Sometimes life throws something in your way that forces you to stop to think about its direction. We all tend to have landmark moments and of course the context, timing, and nature of them vary enormously. However, they all tend to pose a version of the same question … “so what now?”
One of the underrated skills of a good financial planner is to consider the things that we don’t want to think about. It would be normal for most to assume that this is the impact of a major economic crisis, financial meltdown, or some disaster to your portfolio. Whilst these things do happen, (regularly!) there is a degree of predictability about them, barring the final moment of global collapse, should that ever happen. These events (barring the apocalypse) are ‘baked in’ to your financial plan, making allowances for market corrections and reductions in capital values.
The real-life challenges are those we witness personally, perhaps experience vicariously or through the arts. These are the crises that we all probably wish away and hope that it doesn’t happen to us. Perhaps a marriage ending, a child dies, an addiction, a business bankruptcy, redundancy, a life-threatening illness, death, loss of loved ones or loss of personal mental capacity and independence.
These are no small matters, and I wouldn’t presume to pretend that financial planning removes the stress of such situations. However, raising such issues enables us to do some planning, but sometimes helps simply to acknowledge the reality that we cannot control very much in life at all. I will also not claim any special skills or talent in this area, it’s a minefield of values, beliefs and emotions. However, experience has taught me to face these challenges personally and with clients. I have improved my ability to ask the pertinent questions over the decades, but of course responses differ and there are no ‘right answers’.
Coming to terms with loss…
I was asked to speak at a funeral of a friend who died much too young. One of the things I believe is that life is about coming to terms with loss. The majority of the gathered crowd simply stared back at me, looking incredulous. So perhaps I should’ve explained my position rather better. Life is precious, it’s a gift, it’s a miracle that any of us are here. It is also incredibly brief and once you have got over your own infant state of omnipotence (which for most of us happens in early childhood) you realise that everything you have and hold dear will eventually leave you. Whether that’s friends, brain cells, careers, skills, loved ones, money, energy, mind, health and so on… your va-va-voom eventually. Coming to terms with this isn’t always easy, in fact I’d say it’s a lifetime education. However, it will come to us all.
How do you measure a year? Seasons of Love – 525,600 minutes
One of my favourite musicals is Rent by the marvellous Jonathan Larson (who died the night before its premier – imagine that!). He begs the question “how do you measure a year?”. Of course we value your portfolio and consider its returns against markets; this is obviously sensible in the context in which we operate, but frankly, these are not measures of your life. I’m probably two thirds of the way through my lifetime, maybe it will be longer or shorter, but however much time I have left, I am grateful for each day (I’m practicing at getting better at this) and believe that it is my responsibility to get (and give) the most out of it. To experience connection and make meaning, which will almost certainly be forgotten within 100 years or less.
The assumption that tomorrow will be like today is deeply flawed. Carpe diem and all that. I’m not suggesting that we should live in a state of euphoric life maximisation (even if it is possible to do so); but certainly to consider the reality of loss as a built-in design of life. Pretending it isn’t so seems incredibly naive (at best). When such unwelcome challenges arrive at your door, plans have to change, sometimes dramatically.
I know that many of you have had these experiences and at times life is very hard. I cannot promise easy fixes, soft landings or neat solutions; I can simply promise that my team and I are empathetic and very much in your corner.
Your timeline is your own, we will help you to identify many of the key milestones that lie ahead and help plan for them. It is my belief that your financial plan should be rammed full of the things, people and experiences that you truly value.
I wonder if your email, social media and text messages have been filled with offers about Black Friday and Cyber Monday? The palpable sense of missing out on a deal that will save you 10%, 20%, 30% or even 80% over a 24-hour period that sometimes extends to several days or even weeks in the run up to Commercialistmas.
This is the type of capitalism that we can all relate to, a discount on something… and gosh can’t that discount be rather large. Black Friday is brilliant for those that are focused and have planned purchases, perhaps even waiting the better part of 12 months for the announced day of the deal.
In truth Black Friday is the envy of financial advisers, many of them may not even realise why. We have our Black Wednesday, or more accurately, had it on 6th September 1992… which you may remember a certain Mr Soros managed to collapse the ailing pound resulting in a swift departure from the ERM – Exchange Rate Mechanism.
