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I think we should no longer try and attract clients that need to build wealth and motive them to do so. Instead, aren’t we better off working with clients that are already motived to build wealth and show them how?
Most people will work for approximately 40 years of their life. The money generated from these 40 years of work will then need to fund the next (probably) 30 years of their life. So why would anyone risk working hard for 40 years and have little to show for it – when taking control of their finances actually requires such little time and effort? Or, why would they leave investing to the last 10 years of their working life?
I’m not talking about being obsessed with money, driven by money or money driving every decision you make. I’m also not suggesting that you have to spend hours worrying about the markets and obsessively checking stock prices. No one wants to do that. What I’m talking about is taking a tiny amount of interest (and action) in your own financial affairs. Put differently, not being completely disinterested.
I can’t change the story you are telling yourself. Only you can do that.
One of the frustrating and painfully regular occurrences in my business is when we receive an enquiry from a client. We speak to them and discover that we can actually add lots of value and help them significantly improve their financial position with minimal fuss, risk, expense and effort. And they initially share our excitement.
However, when it comes to implementing the advice or making a final decision, they end up procrastinating. Or worse still, they go completely cold. Some people verbalise their interest in taking action but act as if they are reluctant to do so e.g. like taking many months to provide basic paperwork. Why? Why wouldn’t you be interested in spending the one minute it takes to provide this information so that your financial position is advanced?
A year from now you will wish you had started today
Why would someone self-sabotage their financial success in this way – when so much is at risk (i.e. a safe and comfortable retirement)? The answer is that it often comes down to the story they tell themselves. This story might include:
- I’m paralysed by the fear of making the wrong decision,
- Retirement is so far away… I’ll worry about it in a few years’ time,
- If I start investing I fear that I’ll have to cut back on discretionary spending,
- I’m worried I’m going to get ripped off and feel like an idiot,
- I’m trying to predict what the market will do in the short term and its hard so perhaps I’m better off waiting to “see what happens”,
- I have no idea where to start or what to do,
- And so on…
Do any of these stories sound like yours?
The stories you are telling yourself (both positive ones and negative) are the product of your environment, experiences, what your parents have taught you, your personality, genetics and lots of things. The chances are that I’ll have very little success in helping you change that story until you acknowledge that one exists.
For example, I’d bet that if I stood in front of a busy train station at 9am in the morning and tried to hand out $100 notes for no reason at all, that not many people would take them. They reason is that we tell ourselves a story about the type of people that would do that “no one gives something for nothing – there must be strings attached, this guy’s clearly a weirdo and I want nothing to do with him” and so on. These are the stories we tell ourselves.
Fear: The best way to reduce the chances of making financial mistakes is to think long term
It is very difficult to pick a property or stock that will be worth a lot more in 12 months’ time. It is significantly easier to pick a property or stock that will double in value over the next 10 years. The reason is that markets are, in the short run, sometimes influenced by irrational behaviour and are inherently unpredictable. However, in the long run, the underlying fundamentals will shine through and determine the outcome (either good or bad). A good yet extreme example is the dot-com bubble in the early 2000’s. Tech companies – some with zero revenue (!) – were being overvalued by the market at ridiculous amounts. The valuations made no sense whatsoever. Many of these tech companies ended up going bankrupt and investors lost a lot of money. As Warren Buffett says, “only when the tide goes out do you discover who’s been swimming naked.[1]” Fundamentals last a lot longer (a lifetime) than fads and trends.
If you make short term financial decisions you risk being influenced by short term and often irrational trends. As such, short term decisions rarely result in the creation of long term value. Instead, you are far better off thinking as long term as possible i.e. ask yourself what actions you can take now to ensure that you are financially stronger in 10, 20 and 30 years’ time. Focusing on long term returns reduces the anxiety created trying to predict short term outcomes.
I have an unhealthy interest in trying to help everyone – even if they aren’t ready for my help yet
American author extraordinaire, Seth Godin wrote this recent blog about the reluctance people have to take action: “Action requires overcoming the status quo, action means that someone has dealt with the many fears that come with change and felt that fear and still done something.” I am passionate about helping people and I’m often encouraged mostly by my ability to see what help (value) my advice could create. Over the years, I haven’t been discouraged by whether the person is actually ready for my help or not (i.e. what story they are telling themselves). After over 20 years of financial services experience, I have finally learnt that only you can control when you are ready or not (I know, slow learner hey!). I’m not going to do that anymore. I’m going to stop trying to motivate clients and instead direct my energies towards clients that are already motivated. I hope that’s you?
[1] Incidentally, Buffett never invested in any of these tech companies despite every man and his dog jumping on the band wagon. This is an excellent example of why it’s important to focus only on fundamentals.
