Welcome to Fusion Fix-It Fridays, hosted by Jonathan Blau, CEO of Fusion Family Wealth. In today’s episode, Jonathan dives into the uncertainty trap—the harmful reliance on financial predictions that many investors pursue to find certainty about their financial future. He explores how the financial industry has shifted from selling products to selling advice and how this advice often feeds the illusion that certainty can be bought. Jonathan will explain why financial forecasts are frequently unreliable and how investors should focus on preparation rather than prediction to navigate the unpredictable nature of the markets. Listen to Jonathan’s insights on avoiding the uncertainty trap and taking a more resilient investment approach.

IN THIS EPISODE:

• [0:21] Jonathan’s topic is financial predictions and the inevitable uncertainty
• [2:04] Firms are selling the illusion of certainty regarding consumer investments
• [3:00] Beware of financial predictions and instead work on the preparation for the uncertainty 
• [8:22] Discussion of the Bond Market, which will be less favorable
• [9:31] Bottom-line investment advice

KEY TAKEAWAYS:

• The financial industry's reliance on predictions to sell advice and products perpetuates the illusion of certainty, which cannot be achieved. Forecasts about market timing or economic performance with studies showing their accuracy are no better than chance. Investors often fall into the "uncertainty trap" by prioritizing predictions over sound financial preparation.
• Relying on financial forecasts, especially those from seemingly credible and articulate forecasters, is often counterproductive, as their accuracy is comparable to a coin flip. Instead of seeking predictions, investors should focus on preparation and resilience to navigate unprecedented events and uncertainty effectively.
• The idea that uncertainty can be heightened at specific times is misleading because uncertainty is constantly inherent in every moment. Media narratives suggesting otherwise can create unnecessary caution and anxiety for investors. Recognizing that ever-present uncertainty helps foster a more grounded and resilient investment approach.

ABOUT THE HOST: Jonathan is the President and CEO of Fusion Family Wealth, founded in 2013 to focus on behavioral finance and guide clients toward rational financial decisions. A sought-after speaker in wealth management, Jonathan previously held senior roles in tax and estate planning at Arthur Andersen. He has a BS in Finance, an MS in Taxation, and an MBA in Accounting. Based on Long Island, Jonathan is active in the local business community, supports causes like the Middle Market Alliance and Sunrise Day Camp, and enjoys boating with his family.

RESOURCE LINKS 

Fusion Family Wealth - Website

Jonathan Blau - LinkedIn

Please Note: No individual has been provided nor promised any direct or indirect economic benefit for sharing Fusion podcasts/articles/opinions. No post should be construed as any assurance that a reader will find the podcast/article/opinion beneficial. Please click below for important disclosure information.

https://www.fusionfamilywealth.com/disclosures

Uncertainty, Financial Predictions, Preparation, Fusion Family Wealth, Investment, Wealth Management, Behavioral Finance, Behavioral Investment Counseling, Investor Behavior, Illusion of Certainty, Financial Forecasts, Market Timing, Financial Planning, Investor Resilience, Economic Trends, Media Narratives

A copy of Fusion's current written disclosure brochure discussing our advisory [00:00:15] services and fees is available upon request or at www. fusionfamilywealth. com.

So, well, let me start off by saying [00:00:45] the financial industry, is the seller of a product. I call it advice. It used to be financial products like mutual funds and, and, uh, insurance products and such, but it has evolved into primarily advice [00:01:00] driven sales. Um, In the pursuit of what the client or the consumer who's the investor is looking for, which is as much certainty about their financial future as they can possibly buy.

Uh, [00:01:45] quote unquote forecasts, and at the same time they'll talk about how the economists are going to consistently forecast what's going to happen in the economy, when the next recession will come and end, and they'll use that information, the, the investment, uh, advisory firm [00:02:00] to tell the investor how to gain a timing advantage over the stock market.

Uh, so, so I shouldn't say that. The [00:02:30] illusion of certainty is prevalent. What doesn't exist is certainty. In fact, what I always tell people who are seeking it. in respect, with respect to their financial investment, uh, endeavors, is that not only can't we get it there, but certainty doesn't exist [00:02:45] anywhere as a condition in nature.

