When people ask what we do as wealth advisors, concrete examples include managing investments, developing tax strategy, and modeling retirement.
But the true crux of our work is helping our clients manage the risk of regret.
Regret is a funny thing. To regret something is to admit, at least to yourself, that you made a mistake.
Regret often comes from confusing a bad outcome with a bad decision. We judge our past selves using information we only learn later. But good decisions are made in real time, under uncertainty, with incomplete information.
Wealth planning is not about making sure every choice turns out perfectly. It is about making choices that still make sense when viewed through the lens of what you knew, what you valued, and what you could reasonably control at the time.
The goal is not to always be right. The goal is to be right – or wrong – for the right reasons.
One of the clearest examples of this in our work comes from clients who hold highly appreciated concentrated stock positions. Maybe they accumulated shares through years of equity compensation. Maybe the stock represents not just an investment, but a core belief, or a career, a set of relationships, and a company they still believe in deeply.
From a portfolio-construction standpoint, the advice can sound generic, even dogmatic: diversify.
As investment professionals, we are well-versed in the data that tells us that investors are not reliably compensated for taking on single-stock risk. If too much of your wealth is tied to one company, selling down the position and spreading the proceeds across a diversified portfolio is usually the textbook answer.
But for many people, the textbook answer is not always the one that minimizes the risk of regret.
Selling can trigger a large capital-gains tax bill. It may feel emotionally difficult to part with the stock that created your wealth in the first place. And if we remain optimistic about a company, selling may feel less like prudent risk management and more like abandoning a winner.
The risk of regret is almost always two-sided.
One side is easy to imagine: sell too much too soon, pay the tax, and then watch the stock double again.
The other is just as real: hold too much for too long, defer the tax, and then watch a concentrated position fall sharply.
Neither possibility means one choice is obviously correct. The work is in finding the middle ground.
We can often soften the edges of this decision by employing various techniques that separate the diversification event from the tax event, such as direct indexing to harvest offsetting losses, using options to hedge risks, spreading sales over several years (potentially keeping capital gains in lower tax brackets), or earmarking some shares to meet charitable giving goals, to name a few.
A client may choose to retain more single-stock exposure than an academic model would suggest, but that does not necessarily make the decision wrong. It makes it human.
Every dollar is a bet on the future
Concentrated stock is one of the most visible examples of regret risk in our work, but it is hardly unique. Once you start looking for it, the same two-sided tradeoff appears almost everywhere money intersects with life.
One question we ask all our new clients: “On a scale of 1 to 10, how confident are you that every dollar to your name is serving you as best as it possibly can?”
When you spend money today, you are betting that what you buy will create more value or happiness than the alternatives.
When you save it, you are betting that your future self will value that dollar more than your present self does – especially if that dollar will buy you more in the future than it can buy you today.
When you hold cash, you accept inflation risk in exchange for certainty.
When you invest in stocks, you are betting that businesses will continue producing value long into the future.
When you work with an advisor, you’re betting that an outside perspective can help you make better decisions, stay accountable, and keep your present and future selves in conversation.
Spending too much or spending too little?
Here’s another vivid example of the two-sided nature of the risk of regret.
Spend too much, and you rob your future self of options. Spend too little, and your future self might regret the experiences they never had.
This is where the power of wealth planning software shines. We have many clients who come to us with wealth scattered about, but no real sense of what it can buy them. Only by tying it all together in one cohesive picture and making assumptions about the future can we get a sense of whether financial independence is within reach, or if it is indeed time to put in the pool or purchase the Porsche.
Another two-sided risk is your lifetime tax liability.
Should we pay taxes now because we think our tax rate in the future will be higher – either because we’ll be in a higher bracket, or because rates will be higher in general?
In 2024, we wrote the four lands of retirement assets, which describes how retirement savings can be routed to various types of accounts.
Clients who come to us on the verge of retirement may already regret how their wealth is spread across Traditional, Roth and taxable accounts. They may have missed low-income years or market pullbacks to contribute or convert to Roth. They may have built up taxable gains in unsuitable, expensive funds that will use up tax budgets to unwind.
These decisions can’t always be optimized with certainty. Tax laws change, markets move, careers evolve, and none of us know exactly what our future selves will need.
The goal is to make those decisions intentionally while we still have choices available.
That might mean paying some tax today to reduce a larger future liability. It might mean contributing to Traditional accounts because current deductions are still valuable. It might mean realizing gains sooner than feels comfortable, or deliberately deferring them. As with concentrated stock and spending decisions, the risk of regret lives on both sides.
Good planning is not about eliminating uncertainty
In nearly every area of wealth planning, the risk of regret runs both ways. Diversify too quickly and you may regret giving up future upside. Diversify too slowly and you may regret taking more risk than you needed to. Spend too much and you constrain your future; spend too little and you may miss experiences the money was meant to make possible.
The objective is not a life without mistakes, but a life in which our choices were intentional enough that we can live with the outcomes.
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