#4 October 2019

Mental Accounting

Our understanding of behavioural and cognitive biases has come a long way in the last 50 years. For those interested, the development of the field of behavioural economics is excellently documented by Richard Thaler in his book, Misbehaving.

Mental accounting refers to the different values people place on money, based on subjective criteria, that often has detrimental results. It results in humans separating their money into separate accounts rather than treating money as fungible.

It shows up in the way we budget our income, but also in the way we treat our investments.

It brings to mind the client who has outstanding high-interest credit card debt while at the same time having money in a low-interest savings account.

The envelope system of budgeting helps people create the necessary discipline to live within their means, but can also lead to sub-optimal behaviour if underspending in one category isn't allocated to another category of spending that brings them joy.

How do you see this behaviour showing up in your clients' lives?

HUM South Africa 2019

Andy recently returned from Cape Town, South Africa, where he hosted the 4th HUM conference. It was the 2nd time that the event has been held outside of London. The day was a massive success - 1 great venue, 2 local partners, 6 generous exhibitors, 11 speakers & 180 ambitious advisers and service providers.

Thank you to everyone who contributed to this wonderful experience. We hope to be back next year for another successful event.

You can listen to the on-location narrative-style podcast of Andy's time in South Africa here. Keep an eye on the HUM website for the videos.

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Main Feature

Financial planning founders started a movement - and created a profession [9 minutes].

Many may not know the story of our profession's birth at a Chicago airport hotel in 1969. This article looks at the start of the financial planning movement. We stand on the shoulders of giants.

Articles and Blogs

The Second Rule of Human Risk is... [7 minutes]. To achieve a desired behavioural outcome, we need to focus on the outcome rather than on the processes and controls we will use to achieve it.

What Advisors Want to Achieve [5 minutes]. Advisors can use behavioral science to more effectively communicate the value they can bring to prospects.

When Heuristics And Biases May Actually Improve Financial Decision-Making [17 minutes]. Is it possible that we’ve adopted too negative of a stance towards bias and heuristics when making financial decisions?

Risky Business: The Quiz That Could Steer You Wrong [4 minutes]. Many of these questionnaires are unhelpful at best and harmful at worst.

Nurturing The Lifecycle Of The Advisor-Client Relationship [24 minutes]. Advisors need to be aware of the changing stages that client relationships will go through over time.

Negligent Financial Planning [3 minutes]. Are there gaps in your advice?

Skilled financial coaching, “it’s a game changer” [5 minutes]. Gain a better understanding of the people you help.

Justin King: An Ironman is Like Financial Planning [4 minutes]. Dream, plan, get a coach and execute.


Humans Under Management: South Africa 2019 [41 minutes]. Andy presents the journey of creating HUM SA 2019 in the form of a narrative podcast.

Resources to Help You Grow Your Financial Planning Business [20 minutes]. Roger Whitney shares his non-industry sources of inspiration.

No Jacket Required: Inside the World of New School Wealth Management [34 minutes]. An audio review of the recent WEALTH/STACK conference.

Book Recommendations

Talking to Strangers: What We Should Know about the People We Don't Know by Malcolm Gladwell. The well-known author and thinker uses stories of deceit and fatal errors to cast doubt on our strategies for dealing with the unknown, inviting us to rethink our thinking in these troubled times.

How to Fight a Hydra: Face Your Fears, Pursue Your Ambitions, and Become the Hero You Are Destined to Be by Josh Kaufman. We are all fighting hydras. In this illuminating fable, productivity expert Josh Kaufman explores the uncertainty and fear inherent in facing down any ambitious challenge, from starting a new business to completing a work of art.


Vanguard: Assessing the value of advice. How should we measure the value of financial advice? In this paper, Vanguard introduces a new three-part framework based on portfolio, financial, and emotional outcomes.



Financial planning wasn't even a thing 50 years ago [3 minutes]. A video celebration of our profession's first 50 years.


Daniel Kahneman on Mental Accounting [3 minutes]. A short look at the funny things our brains make us do.


Josh Brown and Joe Duran: On Financial Advice, Living Well and Building a Billion Dollar Business [21 minutes]. The founder of United Capital on how he sees our profession evolving.