A reminder at Christmas Time

I am having an interesting night tonight. As happens every year, I am given an awkward reminder of another time, with a Brisbane landmark that brings joy to many.

The King George Square Christmas Tree



Here is the Christmas Tree from King George Square that is erected every year, oddly enough, at Christmas. It seems happy enough. Decorating it is a 'thing' and it is unveiled every year at an event, and carols are sung.

 

I don't consider myself a Scrooge at Christmas, and so what you may ask am I reminded of?

 

Well, my wife sent me this photo today. A colleague of hers took it, and she told me when she sent me the photo via text that her friend had taken it, and that she had told him about Russell. (Names changed and all that).

 

Going back a few years, he was the guy who put the tree up every year. He was a client of mine, and an interesting one at that. He inherited some money, but really took it, and made the most of it. He used it to really 'do' something. But then he died.

 

He rang me one day to check that he had trauma insurance cover. After some back and forth over a bad phone line, I confirmed that he did, and reminded him of how difficult it had been to convince him to take it. He said that he was glad that he had listened, because he had been diagnosed with a tumour the size of a grape fruit, that totally surrounded his kidneys, and had a major artery engulfed in it as well.

 

Two oncologists and a vascular surgeon had agreed that there was no point in operating, and chemotherapy was little value. He was given 6 months to live, and he proved them wrong, but only just.

 

As an adviser, I have had a number of clients who have been sick, and even died, but for some reason, this client and his circumstances give me what I feel is an irrational emotional response. He was not a friend or family member, although we spoke about personal information, and laughed at things a fair bit.

 

It may be because it was so sudden. It may be because he was too young - mid 40's. It may be because he had changed his life with the inheritance, and his future, and those of his staff was bright. It is probably all of those things, plus me being a bit sentimental.

 

Anyway, as much as I like Christmas, that tree is a sorry reminder.

If you don't like the gun culture so much, why do you invest in it?

There has been enough discussion of recent events surrounding guns and weapons in other countries, that I am sure that I don't need to go into it here. Suffice to say that 'gun control' (or the lack thereof), continues to be an issue.

It now appears more likely than not, that in America at least, there will be no change to their gun laws, at least in the short term.

While the stats in the attached article are a few months old, they highlight the ease with which guns are available in America, and the way that they have been 'normalised' in society.

But in Australia, we have tighter gun laws. Phew. We don't own nearly as many guns per capita as other countries. But, whether you know it or not, you own the companies that make them.

A very quick skim through this Guardian article shows the largest manufacturers of arms in the world. There are many companies that have names that makes it impossible to know what they do (no doubt a coincidence), but there is one or two names in the top 20 that people will have heard of. General Electric, or GE is one of them. Now, GE is not the worlds biggest maker of arms (this report says 18th). And they don't even have a large percentage of their business revenue being generated by arms sales (a measly 3% of revenue according to this report). But, on the other hand, in 2010, they sold $4.3B US in arms. Further, fund managers are pretty tight with their share holdings, so I would imagine it is fair to say, without looking beyond the first page of the first fund manager I looked up, that this is not the only investment in weapons that js been made on behalf of Australian superannuation investors.

What's that got to do with you. A quick scan of one super provider QSuper shows that GE makes up a part of their international share portfolio. So investors utilising the services of Qsuper (public servants at the least, and many others in Queensland), own a part of the company.   For some, this would not be a problem, but for others, it may well be.

And that is where the concept of responsible investing plays a part in the financial planning process for individuals. You may have the ability to screen out the companies and sectors from your portfolio that operate in areas that you feel uncomfortable with, or even support those companies that produce products or services that you can get behind.

The above example with GE and QSuper is just one small look at the type of companies and products that people may unwittingly own. There is something you can do, and it starts with asking,

"What's my Money up to?"

Feel free to leave a comment and let me know what you think.

Find out more at www.sociallyresponsibleinvestment.com.au

 

Why having values may lead to better investment decisions

On a personal level, my wife and I started thinking about ethical and responsible investment shortly after our first child was born. Being responsible for someone other than ourselves really meant a review of our priorities, and the importance of a 'legacy', for want of a better term.

You got that right

On a professional level, it took a little longer to get started. As I have said in an earlier blog posting, I had a boss who thought that 'ethical investment' was for hippies (his words), and was not something that he wanted discussed again. So I let it 'sit', but still looked for opportunities to introduce it into the practise, if an opportunity arose.

