How to alleviate anxiety, and F.E.A.R.

With all the attention on the bad practices of the banking and financial services industry, it was quite a change for me this week when I spoke at the Barron’s conference in Sydney. Barron’s is a US-based financial magazine that has entered the Australian market with the purpose of creating greater focus on “the top 1% of advisers” rather than, as they put it, the royal commission focusing on the “bottom 1%”.

When asked to speak, I had no hesitation. However, as seems to be my pattern, I have major regrets around 24 hours before the event. I generally enjoy public speaking – especially on the topic of client engagement and financial planning – but it doesn’t stop me feeling a little nervous, and it always seems to be 24 hours before. Subconsciously, there is obviously concern about making a fool of myself.

There is no logic to my fear – and that’s the point. As soon as I become more logical, the anxiety dissipates completely. Over the years, I have learned to recognise when it’s happening and have developed two simple techniques to deal with it.

The first is to simulate the experience. I pretend it’s a movie and watch myself walking up to the stage, turning to face the audience, beginning to speak and as I move more and more into my topic, speaking to each person in the audience as if it’s a one-on-one discussion.

The second technique I use is to think about the worst thing that could possibly happen: I could forget what I wanted to say, the technology could fail completely, or I could say something ridiculous. By going through this process I come out the other end feeling not only relaxed, but looking forward to getting up there.

We’re mostly unrealistic

The acronym F.E.A.R. stands for False Evidence Appearing Real, and the best way to prove that the “evidence” is false is to simulate the possible futures, including the worst case. Human beings naturally begin solving problems when they are addressed directly.

Exactly the same process occurs around money. Whether it’s a fall in the stock market, a loss of a job, or any other potential financial concern, the worst thing to do is to worry about it at a high level. There’s no logic in just worrying about something and getting anxious. It doesn’t help.

Having said that, to some extent I’m grateful that there are so many people out there that worry about money. Without that innate concern, we’d have no role to play.

New clients especially, worry about lots of things. There are often real issues but sometimes, they worry about what they are worried about. They often ask: “Is this a common problem? or “Do other people also worry about this?”

Glass half full, or empty?

One of the American speakers at the event had an exercise that apparently identifies people as either optimists or pessimists. The optimists are the “glass half full” people and the pessimists are “glass half empty” people. Interestingly enough, when the speaker asked for a show of hands for those that considered themselves pessimists, not one hand was raised. It’s not “cool” to be regarded as a pessimist. But the truth is, one is not better than the other, and both have blind spots.

The optimists can be overly confident about the future and therefore unrealistic about the assumptions being made. As the pessimists would say, the optimists may get a nasty surprise sometime in the future.

Pessimists on the other hand could be equally unrealistic in their assumptions, resulting in a life of unnecessary frugality.

These outlooks come from various sources – genetic, wiring, and learned behaviour. They’re mostly not a choice but can still be very limiting.

It creates a sense of freedom

The ultimate purpose of course is to be free at both a practical and psychological level to live the life that you most want. In order to achieve this level of freedom in an unpredictable future, simulation and scenario planning can have a significant impact.

Just as I simulate my presentation and allow myself to deal with the unexpected, it is even more powerful to simulate the potential impact of external factors on cash flows. It is a wonderful way to alleviate anxiety.

When doing so, it’s worth contemplating all the possible risks including worst case, the potential implications should they occur, and how these risks can be reduced or avoided.

We all wired differently – some optimists, others more pessimistic. Neither is perfect and each can cause problems that can be neutralised with some simple techniques. Being aware of your default outlook, and then simulating the opposite, creates a sense of freedom that allows for a real enjoyment of an experience. And as is often the case, I was on a real high after the presentation. None of my concerns became reality.

Programming your autopilot

When I first wake up in the morning, I think I would describe myself as being a little stupid. On occasion, I have gone to work without my belt, tie and sometimes even my wallet. It doesn’t happen that often but over the years, I have learned I just can’t trust myself first thing in the morning. I’m clearly not much of an early morning person.

Immediately after waking up, I’m slow and I have to remember too many things when trying to get ready for work. I need a simple process and I don’t want to be thinking about small things – especially if my mind is already getting focused on the day.

