MML #060: Your Biggest Investment Risk Is You

Over the past few editions, we've been deep in the weeds on Medicare — enrollment windows, Part B premiums, IRMAA surcharges, and how those decisions connect to your broader retirement strategy. There's still more to cover, and we will. But this week, I wanted to step back from the technical material and share something a little different.

Consider this a breather. And maybe some food for thought.

The Book I Keep Coming Back To

A few years ago, a financial planner named Carl Richards wrote a slim, deceptively simple book called The Behavior Gap. Richards is a CFP® and the creator of the Sketch Guy column in The New York Times, where he explains financial concepts using hand-drawn diagrams on napkins. The book is very much in that spirit — clear, honest, and cut down to what actually matters.

The core idea is that there's a gap between the returns investors could earn and the returns they actually earn. The gap isn't caused by bad markets or bad luck. It's caused by behavior. By us.

Richards calls it the behavior gap. I'd call it the thing I think about most in my work with lawyers.

Why This Stuff is Different for Lawyers

I’m going to be honest with you—lawyers aren’t always the easiest to work with. You're not dealing with financially unsophisticated people. Lawyers are smart, analytical, and accustomed to managing complexity. If better information were the answer, lawyers would have the best financial outcomes of anyone.

But that's not always how it plays out.

What Richards describes — the fear-driven decisions, the tendency to do something when the market drops, the impulse to chase what worked last year — these are signs of being human. And being smart can actually make it worse, because smart people are better at constructing convincing justifications for decisions they've already made emotionally.

I've sat across from brilliant trial lawyers who couldn't resist moving to cash in March 2020. I've watched partners near retirement chase technology stocks in 2021. The behavior gap doesn't discriminate by credential.

The Ideas That Stuck With Me

A few things from Richards' book that I find myself returning to regularly:

Simplicity beats complexity. Richards argues that overly complicated financial plans create more opportunities for error, not fewer. A simple, clear strategy that you actually stick to will outperform a sophisticated strategy you abandon when things get uncomfortable. For lawyers who are used to mastering complexity, this one can be a hard sell. But it's true.

Planning matters more than the plan. The financial plan you write today will be wrong in some ways within a year. That's fine. What matters is the habit of revisiting decisions, adjusting thoughtfully, and not letting the plan gather dust. Richards puts it plainly: life and markets are unpredictable. The process is what keeps you grounded.

Your goals are the benchmark. Richards pushes back on the idea that you should measure your portfolio against the S&P 500 or whatever the market did last quarter. The real question is whether your financial decisions are moving you toward your own goals — the retirement you actually want, the transition out of practice on your terms, the financial security that lets you stop worrying. That's the only scoreboard that matters.

What This Means at First Light

I share Richards' view that most financial planning mistakes are behavioral, not technical. The math of retirement isn't that hard. The behavior is.

I often get questions like, “So where do you think Nvidia goes from here?”

But my job isn't to find you the highest-returning fund or predict what the Fed will do next. It's to help you build a strategy that's aligned with your goals, simple enough to understand and trust, and sturdy enough that you won't abandon it when things get uncomfortable — because they will, at some point, get uncomfortable.

That's the behavior gap in practice. And closing it, in my experience, has a lot more to do with clarity, honesty, and a good process than it does with any particular investment decision.

If you haven't read The Behavior Gap, I'd recommend it. It's a quick read, and it'll likely change the way you think about your own financial decisions.

Next week, we return to Medicare — specifically, how your healthcare decisions in the years before and after retirement can affect your tax picture in ways most people don't anticipate. It's one of the most underappreciated planning opportunities I see with lawyer clients, and I don't want to leave it unfinished. If you missed the last several weeks on the topic, you can catch up here.

As always, thanks for reading.

— David

First Light Wealth

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