People Have Simple Goals

People have simple life goals and yet they are not always attained and only rarely exceeded. There is a reason and that reason will have an impact on how financial services will be delivered in future.

There are four simple life goals regarding financial matters:

  1. People want to live well both now and in the future.
  2. People can’t know everything, so they want to have a margin for error. (Security)
  3. People want to leave the results of their life’s work, intact, to their children and other heirs
  4. People want to use their money to efficiently achieve these objectives.

Business owners, professionals and senior managers spend about 100,000 hours building their wealth. Despite being clever and capable people they frequently do not achieve lasting financial success. Why?

The do not reach their goals because many spend fewer than 100 hours dealing with the financial wealth that results from their efforts. One-tenth of one percent of the effort will not get you good at very many things.

They spend this little bit of time because they think somehow that it cannot be hard to do. Their advisers give them ideas and purportedly make plans. Why should they learn anything? They hire an adviser and hope.

Many people are lacking in financial literacy and there is a developing push in the financial services business to help with that.

That push will go nowhere as long as the providers are using it to explain tactics – the packaged product that they sell. Like insurance, mutual funds, segregated funds, and tax structures like RRSP, RESP, IPP and many more.

Knowing more about these is not required to be successful.

That is what the adviser is for – to know about these.

I have been told by a psychology professor that having your memory become weaker as you age is not a problem. Not knowing where your car keys are is normal. Certainly not a sign of brain damage or disease.

Not remembering what they are for; now that is a problem.

Until clients know what financial planning is for, it limits, and its reasonable expectations, they will not be materially better off by knowing more about the methods available. The analog of “I know where my car keys are but I don’t know what they are for.”

So far, almost all clients are deficient in planning technique and philosophy and few are addressing that shortfall.

That is why, in the present form, the financial literacy push will fail.

Don Shaughnessy is a retired partner in an international accounting firm and is presently with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario. | Twitter @DonShaughnessy | Follow by email at moneyFYI

2 Comments on “People Have Simple Goals

  1. In any life situation once you know “why” you want to do something, figuring out “how” to do it becomes much easier. Without that motivation one is much less inclined to seek out and understand the possible ways to achieve what they want. When it comes to financial “goals” knowing the end game (what you want & why) will make it clearer what of help and specialized advice you’ll need to get there.

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