I am not an expert on thermodynamics, but the second law is about entropy. Ordered systems tend to become disordered. Throw money into the equation and the disorder happens more abruptly than you can imagine.
When you are working with a financial planner some of what they do is get you organized, help create a better process for making decisions, hopefully allow you to see what is possible, and deal with your complicated, emotional responses to money. But maybe the most important part of any financial-planning relationship is how entropy, the inevitable disorder, is handled.
We do a lot of family meetings with clients where parents talk to their kids about how they are making decisions that impact them today as well as tomorrow. We have an outline for the conversation, and things like estate plan flowcharts which show how assets will get distributed. It is all orderly — until it isn't. Some meetings go off without a hitch, but that doesn't mean that entropy won't ensue later. Some meetings degenerate relatively quickly because someone says something that causes feelings to get hurt. While on the East Coast disruption is a badge of honor, for Minnesotans it can be terrifying.
But actually, this disorder is where the value of the planning relationship takes place. Rather than wonder what people are feeling, disorder leads to a better understanding of various viewpoints and therefore helps alleviate the unsolved mysteries after death that occur in families that don't talk about challenging things.
Entropy, order devolving into disorder, is guaranteed to occur at any major life shift. Even when you think you have things nailed, boards will come loose. The most important thing you can do during transitions is allow for the discomfort and be ready to adapt. That means that when you are in a position to make choices, leave yourself some wiggle room.
If things move to disorder, then that dream job will at some point frustrate you, that new house that solved your space problems will have furnace issues, and that retirement you dreamed about will have some very boring days. The big mistake our clients make is believing that change will solve all their problems without recognizing that it will also create new ones. It shouldn't be discouraging. Too many people view things as mistakes rather than disorder. One of the best things a planner can do with you is help you distinguish between what changes represent opportunities and which are merely escapes from an uncomfortable situation. While change will eventually involve entropy, the opportunities have a lasting benefit that outweighs the disorder.
Spend your life wisely.
Ross Levin is the chief executive and founder of Accredited Investors Wealth Management in Edina.
