Thinking Inside the Box
At the core of effective time management is a continual focus on the right priorities. It sounds easy, but many of us face competing demands that take our attention away from what is truly important. Time management gurus advocate for tools that can help you prioritize tasks and avoid distraction. One famous tool is the so-called Eisenhower Box.
US President Dwight D. Eisenhower is alleged to have said, “What is important is seldom urgent and what is urgent is seldom important.” Although the true origin of this quote is murky and attributing it to Eisenhower may be a time management urban myth, the tool bearing his name offers a useful framework for prioritization.
Quadrant one is what is urgent and important. That’s what you focus on doing now. Quadrant two is what is not urgent but still important. You should decide when to do those things and plan accordingly. Delegate what’s in the third quadrant whenever possible because these items aren’t important yet are nonetheless urgent. And, lastly, delete anything in quadrant four because these items are neither important nor urgent.
Be Like Ike
Similar to time management, sound financial advice and effective wealth management require emphasizing the right priorities while resisting distractions that divert attention from what is important in achieving your client’s long-term goals. Perhaps the following modified version of Eisenhower’s Box, framed upon the dimensions of importance vs. control, will help you and your clients maintain the appropriate focus.
For illustrative purposes only.
Before discussing any investment or planning-related issue, locate it on the matrix by considering whether it is important and within your control. The attention you subsequently devote and the approach you take depend on where the issue lands.
Quadrant 1: Important and Can Control
A well-crafted plan accounts for the first quadrant—things that are important and within your control. Examples include diversification, asset allocation, tax efficiency, and environmental, social, and governance (ESG) considerations. Develop your own comprehensive list for this quadrant because it reflects opportunities to add value and is the focal point of financial advice. Although some important matters are ultimately within a client’s control, such as spending or saving and planned retirement date, your guidance and expertise should inform these decisions.
Quadrant 2: Important and Can’t Control
Issues that are important but out of your control require monitoring. Changes in interest rates, tax rates, and long-term realized returns are a few examples that might require adjustments to your client’s plan. These course corrections are an important element of ongoing advice aimed at increasing the probability of achieving the stated financial goals.
Quadrant 3: Not Important and Can Control
It is tempting to focus on this quadrant because these things are within your control—but resist pursuing them because they aren’t important. For example, you may be less concerned with arranging for income in the form of dividends or coupon payments if your goal is tax-efficient cash flow that aligns with a sustainable withdrawal rate. Another example is if you incur higher costs to closely track an index. After all, your clients can't spend less tracking error,1 but they can spend more money! Finally, don’t fall for the illusion of complexity. Instead, follow Albert Einstein’s advice and make things as simple as possible—but not simpler.
Quadrant 4: Not Important and Can’t Control
It’s ironic how what is not important and beyond control often causes investors the most distress. This matrix may prove invaluable if, at minimum, it helps investors tune out the noise in quadrant four. The media, short-term market returns, and the (alleged) great performance of their brother-in-law’s portfolio can all be examples of distractions that are not important and are uncontrollable. Some clients might have the urge to focus on the latest speculative craze like bitcoin. Others can’t resist the temptation to extrapolate recent events into the future even though the information is already reflected in prices. Regardless of the speculative itch they want to scratch, the items in this quadrant can lead investors astray.
Game On
This matrix can be more impactful when used interactively. As issues arise, have your clients first place them in the appropriate quadrant. This may give them pause and reveal their mindset before you respond.
Follow a similar approach when proactively educating clients. List the concepts you want to discuss, have them place each one in the box, then delve deeper. If you’re conducting webcasts, you might start by describing the framework and then, as you introduce each topic, ask the audience where the topic belongs in the matrix using a live poll. Some concepts have obvious placement, but others will provide food for thought and lead to productive dialogue. For instance, where do investor behavior and discipline belong? These are clearly important, but are they within their control? The question could segue into discussing your role as an advisor.
There are numerous ways to make this a fun, interactive, and tactile experience that helps make your point with a lasting impression. You could use a white board to illustrate the decision matrix. But consider more creative approaches that could liven up client meetings with a gamified feel by using laminated placemats, magnet boards, or comparable tools for virtual meetings.
Whatever your approach, the matrix can help clients maintain a disciplined focus on the right priorities. Encourage them to think inside the box before making decisions that impact their investment experience and financial goals.
Footnotes
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1Tracking error is defined as a measure used to quantify how closely a portfolio follows an index or benchmark, often defined as the standard deviation of the difference between the portfolio and index returns.
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