Broker Check

Which Came First, the Chicken or the Egg?

June 29, 2022

Every day, we work with clients who are both investors AND human beings with real emotions. Those very real emotions can, at times, short circuit our decision making when our fight or flight response kicks in.

As an investor who is also a human being, I can relate. I know personally how uncomfortable surprises in employment, expenses, or other unpleasant cash flow scenarios can affect my decision making. I find that I use my CFP education AND my behavioral finance tools at the same time on a daily basis when working with clients. After more than a decade in the business, I’ve learned that interruptions in cash flow greatly magnify our stress.

Daniel Kahneman, considered to be the father of behavioral finance, has long posited that risk tolerance and loss tolerance are two very different things for investors. Which therefore comes first, the chicken or the egg? (Let me apologize for the pun – many of you know that my Grandfather was a chicken farmer. You knew that was coming…)

What causes our distress when financial markets are volatile? Let me ask the question another way: if you owned a house in the 2008 crisis and the value of the house dropped: what was your level of concern? It likely depended on whether or not you had a cash flow interruption or job loss.

Daniel Kahneman’s writing on risk tolerance and loss tolerance led me to think about risk in a different light for our clients. Is volatility inherently bad? Or, is it that when we don’t have enough of a cash cushion, market volatility heightens our stress? That led to the SCORE process we follow.

In March of 2020, we talked with every client. We followed our SCORE process and focused on their unique plan, cash and cash flow. It’s why cash and cash flow precedes how we discuss opportunities in investing. Following the process in both good times and bad helps us to help our clients follow the plan.

Could SCORE work for you? Let’s talk.


Tip of the Month

A harmless like on social media can have repercussions. Sometimes that like can lead to malware and viruses.


2021 Five Star Wealth Manager

Once again, I am honored to be named a Five Star Wealth Manager by Texas Monthly. Nearly 4,000 Dallas-Fort Worth wealth managers were considered for the award; ten percent of these candidates were named 2021 Five Star Wealth Managers. Being recognized is always nice, but the real blessing is serving families and helping them on the path to fiscal harmony in their lives.

This announcement also appeared in the September 29th edition Wall Street Journal.



Orchestrating Fiscal Harmony™,  
Kelly Kunst CFP®
Founder



2021 Five Star Wealth Manager


Once again, I am honored to be named a Five Star Wealth Manager by Texas Monthly. Nearly 4,000 Dallas-Fort Worth wealth managers were considered for the award; ten percent of these candidates were named 2021 Five Star Wealth Managers. Being recognized is always nice, but the real blessing is serving families and helping them on the path to fiscal harmony in their lives.


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