It’s easy to criticise Armstrong but there are lessons for investors in his thinking and planning.

Lance Armstrong had one goal in life – he wanted to be the world’s best. We now know that he used illegal methods to achieve this goal but it all started with his thinking.
At some point in his career he decided that his strategy for becoming the world’s best was to dope. Choosing to cheat is a flaw not just because it is not the honest way of winning, but because the consequences of being caught are huge and usually life-impacting. They are however quite predictable and that’s the first lesson for investors.

Had Armstrong even considered this as a possibility, he would have contemplated the enormous backlash and consequences for him and his family. And had he done so, it is likely his actions may have been influenced. As he recently admitted, he would never have made a comeback.

Considering the alternative scenarios, in particular the worst case should be a part of every planning process. It helps to identify what’s certain and what’s uncertain, what’s controllable and what’s not, and then what options exist.

Almost all investment disasters are the result of too much concentration of resources in one asset (i.e. all the eggs in one basket) or too much leverage. Both would be avoided through a simple process of scenario evaluation.

What caused Armstrong to never contemplate this as a scenario is the second lesson. He thought he could control the variables and one of the key variables in his case (and the one that ultimately brought him down) was human behaviour. His plan was elaborate and complex and relied on those around him holding the line, potentially under extreme pressure. He thought he could control the people around him. After all he had done so throughout his life so he had experience.
He was overconfident and his overconfidence led to blind spots.

As human beings we are all susceptible to overconfidence. To be psychologically healthy, we have to be optimists. The future always seems better than the past and we are never realistic about our prospects. But optimism leads to overconfidence and overconfidence leads to very expensive lessons in the investment markets.

Lance’s third lesson for all of us is to know why we are doing what we are doing.
There was only one point during his interview with Oprah which gave us a glimpse of what is really important to him. Only one time where he showed some emotion – in fact where he couldn’t control his emotion.
It was when he spoke about the time when his 10 year old son had to defend his father to his friends. Imagine contemplating that your children may be teased about you, their father being a cheat. Instead of being proud to be admired by the world, at the age of 10 his son faces challenges which at best will leave massive emotional scars.

When he embarked on this strategy, he probably was after the admiration, respect and money that would come with winning. Ultimately he wanted to be loved by the masses but he hadn’t actually contemplated this at a conscious level. Had he done so, he may have wanted something different. Maybe he would have chosen his family’s wellbeing over his own. He certainly wouldn’t have chosen being an embarrassment to his children and mother.

Lesson three is therefore to contemplate the ultimate purpose of the plan, not the ‘doing’ and the ‘having’ but the ‘being’. Answer the questions ‘why?’ and ‘so what?’ What’s the ultimate purpose of the investment? If the returns are achieved, so what?

Many investors think that the objective of investing is to maximise returns. It should only ever be to optimise returns – to deliver the necessary return to produce the cash flow required within the acceptable risk tolerance. We can be thankful to Armstrong for at least reminding us how important it is to have a process before embarking upon a strategy – a process which takes into account the purpose, the blind spots and the possible scenarios.

Written by Justin Hooper, Managing Director and Financial Strategist

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There were many standouts from these Olympics and some provide good lessons both for life and managing money.

Obviously there is the Usain Bolt. Some will detest him calling himself a legend, others will smile at his take on life. All have to be impressed with his remarkable speed. The standout for me with regard Usain Bolt has nothing to do with him directly but rather with a discussion I heard on ABC in which the female South African 800 m runner who was forced to undergo gender tests (because she was being too successful and apparently had high testosterone levels). The point being made in comparison to Bolt was that although he is significantly taller than his competitors and has significantly bigger strides, no one complained. At what point do we simply accept how people are born and compete anyway?

On the topic of Usain Bolt himself – how much fun can one guy have? That has to be one of the real standouts is his ability to have fun even when under extreme pressure. He knows that his athletics is a means to an end – being a legend and having fun. Financial planning and money management needs to have life purposes as the final objective too.

Another standout for me was Sally Pearson. Apparently when she came second in Beijing she realised her possibilities. She created a clear vision, then a set of strategies over four years and together with an incredible focus and a trustworthy coach she never looked like being beaten.