MONDAY… AND TUESDAY
Before that we had Black Monday 19th October 1987, which overran into Black Tuesday. No sooner had we all collectively popped our heads above ground following that ‘great’ storm (the one Michael Fish is forever linked with) than the stock exchange had to be closed as commuters could not get to work. When they got to their desks, they soon wished they hadn’t bothered, as markets nosedived around the world. The Dow Jones fell 22.6%, double the FTSE100 fall. This was the largest fall on a single day since 1929 (the Great stock market crash).
Falling prices on the stock market or in the value of the pound invariably send investors into a state of frenzied panic selling. The same discount sends shoppers into a state of frenzied buying. I’m going to push the analogy a bit… I suspect that most of what has been bought on Black Friday or Cyber Monday will not last more than 10 years, probably a lot less than that. Yet investing into global companies of the world will last a lifetime. Sure – some companies will go bust, but invariably merged or acquired by larger rivals; there will be replacements, new entrants and new solutions. The path of progress is relentless, whatever you hear on social media.
I can promise you that there will be a significant market fall at some point, you won’t like it, neither will I. You can attempt to guess when it will be, but your chances of correctly timing it are really alarmingly small. You can choose to weather the storm by ensuring that your planned income and requirements for capital are already in place by having a proper plan. The markets will recover, often very quickly, and at some point you will wonder what the fuss was about and have to google Black Monday to remember the scale.
The night of the Great Storm – a very youthful Dominic Thomas went to bed in his rented room and didn’t stir all night. He woke to see the garden sculpted by a tree that had been snapped in two; his landlord flabbergasted that he hadn’t stirred all night as the shaking chimney stack threatened to topple into his room.
SOMETHING FOR THE WEEKEND
Perhaps you will spend the weekend pondering your Christmas list and plans, remembering all those purchases last year… but can you? I suspect you can remember “A dog is for life, not just for Christmas”… much like your investments, they are here to serve you for your lifetime and frankly, we prefer to think of them as eternal as they are passed to your future generations. So when the big crash comes, I’m going to remind you to hold your nerve; prices are discounted temporarily; and ask you to consider buying at a massive discount. The next crash is a discount.
We all remember the credit crunch and the general ill-feeling towards bankers, perhaps you missed the story of the credit munch? Whilst the Credit Crunch lasted, well…truthfully the long term ramifications are still with us, but it really ‘started’ (became apparent) in 2007. The credit munch took place in July 2022 and lasted about a year.
A financial crime analyst with Citibank was on a business trip to Amsterdam. It appears that Mr Fekete forgot (see what I did there?) to declare that his partner joined him on the trip. They put a very modest sandwich lunch on business expenses, claiming £86.70 of the £100 daily allowance.
Mr Fekete’s managing supervisor queried his submission and wondered whether Mr Fekete had indeed really consumed two sandwiches and coffees. Here I must claim that my own personal battle with a good sandwich does not immediately conclude that such an appetite is implausible; but merely a little excessive… mea culpa! Anyhow, Mr Fekete didn’t confess that it wasn’t simply him and that he had in fact shared lunch with his partner. He was dismissed for breaking company policy of claiming expenses for his partner as though his own. In essence, Citibank concluded that he was dishonest.
A series of emails providing some “optimistic circumstantial rationale” for his forgetfulness was not accepted by a judge, as Mr Fekete took his employer to an employment tribunal for unfair dismissal. It seems that the judge agreed with Citibank that the employee should have owned up when challenged and then been given the opportunity to correct his error of judgement.
The judge said “I am satisfied that even if the expense claim had been filed under a misunderstanding, there was an obligation upon the claimant to own up and rectify the position at the first opportunity. I accept that the respondent requires a commitment to honesty from its employees.”
So, it seems that Citibank are holding their employees accountable and expect honesty from them. Perhaps this is a sea-change at the Bank and within the sector. After all, it was only last year that Citigroup were fined £12.5m for failing to properly implement market abuse regulation (which was a discount of 30% for admitting failure). In the context of all the ills of Banking, I suspect you will agree that this all seems rather trivial in comparison to a Credit Crunch, LIBOR fixing and so on. However it does speak to a culture of integrity and when your employed job is upholding it, it is hard to fathom why on earth Fekete didn’t simply own up.