And one example is, um, fellow named Phil Tetlock wrote a book where he did a study on the accuracy of, of, of predictions. And what he found is. Forecasters write about 49 percent of the time. So it's the [00:03:30] same efficacy of a coin flip. But what was worse is the, the, the forecasters who were the most articulate and, and the most credible were the ones that often had the worst forecasts and, and unfortunately [00:03:45] those are the ones that the, uh, the person who's seeking out certainty will listen to In, in, in, in terms of.

So what I mean by that is, uh, things that never happened before. we call unprecedented. Uh, those are the things that a lot of people are always afraid of. What if this or that happens? [00:04:30] And, uh, and, and what, what if Russia goes into Ukraine with, with tactical nuclear weapons? We've never seen that before.

And I say two to three years because typically, uh, while the stock market goes down on average During what's called a bear market, a 20 percent decline from a previous peak, that [00:05:15] happens once in five or six years. The recovery from the bottom of that bear market to a new high since the 1920s has taken 40 months.

So the other, um, lesson [00:05:45] that we want to learn about certainty from my perspective is when we're watching the media and they come up with one of my least favorite narratives, which is, uh, they talk about heightened uncertainty. The market hates uncertainty, they tell you, and investors hate uncertainty. [00:06:00] So with this new war in Ukraine and with the new political regime coming in, the markets just hate uncertainty and they'll tell you that you have to be cautious because of that.

So [00:06:30] by definition, I always found that to be a very intriguing thought in terms of how crazy it is that there's levels of uncertainty that can kind of be measured. So. What's interesting is there are studies that look back, [00:06:45] uh, in modern history at things like policy change and how often newspapers and people are talking about uncertainty.

It's just, it was probably never more certain that we were going to have a terrorist attack on our soil on September, than on September 10th. It's just that we were ignorant to the fact [00:07:30] on September 10th. It's not that the risk of a terrorist attack became less. more likely after September 11th occurred.

It's actually, um, the opposite. We probably, again, never could have been more certain that there'd be a terrorist attack. There was never more certainty of one than on September 10th. So, [00:08:15] uh, so when we think about it in those terms, it's important not to get fooled by the idea of heightened uncertainty. So when we're endeavoring to roll our money, um, we need to understand that uncertainty is a [00:08:30] condition that always exists and we're pre programmed with certain biases.

Are they going to be positive this year or negative, and [00:09:00] to what magnitude? We'd rather invest in bonds, even though we know that the long term outcome is going to be less favorable. Because it's more important to us from a behavioral standpoint to, to invest in, in the bond market. because it has more certainty [00:09:15] attached to when we're going to receive income and when we're going to um, receive our principal back at maturity.

All of Wall Street's annals last year had an [00:09:45] average forecast that the stock market, the S& P 500, would end this year at 4, 800. We're now at 6, 100, so they were only wrong by about 25%. And the year before, it was even worse. The head of, uh, [00:10:00] Morgan Stanley's, uh, in, in stock investment, uh, research, uh, was a guy named, uh, Mike Wilson.

You know that you're prepared for what, [00:10:30] whatever causes it, uh, in terms of switching to be able to spend the money that you have aside, two to three years living expenses. And also be prepared emotionally. Understand that things that never happened before happen all the time. And engage more with [00:10:45] history, uh, so that you can, when you're engaged with history, you'll appreciate what Harry Truman said, which is that, uh, the only things that are new in the world are the history that we don't know.

We're on Apple, we're on Spotify, and uh, and all the other favorites that That you, uh, that you might access your others on at the same time, you can go to crazy, wealthy podcast. com, and you can also access it on our website, [00:11:30] fusion family, wealth. com. Again, thanks for listening. And we'll see you in a couple of weeks.

the previous [00:12:00] podcast by fusion family wealth, LLC fusion was intended for general information purposes. Only no portion of the podcast serves as the receipt of, or as a substitute for personalized investment advice from fusion or any other investment professional of your choosing. Different types of investments involve varying degrees of risk, and it should not be assumed that future performance of any specific investment or investment strategy or any non investment [00:12:15] related or planning services, discussion, or content will be profitable, be suitable for your portfolio or individual situation.

No portion of the video content should be construed by a client or prospective client as a guarantee that he or she will experience a certain level of results if Fusion is engaged or continues to be engaged to provide investment advisory services. A copy of Fusion's current written disclosure brochure discussing our advisory services and fees is available upon request or at www.