The Only Return That Matters

There are a few fundamental truths we hold dear in this profession. If we remember these, a lot of the noise disappears.

The latest media obsession is the return of inflation in the US. Here in the UK, inflation has just breached the Bank of England’s target for the first time in two years.

An increase in the cost of living is no small matter, but to the Behavioural Financial Adviser it is not a foreign concept. On the contrary, it's the cornerstone of our planning. Many of us know the numbers. Over the last 30 years, the length of an average retirement, the cost of living has increased by 84%. An item costing £1 in 1991, costs £1.84 today. Inflation is the number one enemy of the long-term investor. It's also worth noting that this has been historically a lower inflationary few decades.

Luckily, we have the antidote. It starts by reminding ourselves, and our clients, that the only returns that matter are real returns. That is, returns in excess of inflation. By framing all returns this way, we lay the foundation for clients to understand the past behaviour of different asset classes and help them to make more informed decisions about how best to invest their own money.

When comparing only real returns, we observe the incredible power of investing in the great businesses of the world over long periods. £1 invested in the UK stock market in 1991 is worth £3.36 today. You choose which risk you wish to dance with, the overt risk of market volatility (it's easy to scream about) or the covert risk of inflation (the silent, invisible risk to short term thinkers). The final risk in our trifecta of doom is permanent loss of capital.

A bold statement but the behavioural adviser can work with all three of these risks and navigate the client from financial darkness to the light. This is the reason we've been sent into this world and it's the reason why our noble work is so impactful. In short, we invest in inflation beating assets that never completely blow up. Welcome to the world of mainstream global equities.

Inflation is often a silent killer, but the recent spotlight on its existence will hopefully help more investors to grasp its dangers. We have the answer. We'll never run out of prospects. Tell enough people the truth about financial and investing success and the ones who want to be saved, will be. Remember, we can only help families who wish to be helped, by us, and now.

"A man convinced against his will, is of the same opinion still." - Benjamin Franklin.

📰 Articles & Blogs

On the Benefits of Curiosity [4 minutes]. Once you become curious you have no idea where it could lead you.

Nudging: A Very Short Guide by Cass R. Sunstein [12 minutes]. A list of ten of the most important “nudges.”

Getting Into Position [2 minutes]. What helps the most is setting ourselves up to do the great work we already know how to do.

Speculation: A Game You Can’t Win [6 minutes]. Anything with the allure of an astronomical return within a short timeframe isn’t worth the mental (and moral) tension that comes with it.

It’s a Packaging Issue [4 minutes]. Why not spend some time packaging up your service more effectively?

Behavioral Finance Coaching To Help Clients Make Better Choices [21 minutes]. A way to give each client the best odds at reaching their goals, despite any biases they may have.

The Visible Expert: How Ordinary Professionals Become Thought Leaders [16 minutes]. A perfectly achievable goal for most professionals.

🎧 Podcasts

Uncovering Your Clients Most Meaningful Goals with Samantha Lamas [86 minutes]. Research shows that there is a gap between the goals clients think are important to them and the goals that are actually important.

Showing Financial Planning Value As An AUM Advisor By Focusing The Conversation with Dan Moisand [89 minutes]. Can you communicate the value of financial planning to clients in a clear and compelling way?

📚 Book Recommendations

Talking to Strangers: The Adventures of a Life Insurance Salesman by Peter Rosengard. An extraordinary account of his life so far, and the endless adventures in which he made, lost and remade a fortune.