I’m reminded of Richard III shouting “A horse, a horse! my kingdom for a horse!”. How little it takes to lose everything. That was some meal deal.
I signed up to Oliver Burkeman’s newsletter recently and it is proving to be a really wise choice.
He does not spam me or fill my inbox, he writes thoughtfully and in depth and I receive one email every few weeks. He writes really fluidly about a lot of the things that I tend to worry about – and so his emails have become like an old friend you don’t see very often but who knows you really well; and with whom you enjoy spending time!
Recently he wrote about ‘productivity techniques’ and once again, his words and style resonated with me. It was very reassuring to hear that I am not the only person who struggles with finding the best psychological tool for any given job – and he assured me (obviously not ‘just’ me!) that different techniques work for different tasks, for different people, at different times. A carpenter would not ever say “from now on – it’s only the chisel for me!” With physical objects, it’s easy to tell that they are obviously and only tools … the psychological tools are not so easily discernible and we often make the mistake that any given tool might be the silver bullet of productivity … when in truth, there is no such thing.
Any of our clients who have ever had a conversation with me will probably know that I like ‘order and simplicity’ (a lofty aspiration indeed – especially in my particular role!) Order and simplicity of course are ‘in the eye of the beholder’ (think swan above and below water – serenity right there above effort and endeavour!)
So it was quite liberating to hear Oliver tell me (again – obviously not ‘just’ me!) that I can stop looking for that one technique (that silver bullet does not exist).
Anyway – one of the things he suggested (as a tool only) was to set a timer and work in six minute ‘bursts’ – as soon as the timer goes off; move on to a different task (no matter how engrossed you were) and set the six minute timer again. I baulked at the idea – so few of my tasks are that ‘quick ‘n’ easy … but I was determined to give it a try (always being willing to add to my ‘toolbox’).
I tried it for one hour and true enough – it was really effective – of the ten tasks I attempted, I was able to complete seven of them within the six minute window … and then having crossed so many things off my list, was able to proceed with the rest of my day feeling very self-righteous about how productive I had been! Obviously – I had to select quite specific tasks for this trial – but another day, I am tempted to try again without careful pre-selection. Interestingly – of the three tasks I had to go back to – I actually felt ‘motivated’ to crack on with them because I had already ‘made a start’.
I reflected on the productivity techniques I had applied during the remainder of my day and was interested to note that I used another three or four styles (that I could readily identify).
But the most important thing that Oliver wanted me (!) to take away from his email was that …
“You need no longer feel overwhelmed by the vast array of techniques, systems and philosophies that crowd the internet and the shelves of bookshops, promising ways to improve your life, because you’re not trying to discover the “right” one. Instead, you get to pick from them all, as you see fit, for whatever purposes you deem them useful – and only for as long as they actually serve to improve your experience of being alive.”
And I got the feeling that he wasn’t just talking about productivity techniques …
If you haven’t seen already, Indiana Jones is back for a last crusade. The fifth and final chapter in the Professor Jones diary brings us up to date in 1969. I won’t spoil the story for you, (I quite enjoyed it) but it serves as a prompt for our desire to alter history and explore the “what if?”…
The ‘mystical tool’ that we use here isn’t that mystical at all. It’s software, in fact it’s various pieces of software which allow us to plan forwards and make adjustments, whilst learning from history, through the rather more mundane elements of historic rates of returns, inflation, economics and investor behaviour.
The new film uses some amazing software too, making Mr Ford look rather like he did way back in 1981 when Raiders of the Lost Ark was made. Sadly, our software doesn’t make us look younger! I’ve come across some tools which make someone look older and one pension company thought that this would be a good tool to use to help young people think about their retirement, I struggle to believe it would.
As with most stories of this theme or perhaps genre, the ability to change the past is very enticing, particularly if the present is not as you had hoped and you lack optimism about the future. The climate and global leadership crisis may well prompt these types of feelings. How wonderful it would be to go back in time and adjust some things. It’s a very tempting offer, but of course one that is nothing more than wishful thinking. We all live with the consequences of combined actions, our own and those of others. Perhaps this is more about accountability (or the lack of it) than any real notion of changing the past.