What about Mo Farah? Here is a guy who went to England as a schoolboy refugee from Mogadishu in Somalia. He was given an opportunity for a better life and is now a hero in Great Britain. The commentators couldn’t stop saying that they had never heard a louder cheer for anyone in any stadium anywhere in the world. There can be no under-valuing of human capital and we should all protect our abilities and be very clear about the implications of voluntarily giving up our human capital.

Chad Le Clos the 20-year-old South African swimmer who beat Michael Phelps in the 200 m butterfly also provided an interesting lesson. In the interview after the race, he was like an excited teenager not because he had won but because he had raced his idol. “All I wanted to do was be in the next lane and race him” he said. “On the blocks I looked at him – but he didn’t look at me.”

Maybe we should all simply enjoy the participation and the challenge to ourselves – measure ourselves against the best but most importantly enjoy the growth.

I found myself watching all sorts of “crazy” events and staying up to all hours of the night. Sports which I have never watched before I was becoming an expert in – I’m sure it was just the enjoyment of something so different. Differences and diversification add value.

But the most lasting impression is probably going to be the way the games were organised. They had the wonderful British ability to organise big events whilst also having a flair and creativity that I have never seen at any Olympics before nor in many other British events. It reminded me again how planning well actually allows for creativity and freedom.

There are many more impressions and lessons from a wonderful two weeks but the most important ones for me are:

• Know why you are doing what you are doing,
• Vision, focus, good strategies and trusted coach help,
• Human capital may be the most valuable asset of all,
• Diversification is essential,
• Planning and organisation allows for freedom, spontaneity and creativity.

I hope you enjoyed the games as much as I did.

Before leaving, I must admit I was very aware of the potential risks and dangers of the trip. The plan was to spend four or five days in Johannesburg and almost three weeks camping in Botswana. My Australian friends were more concerned about the threats wild animals posed, but I was much more concerned about humans in the cities.

There’s no doubt that Johannesburg is an “interesting” city. For starters, the police stations are protected by security firms! They also don’t get involved into public protests on the basis that it’s not their jurisdiction.

It appears that by and large the communities have resorted to their own system of protection, prosecution and retribution. “Burnings” (i.e. people being killed by being burned to death) appear to be the result of community prosecutions for crimes as minor as theft. The community is obviously at its wits-end.

Car hi-jackings persist and danger areas are clearly identified. A friend of mine (who enjoys mountain biking) told me that “bike-jackings” are also a problem.

Notwithstanding all of this people still get on with their lives. The traffic is unbelievable – five and six lane freeways are packed. In fact the vibrancy of the streets is greater than I’ve ever seen before. Bike races through the dangerous areas still continue with some adaption to provide greater protection. People have learned to live with the risk and refused to allow it to impact their lives. Maybe this is naïve, or just a practical way of dealing with it.

A new law encouraging (okay, maybe demanding) black empowerment is being applied quite normally. Every company is required to favour black people in all categories. It’s a quota system of sorts and it permeates the whole of South African society. There’s the odd comment about it but everyone just gets on with it.

There’s a new train system in Johannesburg and Pretoria. It’s absolutely world class and a pleasure to travel on. Carriages are clean, it’s quick and in Australian terms, relatively inexpensive. When I was growing up in Johannesburg, trains were dirty and dangerous. We would never have contemplated using a train and would probably never have even thought a whole new system would have been built.

The last time I was there, they were having significant problems with ‘acid water’ underground. The old mines were no longer being maintained and water was building up and almost flooding everything under Johannesburg. My impression at the time was that it was a massive problem. Eighteen months later and it’s not a big topic.

Notwithstanding the enormous challenges and risks, South Africa has grown in many ways over the last 20 years. Economically, socially, politically, and on the sports field, it is a country that has proven its doubters wrong.

Having said that, I am not for a second suggesting that I would rather be living in South Africa. The risks are simply too high… for me. Being able to reduce the risk to my family’s safety was worth every sacrifice.

