Planning for change—in life and in the markets

By David Wismer

October has a way of reminding us that change is inevitable.

In many parts of the country, temperatures begin to fall, daylight grows shorter, leaves change color, and routines perfectly suited to summer need to be adjusted.

None of this is surprising. We expect the seasons to change, and we adapt accordingly.

That makes October an appropriate time to consider another kind of change. October is National Financial Planning Month, a time when financial professionals often encourage clients to revisit their goals, evaluate their progress, review year-end checklists, and make sure their financial plans still reflect where they are—and where they hope to go.

Clients’ lives change

That last part is important.

A financial plan is rarely based on the assumption that a client’s life will remain unchanged for decades. Quite the opposite. Good planning attempts to anticipate change.

Clients get married or divorced. Children grow up, go to college, and eventually leave home. Careers advance, stall, or take unexpected turns. People inherit money, sell businesses, care for aging parents, move, and reconsider when they want to retire.

Priorities change as well.

Someone in their 30s may be primarily concerned with accumulating assets, buying a home, or funding college accounts. Twenty years later, that same person might be thinking about retirement income, health-care costs, charitable giving, and leaving a legacy.

Successful financial advisers understand this. A plan created at age 35 should not simply be placed on a shelf and pulled out again at age 65.

The financial plan needs to evolve as the client’s life evolves.

That idea is becoming increasingly important to the financial-planning profession itself. Research from the Financial Planning Association and Allianz Life examines how planners expect to respond to evolving client needs and “adapt their businesses and client engagement due to the changing landscape in the years ahead.”

The research found that 88% of planners surveyed planned to learn more about their clients’ values and beliefs to better incorporate them into financial plans. The study also found that “74% will invest more time in managing each client relationship, while 67% will evolve their business model to accommodate more clients who view planners as collaborative partners.”

An advisory coach recently addressed this subject for Proactive Advisor Magazine, noting, “Proactively managed clients deserve adaptive messaging, which requires knowing (and viscerally understanding) each client’s exact season.” He adds, “You can share the right message at each distinct life stage to deepen relationships, drive retention, and elevate your expertise as a trusted voice in an industry full of look-alike messaging.”

Market conditions evolve, too

Markets move through their own seasons.

Economic growth can be highly cyclical, influenced by system shocks, or reflect the momentum of new technologies or industries. Inflation can be dormant for years before becoming a major concern. Interest rates rise and fall. Market leadership rotates. Volatility expands and contracts. Investments that thrive in one environment may struggle in another.

That does not mean investors should attempt to reposition portfolios based on the latest headline. History suggests how difficult that can be, particularly when market behavior seems counterintuitive.

Today’s market environment offers an example. A recent article questioned why the S&P 500 remains near record highs when “bond yields are at levels investors haven’t seen in more than two decades. Oil remains above $90, AI risks are multiplying and market breadth has deteriorated.”

However, if we readily accept that a financial plan should adapt to changes in a client’s life, why assume an investment approach should not adapt to meaningful changes in market conditions?

Traditional strategic asset allocation determines an appropriate mix of stocks, bonds, and other investments based on an investor’s objectives, time horizon, and risk tolerance.

But the risks within those asset classes are not constant.

A portfolio labeled “moderate” does not necessarily experience moderate market conditions every year. A 60/40 allocation can behave very differently depending on what is happening with equities, interest rates, inflation, and correlations among asset classes.

Planning for change rather than predicting it

This is one reason adaptability deserves a larger role in advisers’ client conversations.

But adaptability is different from forecasting. We prepare our homes for colder weather without knowing the exact temperature six weeks from now.

Rather than asking, “What will the market do next?” investors and advisers should consider a different question: “Is the portfolio prepared to respond if conditions change?”

Instead of relying on a single market forecast, an adaptive investment process can evaluate market trends, volatility, momentum, correlations, or other measurable factors, adjusting exposure when warranted.

No process eliminates all risk. Nor will an adaptive approach make every correct decision. The objective is to respond to changing conditions in ways that may help mitigate extreme market risk.

At Flexible Plan Investments (FPI), that philosophy has been central to the firm’s approach for decades. FPI uses quantitatively driven investment strategies designed to respond to changing market environments rather than relying exclusively on static allocations or fixed market outlooks.

FPI’s approach also incorporates multiple levels of risk management. Different strategies can respond to market conditions in different ways, using disciplines such as trend following, momentum, volatility management, asset-class diversification and rotation, and adjustments to market exposure. Portfolios can combine strategies with different methodologies, reducing reliance on any single asset class, investment style, time frame, or market outcome.

A financial plan evolves as a client’s life evolves. An adaptive investment process recognizes that the financial markets evolve as well.

Neither requires us to know exactly what is coming next.

Both require something more practical: a plan for dealing with change when it arrives.