Anyway, back to your planning. Together, we can imagine different futures; consider different scenarios for you. That might be retiring earlier than planned, moving home, gifting money, starting a business or selling one – frankly the list is lengthy and limited only by your own expectations and hopes for the future.
However all our planning, irrespective of the state of the world today, hangs on the premise of optimism. The belief that investments will, over time, gain in value, because you are investing in companies that provide goods and services that society, whatever it looks like, wants, needs and requires. Investing is for the optimists, not the pessimists. If you sincerely believe that tomorrow will be worse than today, then investing simply isn’t for you. In that sense investing is like gardening … planting in the hope of tomorrow. We may be mindful of a changing climate and plant differently, but we do so in the hope of tomorrow.
You are more likely to be struck by lightning or attacked by a shark than winning the jackpot on the National Lottery.
Playing the lottery can be a bit of fun, especially if you have a lucky number or a favorite game. Most participants enjoy the thrill of anticipation and the possibility of winning a huge jackpot (let’s face it, most of us have a good idea of what we’d do with our winnings!)
Here at Solomon’s, we are not party poopers and if the Lottery is your ‘dabble’ into the world of improbable dreams – then that’s all good … we’re only talking about £2.00 a week for a ticket after all.
But it IS our job to challenge your financial decisions and I wonder whether you have ever thought about the impact of doing something different with that £2.00 a week … ?
If you were to save it for 50 years and were to achieve a return of 5% per year – you would have more than £23,000 in your account at the end!
Most of our clients understand the power of compounding interest and are fully onboard with the nature of long-term investing, so this example probably comes as no particular surprise – but it just goes to show that ‘a little’ can become ‘a lot’ given time and proper attention (which is a big part of what we do for our clients at Solomon’s).
Of course, the National Lottery does support lots of charitable and community causes, so your £2.00 a week isn’t entirely ‘wasted’!
I spent last week in a beautiful part of the world called Gorran Haven, Cornwall.
I have been going there each year with my wider family for over 20 years – it’s our home from home (17 of us attended this year!).
Many years ago, we visited The Lost Gardens of Heligan which is (as their website says) an “astonishing story of regeneration”.
In the 1990s these Victorian productive and ornamental gardens were rediscovered in the grounds of an old mansion house under mountains of brambles and ivy and since then have been lovingly restored to something close to their former glory across 200 acres (so far).
On the estate, there are ‘living sculptures’, magnificent woodland walks, bee hives, farm animals, a ‘jungle’, giant rhubarb plants, enormous rhododendrons, productive gardens (herbs, vegetables, fruit), pleasure grounds, natural climbing trails for kids and adults alike and many ‘work’ areas that were used in Victorian times and have been left much as they were – all providing something of a glimpse back in time.
We went again this year and I was most inspired by the growth that had taken place since my last visit – the workforce there have managed to achieve an evolution of sorts without appearing to have interfered too much with nature’s processes. It was as wonderful as I remembered; in fact it was better – largely not too much had been tampered with; but certain things had been tweaked, enhanced, emphasised and it was breathtaking.
On reflection, it reminded me (a little!) of why we tell our clients to trust the investment process – it’s a long-term endeavour; it only needs minor tweaks along the way; and can be managed effectively with mindful and careful ‘interference’. Importantly it takes time and patience (and an expert hand). Your financial plan may not look like a fine ornamental garden; it may not be an inspirational thing of beauty; but it is ultimately your creation and speaks of your life, your wishes, your legacy and ought therefore to be treated with respect and care by people who think it matters – you and us.
If you went back in time for one million seconds, it would be Friday, 23rd June. 12 days.
If you went back in time for one billion seconds, it would be Sunday, 27th October 1991. Nearly 32 YEARS.
But the really mind blowing one is this…
If you went back in time for one trillion seconds, you’d be 32,000 years in the past. Days of the week would be irrelevant, you’d be more worried about the fact that ice sheets covered most of the UK, and your closest friend was this guy:
So, when we hear that the UK currently has a national debt of around £2.5 trillion**, we can acknowledge that is a LOT of debt.
