Imagine taking a group of caring, successful international families—mostly with male decision-makers, mostly older, mostly upper-middle class, mostly well-educated—and have them describe their financial life journey.
They’d all be pretty different, right?
Having dealt with thousands of thriving international families over the last two decades, what often strikes me most is the similarity of the stories. Personal finance seems to be much more personal, than finance.
Here are a few of my observations.
There are many paths to winning ‘at the top’ of the mountain.
Most journeys start haphazardly, trying one route and then another.
The greatest danger isn’t a single perilous fall, but gentle ‘drift’ marked by indecision, wrong decision, or emotional decision that builds up over the years to take families miles off the correct course.
Despite the high stakes, few start their journey with a wisely selected ‘sherpa’ to help guide them.
Instead, most of us start climbing our financial mountains solo for the simple reason that our wealth is small, life simple, ‘do-it-yourself’ is cheap and in our 20s and 30s, we can’t afford a professional and experienced guide.
I also see innumerable false starts, climbing accidents and set-backs. Often solo climbers or those with ‘free guides’ (Private Bankers, commission-driven brokers, IFAs and insurance companies) who hinder these journeys rather than help.
After all, good guides are hard to find, extremely busy and often highly selective in who they work with.
Eventually, and often starting far later than most imagine, successful families settle down with a sage guide and do ‘mostly’ the right thing for many years, ending up with surprising wealth—and nobody’s more surprised than the investors themselves, who discover a huge pile of wealth has resulted from decades of prudence.
While each journey to the summit is unique, I notice certain themes again and again.
Here are nine of them:
- Complexity is unnecessary. Savings-rates, dollar-cost averaging, indexing... are some of the nutritious broccoli that fuels your journey. The allure of complexity in personal finance is often a trap that leads to high costs and disappointing returns. Instead, successful families consistently choose simplicity, not just for the better financial results it brings, but also for the peace of mind and sense of control it provides. Hedge-funds, private-equity, venture capital, structured products and some of the toxic industry’s ‘spice,’ not so much...
- Our financial beliefs are shaped by our childhood experiences. As parents, it's important to recognise the influence we have on our children's financial attitudes. It can be daunting to decide which beliefs to pass down and which to discard, but awareness of this process is key to setting our children up for future financial success. You're entirely unaware of the money scripts that frame all your decisions and this lack of awareness can cause a lifelong struggle, languishing, floundering and failing families.
- Developing good savings habits is essential for achieving financial freedom. While it may seem like a tired cliché, the truth is that the discipline of thrift is a tried and tested pathway to long-term success and security. It's the most simple but powerful strategy that successful families consistently employ to achieve their financial goals.
- While it's important to strive for financial success, it's equally crucial to know when to declare "enough." It's not an easy task to learn to be content with what you have and enjoy the wealth you've accumulated. Although this may be the ultimate goal, most of us find that the journey never truly ends, and satisfaction remains elusive. However, this is not necessarily a bad thing. As humans, you're wired to dream and strive, and there's immense satisfaction to be found from that pursuit. Nonetheless, it's essential to find a balance between chasing your dreams and cherishing what you already have.
- Successful families understand that being a great investor isn't necessary for financial success. In reality, most individuals don't achieve investment results that surpass the market averages. This is why indexing, which involves accepting the results of the market averages, is widely adopted by the successful families I have worked with over the years.
- Sage wisdom from an experienced guide is worth paying for. Stripped of every other service and benefit a professional guide provides – even route planning – the inestimable value is many multiples of the cost in moments of extreme danger. Specifically, as the investor’s last defence against his own most destructive impulses. We’re talking investment life or death, here – about every fifth year the market will plummet. It’s just human nature that the pressure to escape the decline – to make the pain stop – will be overwhelming. Most people WILL be overwhelmed in an emergency. Those with a professional guide will not. Between moments of fear will be moments of greed – to invest in an off-market opportunity, your brother-in-law’s money making scheme or dabble in the latest craze. Similarly, avoiding such hazards is as important as surviving the plummets.
- Luck plays a significant role in your financial success, which often hinges on factors beyond your control. At some point in your life, you'll get dealt a bad financial hand, whether self-inflicted or out of the blue, such as a major medical bill, a bad investment, unemployment, or divorce. While these setbacks may temporarily set you back, the damage doesn't have to be permanent.
- Financial success is a result of patient and persistent efforts that often seem to yield little progress in the present moment. It's only when you look back at our journey that you realise how far you've come and how your small but sensible decisions have compounded to create a secure financial future. If you're just starting your financial journey and feel like you're making minimal progress, don't worry. Keep saving regularly and trust the process. Success is a marathon, not a sprint.
- Money is more than just currency, it carries with it a deeper meaning and significance. In the same way that a Maserati is more than just a car, or inherited silver cutlery is more than just flatware. Your individual relationship with money is unique and personal, and it's important to take the time to reflect on what money represents to you. Are you saving for financial freedom or out of fear of destitution? Are you spending to impress others or to fulfill your own passions? At its best, money serves as a tool to provide security, allow you to pursue your passions, create memories with loved ones, and help those around you. How you choose to allocate your financial resources is a reflection of your values and what you find fulfilling in life.
Whilst we might all think we’ve got things perfectly right - there isn’t a family where my tried and tested formula of ‘fix, prevent and improve’ hasn’t had an empirically positive effect. Here's what some of them have told me:
"Thank you for taking care of me and my family. I feel far greater clarity over all my financial life with your wise guidance."
"I’ve been with AES since 2008 and they've looked after my portfolio and given me great advice up to date. They keep me informed and always look after my best interest and I'd have no hesitation recommending them to friends and family."
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