This 'opportunity' really hit home one day when I was speaking to a surgeon who was distressed to find that his investment portfolio continued an exposure to Philip Morris. He said he spent a good portion of his working week operating on oesophagus's (oesophagi?!) and lungs burdened with cancer, and could not and would not make money from a company selling tobacco products.

It was at this point when I realised; this surgeon is no hippy.

Not a hippy
 

Investments play a part in your wealth creation strategy.  Taking your personally held values, and using them to inform your investment decisions can lead to more active ownership and engagement in the process of what it is your trying to achieve.

So you think you have no investments? Almost everyone of working age in Australia has SOME superannuation. If you want to meet your goals, then you'll also need to put SOME money SOME where at SOME time, to help you to achieve this. It is possible to take the things that are important to you, and incorporate them into the investment decisions that you are making.

You can be comfortable that your investment decisions meet your personally held values, and also assist you to meet your financial goals.

Now people, we have analytics. I can see that there are page views. I'd love it, if you could leave a comment or two, to get a discussion happening, or just to hear your thoughts.  

You call that a wealth creation strategy?

I had someone say that to me once. We had spent an hour going through their Statement of Advice, and when we turned to the pages that outlined the recommended investments and their performance, they looked at the 'one year' returns, and said

"You call that a wealth creation strategy?"

Well I did as a matter of fact.

Now this was some years back, in around 2001. Those with a long-ish memory may recall that markets had NOT acted that favourably in preceeding years. However, there are two point that bear noting here. They are:

• short term returns are generally not that relevant in a long term wealth creation strategy, and
• returns are wholly irrelevant, if you haven't got anything to get a return on.

There is a bigger picture at stake that goes beyond what is happening over the short term, and even what is happening with markets in general. That is, step 1 of creating wealth, is to spend less than you earn. Step 2 is to do something smart with the difference.

There is no step 2, without step 1.

You may have a lump sum in super, or access to some equity, but it is the ability to direct free cash flow to the things in your life that are important to you, that will determine the outcomes of your financial strategies. It is that, that will predominately drive your position to the rewards that lie ahead.

 In the end, the strategy that I had recommended for the coupe included cash management, income and asset protection, debt ideas, an estate planning overview, asset allocation decisions and more. And yes, the recommended investment has gone up significntly in the ensuing years. But that is NOT the 'prize', it is merely the icing on the cake.

Outcomes or Behaviour?

Control is a funny thing.

You want to sell your house? You can put it on the market, but you can't make anyone buy it. You want to get to work on time? You can leave early, but you can't control traffic.

What makes you think you can 'be financially independent' just because?

You can't wish yourself to making, building or protecting your intended lifestyle. There is no magic formula.  You can't control the outcome.

(See, I can't even control if someone takes down their video)

There are however, SOME things you can control. Behaviours.

You can't control interest rates, but making home loans payments is something you can manage. Investment market returns are volatile, but you can control how much you invest, and the structure you choose to utilise. You can't really control your health (although there are things that you can do to give yourself the best chance), but you can protect yourself from unforeseen events.

So here is an example of the difference:

Outcome Focus

• I am going to retire comfortably
• I'd like to go on a holiday next year.
• She'll be right

Behaviour Focus:

• I am going to invest $x into super and pay an extra $x off my home loan.
• I am going to put aside funds for a holiday
• I am going to protect myself from unexpected sickness /accident.

So to summarise, behaviours are things you do consistently. They are manageable, and things that you can control. They are things you can do now, and not have to wait for in the distant future.

There is no doubt that these behaviours have an outcome. but that isn't the focus. The 'outcome' is nothing more than a direction. and the behaviours are the little steps, taken often to get you and keep you on the right path.

Thanks Master Oogway.


Comment or connect. We'd love to hear your feedback.

 

Why, why, why, why, why?

Do you have values?

Great!! Have you ever stopped to think about them and why you have them?

Values come from who we think we are.We find out values when we ask questions of ourself like:

• Whats important?
• What's right?; and
• What should I do?

Values aren't things. We can't hold them or spend them, but if you think of yourself in a certain way, how did you feel the last time you acted in a way contrary to those 'values'. The worse you felt, probably correlates to how strongly you hold those values.

So how often do your actions match your values?

The '5 whys' system was initially used by Toyota. It is very simple, and can be very effective. Next time you want to do something, ask yourself why?

