that old fight or flight sensation), they now try to help make financial decisions—a challenge for which they are poorly calibrated.”

A personal chief financial officer can help you become more emotionally aware and avoid making purely emotional financial decisions. As Ervoloni notes, “When uncertainty peaks and the current path just doesn’t feel right, it’s usually the worse time to go with your gut.” In the aftermath of the worst recession since WWII, it’s important to stay engaged with your investment plan. In fact, behavioral finance teaches us that reviewing long-term goals can lengthen your perspective, making it less likely that you will make a hasty portfolio move in response to a market drop or negative newspaper headline.

A personal chief financial officer also adds value by working with your CPA, estate planning attorney, insurance professionals and bankers to manage your wealth accumulation, preservation, and transfer. While using multiple advisors affords you the benefit of broad expertise, if there’s no communication or coordination among advisors, your risk increases, putting you in danger of not achieving your goals. For example, an undiscovered overlap between 401(k) and investment accounts could leave you over-exposed to equities. Or an unfunded trust or a missing IRA beneficiary form could thwart your estate planning goals.

Interestingly, “What keeps you up at night?” is the proverbial first question many advisors ask of potential clients. However, so often it’s not the worries that intrude on a good night’s sleep that pose the greatest threat to your financial well-being. As a friend’s grandfather once commented to me, “The things you worry about never happen.” More often, the real trouble in life originates from corners you haven’t considered or from issues you have had to place on the back burner.

Working with your personal chief financial officer keeps important financial matters front and center and under control. Accordingly, you achieve the peace of mind that comes from knowing that a trusted advisor is managing your money and looking out for your family’s financial well being. My goal as my clients’ personal chief financial officer is not only to ensure a worry-free night’s sleep, but to allow my clients the time they need and want to pursue enjoyable and productive days.

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