But we shouldn’t panic too much.
Because when you put what the UK has borrowed up against what the UK is worth, things look a little better.
And that’s what the debt/GDP ratio below does (all the way back to the reign of King James II).
In 1815, after the Napoleonic wars, UK debt was £854 million – 1/3000th of today’s level. But that represented nearly 250% of GDP!
Today the debt/GDP ratio is 100%. Similar to most other developed nations, and not out of whack vs. history.
There are so many things about moving house that I loathe; but one of the biggest is ‘the admin’ … changing personal banking details, setting up new accounts, changing names on bills, being on hold to a new broadband service, contacting the DVLA and ordering a new driving licence etc.
For the past four years I’ve been living in London and have become accustomed to moving roughly once a year due to landlords hiking rents or wanting to sell their property; or simply moving elsewhere due to problems that have occurred in the property – in the past I have shared various rental homes with bats, rats, and mice … so I think it’s understandable that I have needed to move so often (despite my loathing of the process)!
Last weekend I moved into a basement flat with my partner, and although having years of experience as a renter (with really good checklists in place that have been created due to problems in the past causing huge stress!), it still ended up being less than idyllic when I thought it would be a breeze, having done this so many times before.
I am fully aware that the majority of you will not have to experience such problems; many of you have lived in the same property for many years; but ensuring that your details are kept up to date is still absolutely vital (for you and us).
We want to remind you about the 10-minute challenge serieson our website, something we created during lockdown when it became apparent that many of our clients don’t know where certain important documents are stored. We simply want to help you ensure that whatever you are trying to do or find is made that much easier and less stressful, because you have good record-keeping systems in place. We don’t want ‘future you’ to endure the struggle of some relatively basic tasks; being organised about this is key.
I would encourage you to set some time aside to prepare well for whatever life scenarios you can think of that might require decent and advanced planning … fail to prepare, prepare to fail.
Who said ”financial planning is as dull as watching paint dry”?
I’m sure lots of people have actually said/thought that … and in many ways, financial planning done well is indeed a lot like the painting process.
I spent most of last weekend with a paint brush in one hand and a roller in the other and I had a lot of time to bemoan my utter loathing of anything ‘DIY’ whilst I cracked on and did what was necessary.
It occurred to me after I stepped back and examined the end result of my frustrating (and frankly downright painful at my age) labours, that financial planning is A LOT like painting a room …
You first have to admit the need to make a change; then you have to make some decisions about what you want to do and when you want to do it; then it’s time for organising your equipment (I have discovered that a telescopic pole to extend one’s roller is a MUST); and then it’s the big one … pick a day and just ‘start’ – the preparation is the slog … I was taught well by my father though – sugar soap the walls, fill any blemishes, do the cutting in – and most importantly (like a mantra!) “let the roller do the work”.
There are obstacles in the way, literally and metaphorically – the family dog kept wanting to ‘help’ and I slightly under-estimated my paint quantity requirements (spotting this before it became a problem; meant I only had to make a small adjustment to my plan and simply ended up using a slightly different shade on one wall).
The bulk of the time you are painting ceilings and walls, it is dull, unglamorous, tedious, painstaking and seems to go on forever. But … that moment when you know you are loading the roller for the last time … pure joy! Until you look back at what you’ve done and it looks patchy because it’s wet – which is totally normal but gut wrenchingly soul-destroying.
So you shuffle off to spend what feels like another lifetime cleaning paint out of the brushes, rollers, trays etc; you remove stray paint from your hair, your glasses and your elbow and you get cleaned up.
You avoid looking at the room for a good hour or two (read what it says on the paint tin) – and then you tentatively go back in and check … and lo and behold – it’s glorious. It’s a thing of beauty – you send pictures of it to your friends and tell them how wonderful it looks (they say the right things in response of course – but how excited can you get about a ceiling and four walls?!).
And you pat yourself on the back (rightly so – but gently because that aches too) – the preparation, the planning, the hard graft, the mental effort, the tedium, the waiting – all absolutely worth it.