Why do I want to do this?

Here is an example from when I founded Viridian.

Why do I want to do this?
I think there is a better way of doing financial planning.

Why?
People deserve to be given advice that has their interests at the centre.

Why?
While planning your finances isn't 'life and death', wrong decsions can have a huge negative impact.

Why is that important?
A few small decisions, like paying off a home loan faster, saving for a rainy day or life insurance could have had a large positive impact on my parents.

Why does this matter regarding setting up a business?
I want people to not make the same mistakes.

So for me, that's why. Everytime I hear that someone has cancer, or has had a heart attack, I feel a littel stab. When people talk about the 'conventional wisdom' of making money that, unfortunately doesn't make sense, my stomach tightens, just a bit. So this is why I founded a financial planning business.

Why not give this a try with something you are doing, (or just as good, if something has gone wrong), but rmember: the only important thing is honesty.

We want to learn more about you. More important we think YOU should know more about you.

The value of advice over product

In financial planning, I find that there are things that people want to talk about, and things that they really need to talk about. 

Over the last few weeks, I have met a few new business owners, and we have spoken extensively about the importance of 'telling it like it is', even when sometimes that isn't what our potential clients want to hear.

Without using names for obvious privacy reasons, I have one recent example that springs to mind.

When I first met Daryl and Maggie (not their real names), they had been referred to me by another professional. We sat down and spoke, and they told me about all the exciting things they wanted to do financially. They had some ideas, and an interesting take on their positions. They also made it clear that they had a bad experience with a financial planner in the past, and that they did not wish to talk about insurance.

When I first started in this industry *profession*, I worked for a practice that specialised in planning, self managed super and insurance broking. I was grateful for the opportunity to get a start in the industry, but after some coaxing from the Managing Director, I told him that I wasn't interested in being a 'foot in the door' life insurance salesman. And more than ever, I still don't.

However, there can be no doubt, that your income is the engine that drives ALL of your other activities.  Without this, you can't repay your debt, contribute to super, or invest in property. You don't go on holidays or buy your kids their first car.

To repeat (and it sounds blatantly obvious), but without ongoing income, you don't get to do all of the fun stuff.

So I told Daryl and Maggie that I was down with the fun stuff, but without putting in place a strategy to protect 100 percent of their income, the fun stuff they wanted to do was built on a weak foundation.

It took quite a few meetings, and 3 months to convince them to agree, and then another 3 months to get their cover approved due to the health difficulties that they both had. Finally, it took a few more weeks to convince them to accept the increases in premiums, and the exclusions, and to re arrange how some of the premiums were to be paid, after the insurer finally agreed on what they would cover.

So it was with a sense of sadness, but also relief, when I received a call from Maggie less than 6 months later when she rang to inform me that Daryl had been diagnosed with lymphoma and that she felt she would have to sell their house. She felt this way because even though she remembered that he had income protection, Daryl was so sick, that she had to take time off work and she didn't think her policy (or his) covered that. I explained that we had arranged for sufficient cover to ensure that there was a lump sum available in the event of certain sickness, and that lymphoma was one of these. Daryl would receive a lump sum, and she could use this to fund her break from work, and income protection would cover Daryl's enforced lay off. They wouldn't have to sell their house.

I was grateful that the insurance provider was thorough but swift in their assessment, and paid the claim quickly (and even went beyond what they probably needed to do).

Money, of course, can not in itself help people to recover from sickness or accident, but financial security can mean that when the unforeseen strikes, money is one less (and large) thing NOT to have to worry about.

Does it cost money? You bet. Are there intrusive questions and maybe blood tests? Unfortunately.
Would you regret not having cover after a heart attack, stroke or cancer (and you would be horrified at the probability of having one of these three illnesses)? Probably.

In finishing, I want to reiterate that financial planning, when done properly, helps people to achieve financial goals,  with primary goals being to create and grow your wealth. But anyone who remembers Maslows needs hierarchy would remember that after food, water, sex and a few other things on the bottom rung of the ladder, security was an early need that required being met. Being able to sleep at night, knowing that you are protected from sickness and accident, is a real level of security.

A lot of people think that sickness is something that happens to older people, or that covering this is too expensive. Daryl was 41 when he was diagnosed with terminal lymphoma, and not obtaining cover would have been the most costly mistake possible.

As ever, I'd love some feedback. Feel free to comment, or share this with people you know.