However, the lesson is still relevant. Sometimes we allow risk to get in our way. There’s always risk – understand it, measure it, manage it, but most of all get on with it.

Contemplating risk is critical but it shouldn’t be inhibiting. We all accept that there are no guarantees in life and it would be very boring if there were.

And so it is with financial strategies. Risk cannot be totally eliminated. Accept that risk exists but evaluate all the risks, develop a set of appropriate strategies, put in place a management plan and then get on with it.

At SentinelWealth we have developed a risk assessment and management service which does exactly this. From the macro risks of global warming and the Euro debt crisis to the micro risks of a parking fine, it rates the likelihood and consequence and develops a plan of action.

It’s amazing how this approach creates a freedom as liberating as the worrying about risk is inhibiting.

To find out more about this service, please contact Melissa Oliver on 02 8908 5300 or info@sentinelwealth.com.au.

What I have found most interesting is the emotional reactions of the athletes after the result. Some are in tears of elation, others tears of frustration and anguish and still others almost can’t control their joy. It was really difficult not to have a little empathic tear when the British female rowers balled their eyes out as their flag was raised at their medal ceremony.

Many of them are emotional because they feel they have either met or let down the expectations of their support group. Emily Seebolm is one that comes to mind. “I have let my parents down” she said. (I’m sure her parents had no such thoughts but were possibly sad for her knowing how much it meant to her).
Another standout was the sprinter (not sure where he was from) who came 7th in the first heat of the 100m and was eliminated…after having done a personal best. Can’t be unhappy with that!

And then there was Rebecca Wilson’s comment when commentating on the swimming. “This is something I will tell my children and grandchildren about. Your mum was there.”

Everyone has a conscious or subconscious purpose at the Olympics. For some, it’s to feel better about themselves, to be more ‘lovable’. (Reminds me of Elisabeth Kubler-Ross’ comments – “there are only two true emotions – fear and love”.) For others, it’s just an experience in the journey of life.

One thing is for sure – those that aren’t conscious about what it is about for them, are destined to be at least surprised, if not shocked.

And so it is with finances and investing. Far too often, people don’t know why they are doing what they are doing. They are being swept along with the tide. So when they get ‘beached’, they will often experience fear.

Before settling on any financial strategy, make sure you know why you’re doing what you’re doing and what you are specifically trying to achieve. Be clear about your ‘deep motivators’ and goals and you’ll find the selection of strategies much easier.

If you are interested in finding out more please contact Melissa Oliver on 02 8908 5300 or info@sentinelwealth.com.au.

The article was written in the 1990s and was extremely bullish on the investment climate ahead. It forecast returns of over 20% per annum from equity markets and referred to ‘recent trends’ which had been extremely positive and which had delivered great returns.

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By
Gavin Fineff
Financial Planner

If you are interested in finding out more please contact Melissa Oliver on 02 8908 5300 or info@sentinelwealth.com.au

Now let me say upfront that not having my own plan is ridiculous. I have been in the industry for well over 10 years, I have access to all the resources, and I am surrounded by exceptional advisers and clients.

So why haven’t I got my own house in order? My excuse is that I am your typical 30 something. I spend all that I earn, I have debt, I am enjoying life and am not worried about the future. I believe that the biggest card I have to play is time. I have decades and decades of time on my side so why should I plan for my nest egg now?

Having said this I reached a turning point only last week when the penny finally dropped and I realised how my work could help me.

For the last 7 years I have been creating cash flow scenarios for our clients and listening to the adviser and our clients discuss cash flow assumptions and implications. Although I could see how valuable the cash flow scenarios were to our clients, I was not sold on them for myself.

The other day we had our monthly team meeting at which the benefits of using the cash flow tool for our own planning came up in the discussion. I decided to be honest about my view of the cash flow modelling and consequently I told everyone that I couldn’t see the value of it for me personally. I know that I of all people should have used the tool given that I am a natural planner and love to track against my targets. However, despite this I couldn’t accept it as a viable tool because as far as I was concerned, putting in irrelevant assumptions like earning three times my current income, was a pipedream, and therefore why should I bother?

