Dealing with Complexity

Dealing with Complexity

Naturally as we get older, life gets complex. We tend to accumulate assets and liabilities, responsibilities, obligations, interests and commitments. Growing complexity is one key reason people seek financial advice.

A common feature of growing older is our lives become more complex — not out of any conscious design but often as a result of circumstances. This complexity is not necessarily a bad thing. The ornate and multi-faceted nature of life can add to its richness.

But with complexity comes challenges. There are inter-dependencies in systems that mean a change in one area can have unexpected and unpredictable consequences elsewhere. For instance, an individual who buys an illiquid asset as a long-term investment could experience challenges in meeting liabilities that demand regular and predictable cashflows.

In other words, complexity means you have a system with lots of moving parts. Changing something impulsively in one area often necessitates adjustments elsewhere.

As complexity is incremental, it can be difficult for the person at the middle to see the bigger picture. This isn’t a reflection on the individual, mind you, but a reflection of the fact, that none of us — however smart we are and regardless of our credentials — has infinite cognitive capacity to recognise every possible permutation and combination in the material systems that build up organically in our lives.

And remember that as well as the internal drivers of change, there are any number of external influences that can be difficult to keep track of. Regulatory change, tax law amendments, technological disruption and rapidly evolving economic environments all can further complicate each individual’s capacity to navigate complexity.


Sharing the cognitive load

This is why complexity is one of the key reasons people seek out a financial adviser. Alongside the need to meet distant financial goals, there are the immediate concerns of managing cash flows, meeting existing liabilities, controlling risk, gaining clarity and making optimal financial decisions that are in your best interests.

Rather than attempting to make predictions, what good advice does is provide a structure that allows for flexibility so that changes in one area of one’s material life do not create unforeseen problems elsewhere. Life-long cash flow modelling, a sensible asset allocation and regular rebalancing are some of the tools to achieve this, alongside a risk management framework.

Of course, uncertainty can never be totally eliminated. We had a reminder of that with the sudden appearance of the COVID-19 pandemic. Externally, laws can change, economies can slow, new technology can upend established ways of doing things; internally, changes in lifestyle arrangements, family circumstances, health and income can force alterations.

What an adviser provides each client is not so much certainty but a set of tools to provide a greater feeling of control, a structure to manage the complexity and a confidence that they’ll be OK. The tangible benefits of better investments, tax structures, cash flow and risk management combine with the intangible benefits of a sense of security and peace of mind.

But dealing with complexity is easier if you grasp what you can and can’t control. No-one can control the ups and downs of markets or the pendulum of regulatory, technological or economic change. We can, however, create a plan that recognises there inevitably will be surprises and that builds into the system ways that allow us to deal with change effectively.

In summary, a good financial adviser teaches you how to live with ambiguity, uncertainty and complexity rather than trying to solve every problem at once and predict the future.

A good adviser helps you to clear away some space amid the growing tangle of your life and provides you with a plan to manage change and complexity. The outcomes are clarity and confidence.

That’s an investment worth making.


Next steps

If you have any questions/thoughts in relation to this article or would like more information, please contact Gordon Thoms or David Conte at Calibre Private Wealth Advisers on ph. (03) 9824 2777 or email us here.

The information contained in this article is of a general nature only and may not take into account your particular objectives, financial situation or needs. Accordingly, the information should not be used, relied upon or treated as a substitute for personal financial advice. While all care has been taken in the preparation of this article, no warranty is given in respect of the information provided and accordingly, neither Calibre Private Wealth Advisers, its employees or agents shall be liable for any loss (howsoever arising) with respect to decisions or actions taken as a result of you acting upon such information.



This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial and tax/or legal advice prior to acting on this information. Before acquiring a financial product a person should obtain a Product Disclosure Statement (PDS) relating to that product and consider the contents of the PDS before making a decision about whether to acquire the product. The material contained in this document is based on information received in good faith from sources within the market, and on our understanding of legislation and Government press releases at the date of publication, which are believed to be reliable and accurate. Opinions constitute our judgment at the time of issue and are subject to change. Neither, the Licensee or any of the Oreana Group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Gordon Thoms and David Conte of Calibre Private Wealth Advisers are Authorised Representatives of Oreana Financial Services Limited ABN 91 607 515 122, an Australian Financial Services Licensee, Registered office at Level 7, 484 St Kilda Road, Melbourne, VIC 3004. This site is designed for Australian residents only. Nothing on this website is an offer or a solicitation of an offer to acquire any products or services, by any person or entity outside of Australia.

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