Context is King

“Eat food. Not too much. Mostly plants.”

This somewhat well-known quote is from a NY Times Magazine piece written by Michael Pollan in 2007. Many know Pollan for, among other things, railing against something called nutritionism.

Nutritionism is the idea that the key to understanding food’s impact on our health lies in isolating its individual nutrients. If we determine which nutrients are beneficial, and which are detrimental, we can fine-tune our diets and maximize health.

According to Pollan, nutritionism began in earnest during the 1980s. Since then, we’ve been subjected to a litany of nutrient-centric fad diets, which are seemingly disproven and replaced as frequently as we hold presidential elections. The processed food industry has been all too happy to ride this trend by creating a never-ending cascade of low-fat, low-carb, sugar-free, high-protein, high-fiber, fill-in-the-blank-with-the-nutrient-du-jour foods.

As evidenced by long-term obesity trends in America, this fixation on nutrients has not produced terrific results.

NYU nutritionist, Marion Nestle, gives one explanation why this may be: “The problem with nutrient-by-nutrient nutrition science is that it takes the nutrient out of the context of food, the food out of the context of diet, and the diet out of the context of lifestyle.”

Contextless analysis can only get us so far. What works for one may not work for another, and this doesn’t necessarily make either of them wrong – just different. It’s for this reason that context is king.

When it comes to finding an appropriate investment strategy, king context definitely reigns supreme.

Prospective clients often come to our firm with a host of specific concerns, and investments are normally one of them. Investments are a large part of what initially interested me in this profession, and once the requisite work to responsibly discuss them has been performed, we are obviously more than happy to guide client portfolios. But, instantly analyzing investments without the appropriate context is a recipe for disaster.

Discussing somebody’s investments without the appropriate context is, at best, entertainment, and has the potential to be harmful. This is why we won’t make investment recommendations to a client until we’ve gone through our financial planning process. Investments are just a piece of the overall picture, and many variables feed into what type of investment approach somebody should take.

Somehow this is still a relatively novel concept in our profession. Many advisors are more than happy to fill the role of the processed food industry by offering contextless hot-takes on how somebody they just met should be allocating their life savings – “You have too much small cap exposure”…”A value tilt would really be preferable to the MSCI index for your international funds”…”Here’s the backtest on how our portfolio would have done over the last five years”. All I can say to this is – yikes.

Discussing specific thoughts on investments absent a personalized financial plan is doing a disservice to investors. It takes the investment out of the context of their goals, their goals out of the context of their overall plan, and their plan out of the context of their lives.