What I realized during that open discussion was that the reason I didn’t see the value was simply because I wasn’t applying realistic, achievable and relevant assumptions that I believed in.

Now that I’ve realized this, I am ready to build my own cash flow scenarios and begin to look at questions such as: what if I didn’t make any changes and kept the status quo? What would that look like in 20 years time? Or, in the event that I was disabled and unable to work, how much would I need so that I could financially support myself?

I am amazed at how quickly my view has changed. It is actually an exciting step to know how much I need to live the life I want, and more importantly, to know how much I need in a crisis.

I now see the real value of the cash flow tool. It’s all about achieving a measure of peace of mind by knowing that I am in control of my financial situation and will be well prepared if something unexpected happens.

I hope my blog helps you to decide to take action about your cash flow, regardless of what age or stage of life you are at.

To find out more please contact Melissa Oliver on (02) 8908 5300 or info@sentinelwealth.com.au

Today, I really experienced the truth of that. Seven months ago I decided it was time to take control of my health. I weighed more than I ever had in my life and quite frankly, I was very unhappy about that. Every morning I would look in the mirror and tell myself that I needed to lose weight. So finally after four years of inaction I was ready to do what was required to lose the extra kilos.

I decided that it was time to pull out my wallet and employ a personal trainer. This was a huge step for me because I couldn’t see the value of spending any money on gym memberships, let alone personal training sessions. Ironically, since my first training session, I haven’t looked back.

To date, I’ve lost eight kilos and my body fat has dropped from 28% to 11%. By taking the action to look after my well being, all the other areas of my life have also been positively impacted. This is not at all what I expected because I only saw losing weight as a cosmetic change, not a whole life change!

Apart from achieving such great results, the bonus that I didn’t expect was the relationship that I formed with my trainer. I could not have done this without him. He has been an outstanding coach. He is passionate, dedicated and committed to me achieving my goals – and he knows what he is talking about.

However, today he delivered news that caught me off guard. He has decided to follow a different career path and therefore will no longer be working as a personal trainer.

At first my jaw dropped in disbelief. Then within a few moments the reality of what he said set in and I burst into tears. All I could think about was that I might never find another trainer who would look after me so well.

He listened to me. He understood what I wanted to achieve and addressed my concerns from my point of view. Then he used all his knowledge, experience and empathy to provide me with honest, objective and sound advice. There was no doubt in my mind that he had my best interests at heart.

To me, this intangible value is priceless and I don’t regret a single dollar that I have spent for his time, expertise, training and guidance. I’ll forever be grateful for his impact on my life.

Through this experience I have realised that although the “cost” may seem high, I gained more value than I could put a price on. Employing the right coach/adviser has been the best money I have spent and I believe that being able to say this is the true measure of value.

For more information please contact Melissa Oliver on 02 8908 5300 or info@sentinelwealth.com.au

The engagement was initiated by the employer as part of their commitment to mature aged employees, as approximately 40% of their workforce are over 45.

Each consultation was designed to help educate participants on possible strategies they could explore to assist them with planning their finances and preparing for retirement.

I was honoured to have the opportunity to share my knowledge and help educate this amazing group of women (and man) but it also saddened me that some of them who had spent their entire life caring for others, were in a financial position that meant they would be reliant solely on the government Age Pension in their retirement.

Currently, the maximum Age pension for an individual is $19,468 p/a and $29,354 p/a for a couple, which by most standards does not represent a luxurious lifestyle.

Reflecting on my experiences over the two days, I was reminded of the following lessons:

1. It’s never too early to start planning and managing your finances.

   Small savings over a longer period can have a huge impact on the final outcome. This is due to the compounding interest effect which Einstein claims is the 8th Wonder of the World.

   I wonder how different the story may have been if each employee had developed an integrated financial plan in their 20′s or 30′s?

2. Your beliefs determine your results.

   Most employees had received similar salaries throughout their careers yet some had accumulated enough assets to enjoy a comfortable retirement, whilst others were resigned that they could not save and would therefore have to rely on the government Age Pension.

   Everyone’s circumstances were unique but those with positive beliefs about saving and investing had managed to convert the same income into significantly greater financial wealth.

