OPINION | Required, desired, aspired: How to choose your financial focus

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You can improve your financial well-being by knowing you can cope with anything, no matter what you earn or how much wealth you have. Advisors can help you put plans in place to give you that peace of mind, writes Laura du Preez.


Financial advisors have a much broader and more meaningful role to play in our lives than advising on policies or telling us where to invest.

An advisor’s role includes helping you develop resilience and set priorities, Jason Butler, a UK financial advisor and columnist for the Financial Times, told the recent Humans Under Management conference for advisors.

Being resilient involves the right attitude to setbacks and the confidence of knowing you can cope with them, the conference heard.

Setting priorities makes life more meaningful and involves envisaging the life you want and planning how to get it, speakers at the conference said.

Tips on setting goals

When setting goals, you need to answer these following questions, Jason Butler, UK advisor and Financial Times columnist, says:

  • Will I be okay financially? This means different things to different people so your advisor should explore what it means for you.
  • Can I afford or justify spending on luxuries and fun things?
  • Will my wider family be ok and what does that mean?
  • What legacy do I want to leave? This is not necessarily a money cause – it may be passing on your knowledge or values.
  • You should bucket your goals into required, desired and aspired, he says.

Your financial plan must be to achieve the required goals. If it goes well, you can achieve your desired and even your aspirational goals.

Essentials of financial wellness

Sarah Newcomb, financial psychologist for investment ratings and research company Morningstar, says economic stability is not enough for financial well-being – you also need psychological well-being.

One important and powerful way you can improve your financial wellbeing is knowing you can cope with anything, no matter what you earn or how much wealth you have. Advisors can help you put plans in place to give you that peace of mind.

Newcomb says Morningstar’s research shows that knowing you can cope, results in people having fewer negative emotions – stress, anger, fear and helplessness - regarding money – than that those who do not have this financial confidence.

Butler says you cannot expect your life to be a straight line to the outcome you want, but when you find yourself taking steps back, an advisor can give you perspective. 

READ | How can I find a good financial advisor?

He reminds those concerned about the current cost of living crisis that we have been here before. He relates his own experience of buying property in 1989 – just before the recession of the early 1990s resulted in increasing interest rates and his home loan repayments doubling over the next three years.

His financial nightmare got worse because the economy in the UK went into a severe slump and he was only able to sell the property for around 70% of its value five years later.

We have a feeling that we live in a time of unusual insecurity and that everything is changing, but in fact insecurity has been around since World War 2, Butler says.

Advice costs, but inaction and stupidity cost more

Using a financial advisor will cost you in advice fees.

Fees are important and they do compound over time, Andy Hart, founder and organiser of the Humans Under Management conference, says.

But your own stupidity and inaction also compound and can be way more dangerous than fees, Hart says.

A good advisor will help you fly above the clouds to achieve your goals without turbulence, Hart says.

Focusing on fees and investment returns, is like flying below the clouds, he says.

Returns, like fees, are important, but they are typically baked into a well-chosen and diversified investment portfolio. You will earn them as long as you take advice on how to allocate your investments in the markets and to expect volatility, Hart says.

Taking advice will also help you invest consistently - doing the heavy lifting you need when you start investing, he says.

Financial success does not come down to the fees you pay – it comes down to advice you get, he adds.

Focus on what you can control

Butler says to develop resilience you have to accept that there are many things you cannot control:

  • The economy,
  • The markets,
  • Inflation;
  • Property prices; and
  • What other people do or say.

You can control:

  • What you spend your money on;
  • Your nonessential spending
  • Your emergency reserve;
  • Who you spend time with; and
  • What you choose to spend your time on.
  • Keep your focus on the things you can control and the rest will take care of itself, he says.

Newcomb says focusing on the things you can control – your own behaviour, the consistency with which you save, having a well-diversified portfolio and well thought-out investment strategy – rather than things you cannot control like the markets – will help you develop financial confidence.

Like Butler she says you should consider whether you have been through similar situations before and whether you were able to bounce back. If you have survived adversity before, you can do it again, she says.

Pay attention to your financial and emotional support network on which you could rely if a catastrophe hit, she says.

Be resilient in the face of volatility

Butler says in the 2008 great financial crisis markets crashed spectacularly. One of his clients, the CEO of a large listed company, called Butler to express concern as he had £4 million invested in these falling markets.

Butler asked him if he still believed in capitalism and if his goal was still to grow his wealth over the long term. When the man confirmed his beliefs and goals, Butler advised him to sit tight as the markets would recover in time.

As long as your investment time horizon has not changed and you believe we are not going to go back to living in mud huts, you need to ride out market crashes, as they will bounce back later, Butler says.

The CEO did not receive the same advice from an investment bank where he also had investments. Before Butler helped him think through his reaction to the market crash, the bank acted on his instruction to sell his investments, losing him £2 million that he did not recover when the markets turned around, Butler says.

Setting priorities

Advisors can also make a huge difference to your life by helping you set financial priorities.

Advisors should help you explore what a good life means for you, Butler says.

Butler advised a wealthy UK businessman in his early 40s who was struggling with a decision about selling a successful software business and spending more time with his young family.

The advisor worked out for the man the price at which he needed to sell the business to raise enough money to fund his current lifestyle for the rest of his life. The man accepted an offer a few million pounds more than the number Butler worked out for him.

The man moved into the country and spent time with his wife and young family.

Within five years he succumbed to a heart attack. His widow thanked Butler for calculating the ideal sale price for her husband’s business. It had enabled him to feel comfortable selling his business and spending time with his family.

The decision gave the family precious time together before he died – time they may not have had if Butler had not helped him make the decision to sell.

Butler says advisors should help you work out your life goals and their financial implications. 

And Newcomb says you should think about what you want your life and your finances to look like over decades or generations, Newcomb says.

Morningstar’s research found that many people do not think or plan their finances more than a few weeks, months or years in advance.

However, research also shows those who think about their finances in decades or generations generally have greater financial well-being and more positive emotions – satisfaction, pride, contentment, joy and peace - around money, Newcomb says.

Use an advisor to put some price tags on your goals and get attached to them, she suggests.  

This article was first published on SmartAboutMoney.co.zaan initiative by the Association for Savings and Investment South Africa (ASISA).

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