Upon entering the London Underground for the first time, I had no idea what "Mind the Gap" meant until I saw it written on the station platform as I crossed the gap to the train. Being visual, I got "Look Right" immediately. It appears that many Americans are prone to the pedestrian's equivalent of a "California Stop." Coming to the curb, we naturally look left and only look right after we have begun stepping into the street. Do that too often in London and you will become a hood ornament on a lorry.

A recent edition of The Economist brought these memories to the forefront. Maybe it's my age or a morbid interest - but I start every issue of The Economist at the back, reading the obituary. In this particular issue the famous person featured was Phil Sayer, the voice behind the "Mind the Gap" announcement. It was a voice, the article says, that had "warm, confident tones... [which] smoothed the edge of... anxiety and displacement... [of] travelers...caught between two worlds - They are neither where they anticipate, nor where they were..."

Enacademic, the investment dictionary, says financial travelers are also caught between two worlds --"Where you are [and] where you need to be..." And getting from one place to the other "...is not so clear cut, [because unlike the London Underground] there are no maps on the wall. So most people have no idea where they are."

To solve this conundrum, James Parnitzke, in How to Build a Roadmap - Gap Analysis, writes that you must establish "a clear and unambiguous understanding of the current state, define the desired end state [and then use that information to] develop a well-thought-out road map to close the gaps uncovered in the analysis." If you try closing the gaps without proper planning, author Charlie Gilkey warns that it could lead to "a lot of incoherent action, wrong turns, fits and starts, [and] confusion." That's why the traveler's warning "to 'mind the gap' between the platform and the train is apropos for the investor undertaking estate planning as well," says William Anderson in his post "Mind the Gap" and Avoid Costly Estate Surprises!" As an attorney, he complains: "While you can make every good effort to execute what you believe to be a sound estate plan, in many cases these fail to be completely executed [because execution is not just] about signing your will, trust documents, and/or powers of attorney." It also involves properly titling your assets and synchronizing your beneficiary designations with your estate plan.

I first became aware of this execution gap as a young advisor when an attorney told me, "Stock brokers, insurance agents, and title company clerks do more estate planning by accident than all the attorneys in the country do on purpose."  Recently, another attorney referred to this situation as "appalling" and lamented the "tremendous dangers" of seemingly innocuous actions. Being aware of this problem, we have always focused on the gaps in the execution of our clients' estate plans, as well as in the implementation of their overall financial plans. Way too often, clients and their advisers do things that seemed like a good idea at the time without stepping back and looking at the situation from all directions. That can be as dangerous as stepping onto a London street after only looking left. Ill-conceived actions can lead to unintended costs, taxes, and other consequences. Advisors, brokers, and insurance agents should be required to take a Hippocratic Oath pledging to "first do no harm."

In your financial travels, "If you don't know where you're going, any road will take you there," cautions George Harrison in a Lewis Carroll paraphrase. However, as long as you're not eligible to be on the last page of The Economist we can help you get and stay on the road that leads to where you need to be. And we do that by proper planning and prudent execution that is careful to mind the gaps.

How We Help Fill The Gaps
For our management clients we offer free access to the eMoney Personal Financial Software. Its powerful aggregation, organizational, and analytical capabilities provides us with the information we need to eliminate your savings and behavior gaps as well as spot and help correct gaps in your portfolio allocation, asset ownerships, beneficiary designations, tax efficiency, and so much more.

Unlike Sinatra, I have had a lot of regrets - way more than I would care to mention. The earliest regret I can remember is asking my Mom to take me over to play at Pam Clark's house when I was in kindergarten. The unmerciful teasing by my classmates for having a girlfriend still hurts today. My most recent regret is wasting $400 on a driver that didn't fix my slice. And my biggest regret is a lack of relationships. Being a shy, insecure introvert, I have neither nurtured existing friendships nor cultivated new ones. Strangely, I don't have many regrets from my teenage years in the '60s. That's probably due to the fact, as Robin Williams quipped, "If you remember the '60s, you weren't there."

Speaking of the '60s, John Lennon once said, "Reality leaves a lot to the imagination." If you listen to the lyrics from Imagine you would understand what he meant. "It's easy if you try..." to imagine a world that could have been. After reading Jason Zweig's book, Your Money and Your Brain, I realized that Lennon came up with a pretty good description of the neuroscience of regret. Zweig writes that we have regrets because, "The human brain is a brilliant machine for comparing the reality of what is against the imagination of what might have been." Zweig continues by saying it is this "...woulda shoulda coulda... ache of regret [that] encourages you to play out in your mind what else could have happened and focuses your attention on what you should have done instead. And that, in turn, motivates you to do better in the future. Regretting our mistakes keep us from rushing to commit them again."

A paper, What We Regret Most ... and Why -- by Neal Roese and Amy Summerville, confirms
"...that regret often initiates corrective action, but clearly, individuals are more likely to undertake corrective action when they believe it to be both possible and effective." It is also helpful if we can learn from little mistakes and avoid the big ones. As parents we know instinctively what child author Teresa R. Funke wrote, "The only difference between a grown-up's mistake and a child's is the size of the consequence."

As an advisor, I talk with lots of people who regret their lack of retirement savings. The longer it takes to realize this mistake and take corrective actions, the greater the consequence will be. That's why 401(k) participants need to be constantly reminded how much they should be contributing and into which options. And that's also why I am so excited about the new target date income funds (TDiFs) I learned about from W. Scott Simon's Morningstar column. Scott is a good friend and probably the leading advocate for the protection of retirement plan participants from overpriced and inappropriate plans

In his column, Scott highlights the term "Income" in the Employee Retirement Income Security Act (ERISA). "This reminds us that ERISA is concerned with the security of plan participants' retirement income ... While that has always been true ... in the past the focus has generally been on accumulation of the largest lump sum possible..." The problem with this approach is twofold - you're never sure if you are saving the right amount and you're subject to a collection of unknowable risks, such as inflation, market volatility, interest rate changes, and individual longevity. While Scott's article focuses on how TDiFs handle these risks better than traditional target date funds or annuities, I am more excited about the feedback they provide. Plan participants are regularly informed whether their plan is underfunded and what corrective actions could be taken, like increasing contributions or delaying retirement. This is exactly the type of motivation that is necessary to turn small regrets into effective corrective actions.

"If you don't know where you are going, you might wind up someplace else." That Yogi Berra saying summarizes the problem with traditional 401(k) plans. However, with the new targeted income plans, not only are the relevant risks managed, but also, income goals are established and meaningful feedback is provided. So at retirement, like Sinatra, your regrets will be "... too few to mention."

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