Like many, I wrote my original “recession piece" a couple of years ago and had hoped that by now I could simply delete it and consider it something of a grim and distant memory. Unfortunately, we still find ourselves stuck in an economic environment that remains dubious. While there are now certainly more signs of optimism and there is always reason for hope, many of us may contemplate our futures through a different lens. We have legitimate cause to remain skeptical and we probably are more cautious in planning our ways forward – I know I’ve reconsidered and adjusted my own plans some number of times. We may also feel that we have less margin for error – that we can’t make too many mistakes because our cushions or contingency plans may not be there to the same degrees as before.
One point I made in my original piece was that we may find ourselves needing to reevaluate our thresholds for risk. I recall squirreling away a little graph that advised the migration from equity (“risky”) investments to less risky alternatives on a year-by-year continuum in managing retirement portfolios starting at around age 50. Targeted number of years to retirement is a key variable. It seemed pretty straightforward – logical even. It was what “everyone” was supposed to do. While it may still be “what we’re supposed to do”, I find myself questioning how literally I want to adhere to the graph and its conventional wisdom as I come ever closer to that milestone. I need to balance my desire to maximize my participation in whatever rebounds may lie ahead (my only hope of achieving my original retirement targets) with an undeniable fear that I wouldn’t want to lose almost half of my nest egg again – “if it happened before, it can happen again”-type thinking. Some of the dynamics that may influence the way we think about risk might include:
- Globalization - Much of what happens here is increasingly and inextricably linked to what happens elsewhere in the world.
- Complexity - As I wrote in my article on the topic, doing business and managing our personal affairs continue to become more complex. There are more things that can go wrong, more opportunities to misinterpret, and I believe greater potential to be defrauded.
- Polarization - The political climate is highly polarized and could result in dramatic policy shifts impacting any number of things including returns on investment and how they are taxed. We're of course all too familiar with the emotional daily debates on the news regarding what Social Security and Medicare may or may not provide down the road.
Some people are professional risk managers by trade, but it occurs to me that we are all risk managers of sorts day-to-day in managing our lives and our affairs. I don't feel qualified to offer financial planning advice, but I might suggest that contemplating the competencies risk managers leverage in doing what they do for a living may be relevant in navigating the way forward. The Risk Management Society (RIMS) has developed a core competency graphic depicting a series of risk manager skills in three categories:
- Core competency skills
- Conceptual skills
- Technical skills
The URL to the graphic on their website is:
http://www.rims.org/education/Pages/RiskManagerCoreCompetencyModel.aspx
Another point I made was the very real possibility many of us may face in needing to work longer than we may have originally planned. That may be almost good (or at least neutral) news for those of us who love what we do and are enjoying opportunities to do it – for others it may be a less “rosy” concept. Under any scenario and perhaps not unlike our investment portfolios, it does emphasize the importance of keeping our competency portfolios current, agile, and forward-looking. Some of the things we can do include:
- Keeping up with technology. Whether it be gadgets or new software; I'm not necessarily as naturally drawn to them as some are, but it is important to avoid becoming a dinosaur until you know it's really safe to become a dinosaur. I've observed more than once that polite quips about those who seek to avoid that which is "cutting edge" in almost a charming kind of way can be code for "irrelevance."
- Planning: 3-year, 5-year, 10-year plans? While I still dream 10 years into the future, I find myself more focused upon shorter planning horizons - e.g. 3 years. For me, the world has become plenty dynamic - I'm not comfortable living on "auto-pilot" for extended periods of time. I'm ever on the lookout for the new competencies I may want to possess in 3 years.
- Researching forecasts – what’s going to be hot and what’s not? Paying attention to industry trends and other cues serves two purposes: 1) it keeps us plugged into where opportunity may lie and 2) it may inform our investment decisions.
- Building and nurturing networks. We’ve known for years that networking is important; now may be a time to be extra strategic and focused about it. Rounding out your network in a targeted manner that aligns with your competency plans (i.e. what’s hot?) and goals may be particularly strategic.
- Learning – e.g. taking classes. During these strange and uncertain times, I completed a semester's-plus worth of behavioral science/psychology coursework. I carefully selected classes that were of particular interest to me and relevant to the work I do. It was invigorating, it further rounded out my behavioral science knowledge base, it stimulated my synapses, and it provided tax deductions.
- Reading and writing. Reading of course keeps us current and plugged-in. Writing is a fundamental skill that I believe will only continue to grow in importance as technology continues to further enable our communication - and as the expectations that come along with it multiply (e.g. the need to respond quickly and clearly to high volumes of requests and inquiries).
- Keeping your resume current. It’s a worthwhile exercise for many reasons. I think it’s one of the best ways to stay in touch with your competencies. There’s something about seeing them on paper that makes them seem more tangible and serves as a basis for prioritization. Things happen quickly these days – you never know when you may identify an opportunity you may wish to pursue.
- Keeping your competencies themselves current – they can atrophy just like muscles if not used, flexed, and tended.
- My own take on the competencies and traits that will continue to become increasingly important include:
- Resourcefulness
- Managing complexity
- Resilience
- Negotiation and consensus building
- Communication
- Problem-solving
- Organization and prioritization
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