Life isn’t a bed of roses, which is why we sometimes face more than our fair share of woes and worries.
When I am on stage at the start of, say, a 60-minute professional speech or a half or full-day workshop on financial planning or retirement funding, I often start by saying: “We all have money problems. Most of us have problems because we have too little money. Some people however, have problems because they have too much money!”
I then ask: “Which group are you in?”
THE MONEY SEGMENTATION
Such segmentation is true on a worldwide scale. And even within the microcosm of my small financial planning practice, that truth is evident.
Most clients seek my services because they wish to grow their small stash of cash to a larger one so they might have sufficient money to permit them to achieve financial planning goals. These goals include funding a comfortable retirement, or sending their children to university and funding the planned one, two or three degrees they pursue.
A smaller group of my clients though, have more than enough current wealth to meet such prosaic goals because of their well-run businesses. Their more open-ended wealth accumulation goal differs of course. Their goal is usually centred on aiming for yield enhancement on the portion of their liquid asset base they’re comfortable exposing to a sane level of investment risk (meaning price volatility) to try and improve long-term returns.
It might surprise you to learn I vet both categories of potential clients to see if I’m able to help them and to ascertain whether the chemistry is right between us. Only then are they likely to truly fit within my practice by adhering to my three core financial planning practice principles.
You see, every competent financial planner has foundational principles. Given the high level of informational intimacy required by professionals like family doctors, lawyers, tax accountants and financial planners, a wise client would
take heed of word-of-mouth referrals from respected sources. They could also conduct independent research on perhaps LinkedIn (or at the very least carry out a Google search on the target professionals) before interviewing them face-to-face.
I also recommend another specific filter be used if the professional you are seeking is a licenced financial planner who’s able to journey with you and your family over many years, perhaps even decades, to help you reach key financial goals. That additional filter is an alignment of personal values.
ALIGNMENT OF PRINCIPLES, BELIEFS AND CONVICTIONS
You can identify such values by asking the financial planner you’re interviewing about his or her core professional principles upon which their financial planning practice is founded.
A potential client should only ask to work with a financial planner whom they believe has sound values and solid related principles that are strategically aligned with the client’s beliefs and convictions.
For me, the three founding principles of my practice dating back to 2001 still hold true today in 2017:
1. Intense client education — I only accept clients who are eager to learn about financial planning principles and investment concepts;
2. Buy low, sell high — this foundational truth of successful long-term investing can be automated using emotionless investing strategies like DCA, which stands for Dollar-Cost Averaging, and dynamic asset allocation with rebalancing; and
3. Diversification — I believe in the tried and true wisdom of not putting all your eggs in one basket.
My well-defined practice principles make it easy for me to explain to potential clients what I most likely can and cannot do for them. That level of transparency extends to a careful explanation of all possible related fees and charges associated with my services. This candidness is crucial because, as I pointed out at the beginning, each of us has money problems.
For those with problems associated with having too little money, there is no shame in being born poor or at least not being as wealthy as we would like to be. But given the superabundance of opportunities surrounding us in this second decade of the 21st century, we owe it to ourselves to learn how the world’s economic engine runs and to then think, toil and tinker to re-channel and accumulate some of that bounty for ourselves and our families.
For those who have money problems that come from having too much wealth, I have found that gaining clarity on three distinct issues eventually minimises those wealth woes:
1. Yield enhancement — excess capital should be deployed intelligently to try and raise overall yields above the risk-free cash rate to stay ahead of inflation;
2. Empowerment — wealthy people with children are often terrified that leaving vast sums of unearned, excess money to their progeny will weaken and debilitate ensuing generations; and
3. Generosity — wisely applied philanthropy can make the world a better place for us all.
The wealthy should think deeply about each of those three crucial issues. Doing so can help them make our world better for us all. For instance, consider all the good the Bill & Melinda Gates Foundation, augmented by Bill Gates’ and Warren Buffett’s prodigious wealth, is doing for the world.
On the other hand, for the vast majority of us who aren’t in their league, what’s stopping us from working hard and smart, spending less than we earn, saving and investing the difference, and doing all that for a long, long time? What?
© 2017 Rajen Devadason