Retirement Pension

•Having adequate resources does not necessarily equate to easy choices about asset allocation. I had a terrific start (lots of face cards) but did not want to risk losing the hand by following a strategy with which I was unfamiliar. Additionally, I did not want to let my bridge partner down. In pension land, having lots of money to invest should not equate to a "bet the bank" mentality (i.e. adopting an overly complex approach). Moreover, the interest of beneficiaries (like other partners) must be taken into account.


•Some losses are imminent. Sometimes a few cards are purposely lost in early rounds as a way to gain a superior position for an ultimate win. In investing, markets can bounce around, tempting institutions to pull and run. Establishing trading limits that comport with pre-established goals and risk tolerance levels makes sense. Confusing long-term goals with short-term actions can sometimes be costly and ill-advised.

•Switching partners from time to time offers fresh insights but is likewise hard work. Bridge takes a round robin approach that rattled me at first. After all, if I was winning with a particular partner, why should I have to change? What I've learned is that each new pairing requires a re-examination of the relationship, especially a focus on how to properly communicate with one another. While some investment relationships are ongoing, many are not. The need to clearly exchange mission-critical information is an important skill. Just as any failure on my part to discern my bridge partner's intent during the bidding process can lead to ruin, so too can a breakdown in communication between asset owner and advisor. As the consulting industry consolidates in favor of larger organizations, client communications will be tested as parties get to know each other from scratch. (Note: Interested readers may want to check out "Consultant market set for further contractions," Professional Pensions, April 30, 2010.)

•Skill is essential but sometimes luck dominates. As much as I focus on learning the game, bridge can frustrate. If you are dealt a bad hand, you simply have to get through it, be patient and know that discipline is not a guarantee of high returns. Investing is much the same. A good process is paramount but does not mean that a portfolio's return in any given quarter is going to outbeat a particular target.

•Know where you are going. Journalist Chuck Palahniuk observes that "If you don't know what you want, you end up with a lot you don't." If I stop thinking ahead several plays in bridge, I will unlikely miss my chance to win a particular hand. If an asset owner falls short in proper goal-setting, achieving objectives is going to be hit or miss and could certainly induce all sorts of unpleasant consequences - economic and regulatory.

Finally, bridge requires thought and hard work but can be tremendously rewarding. I learn new things all the time. The life of an investment decision-maker is challenging at best and exposes individuals to tremendous fiduciary liability at worst. Yet numerous professionals make pension stewardship their life's work because it is fulfilling, interesting and satisfying.