3. Regardless of marital status, you need to take responsibility for your own financial health.

   We’ve all heard the statistics about high incidences of divorce and unfortunately this was represented in the participants.

   Whether you are single, married or divorced, taking responsibility of your own financial health ensures that regardless of what life throws at you that is one area you can be in control of.

   To help identify how healthy your finances are, SentinelWealth has developed the unique WealthScan tool which is like a medical check-up for your finances.

If you or your friends would like more information on the WealthScanTM tool, please contact Melissa Oliver on (02) 8908 5300 or info@sentinelwealth.com.au.

Topics included a range of investment areas: gold bullion, Australian equities, international equities, developed and emerging markets, bonds, currency and many others. Each speaker presented compelling arguments for their point of view, and these ranged from one extreme to the other.

Australian equities are undervalued, developed markets are flush with cash and opportunity, emerging markets have to catch up with their share of GDP, etc. etc. Round and round we went with argument and counter-argument but there was very little change to people’s original positions.

A detailed discussion about how to determine the right time to invest created debate around what to use as indicators. One school of thought involved building a 10 year forecast in order to determine fair value now. The other involved using momentum as the indicator (i.e. where the money is going now).

After two days and much discussion, there were still no clear answers I couldn’t help thinking that all the discussion about the detail was being trampled by each person’s belief system around investing. It seemed to me that once the belief was in place, it was simply a case of continuing to justify it with ‘technical’ arguments. I wondered how many of those in the room were even aware of their investment beliefs.

The only thing that was agreed upon by everyone was the need for diversification. That alone confirms at least one money belief shared by all: It is impossible to really predict the markets. So the ‘king’ of diversification is in fact not dead – it is still very much alive.

To check whether your investment portfolio is DIVERSIFIED or DIWORSIFIED contact Melissa Oliver at SentinelWealth to set up a portfolio review.

Note 1: “Diversified” is a portfolio with multiple assets that all behave in a similar way.
Note 2: “Diworsified” is a portfolio of assets with relatively low correlations that creates stability and reduces volatility.

It’s a powerful story, extremely well told, with images that I am sure will always be in my mind and hopefully always help me to appreciate the important things in life.

One of these is the opening scene where a young mother, father and two young children survived by sheltering between two water tanks. It appears that the tanks protected them from the massive inferno. What struck me was that Bronwyn Sparks (the mother) actually had a smile on her face whilst Shane (her husband) was almost inconsolable.

I can’t imagine what it must be like to even be near such a fire tornado, let alone feel that you and your children are about to be incinerated alive. I wondered why Bronwyn had a smile, and why Shane in contrast was so upset. I can only surmise that Bronwyn realised that her family would survive. On the other hand, Shane may have felt that he had failed in his ultimate role as “protector”, or maybe he despaired at the thought of how he would provide in the future. I have no idea what caused him to shed tears, but whatever it was, it was deeply important to him.

Another aspect of the documentary that struck me was how their daughter Lola struggled for a while after Black Saturday. That in itself is not surprising and neither is the fact that psychologically it had a major impact. Apparently Lola blamed Bronwyn and Shane for not getting the family to safety. “Why didn’t you get us out?” she said. The pain of that comment for a parent is impossible to describe. To some extent it goes to the very heart of what it means to be a parent. Although neither Bronwyn or Shane mentioned how it felt, I have no doubt that after what they had been through, it must have been incredibly hard to deal with.

And so the relief and joy that they must have felt when a psychologist was able to work successfully with Lola to deal with this trauma would have been priceless – literally. What that psychologist did was a service not only for Lola, not only for the family, not only for their immediate community but also for the whole of society. Ironically I am sure Lola will grow up to be a wonderful human being and in some way her experience at this very young age, from both the trauma of that inferno as well as the lessons learned from a highly trained compassionate, experienced and independent professional will enhance her as a human being.

What price quality, independent advice? It can be absolutely life-changing.

To find out more SentinelWealth’s AdviserMatchTM service please contact Melissa Oliver on (02) 8908 5300 or info@sentinelwealth.com.au.