So I have developed a method to make this stage of the day easy and reliable. When I get home from work, at the same time that I change out of my work clothes, I select the clothes I will wear the next day and hang them separately. Everything is ready.

I have a similar problem with travel. For many years, it took me way too long to decide what to pack, and I’ve then either taken too much, or too little. I know why it happened – I wanted to be absolutely optimal with what I took on a trip. Not too much, but everything I wanted. That desire to optimise has cost me time, so I developed a formula and checklist to make it simple. The formula depends on whether the trip is for business or pleasure, and the number of nights away. But it’s now pretty easy.

Believe it or not, I am not that organised. I still get distracted by too many things, and still have some habits I would like to change, but at least I have reduced the number of unnecessary errors and time-wasting practices.

To be strong, know your weaknesses

Getting to know yourself around money is more important. Research shows that the cost of an average investor’s behavioural errors is 4% of their investment portfolio per year. That’s a lot of money. From my personal experience with thousands of clients over 36 years, I’m convinced that the single biggest contributor to financial success is personal financial awareness. The most successful people, financially, know their strengths and weaknesses and how they react to various financial stimuli.

There is also an inverse correlation between knowing yourself and financial anxiety. The better people know themselves, the less financial anxiety they experience. The less aware, the greater the anxiety.

Knowing yourself means more than just knowing that you find it hard to change a habit that is not good for you. It’s more than just knowing that you struggle to control your spending or that you can’t help yourself looking at the value of your portfolio daily. It’s not good enough to just know the actions that are harming you. To know yourself to the extent where your habits won’t damage your success means understanding the origin of the problem, and having a system to neutralise any negative impacts.

The catalyst, tool, and process

Getting to really know yourself is not difficult. First, it requires an understanding of the “pain“. How bad is it? Nothing is going to change unless there’s enough pain.

Next, understand the circumstances in which it occurs, or the catalyst. Often, people who live hand-to-mouth feel relief and freedom when there’s money in the bank, and that catalyst means they then spend more. Others panic when the value of their portfolio falls, and they need to change something. Fear of running out and status anxiety are also common drivers of errors.

Designing a suitable process involves a catalyst, a tool, and a process. My catalyst is my suit jacket. When I hang it up, it triggers the process of taking out clothes for the next day. An investor I know uses a 15% fall in the market to trigger a complete sell. He cannot accept the anxiety and accepts the potential underperformance in the longer term.

The final step is the process itself. It needs to be simple and designed to take over when you can’t think for yourself. The assumption is that you’re either stressed or ‘stupid’ so the process has to be simple. It can’t rely on you thinking at the time. My default investment process when prices fall is ‘income, quality and price paid’. Returns over three years or comparing to benchmarks are other ways.

Being self-aware is no guarantee to avoiding errors but being able to observe your own behaviour around money is a critical component to success, not only to avoid errors but also to alleviate stress.

To what extent are decisions influenced by context?

I was lucky enough to be invited on a small tour of the Art Gallery of NSW operations area. It involved speaking to the experts and understanding how they rejuvenate and protect the works. There is so much to it – I had no idea.

In the framing department, we were introduced to a very wide variety of frames, and a lady who has been in this department for something like 30 years made a very interesting comment: “The frame is not supposed to disturb the viewer”, which I took to mean the frame shouldn’t distract the viewer from the real focus – the painting.

Difficult to avoid
The same can be said of financial decisions, and topics. The context in which a financial decision is made shouldn’t affect the decision itself, but in almost every case, it does.

Think, for example, about investors evaluating their returns. It makes a big difference if the frame is the past 10 years or the past year. Similarly, there is a big difference if the returns are critical to lifestyle or not. Making a loan to someone very important to you is different to making one to a stranger for purely commercial reasons.

Evidence confirms it
In the recent edition of the Journal of Behavioural Finance, two papers relate to this topic. In his paper Stock Returns and the Tone of Marketplace Information: Does context matter? Nicholas Mangee of Georgia Southern University explains how impossible it is for anyone to know in advance when and in what ways different variables will matter in predicting stock market prices. However, prices will be totally affected by how different market participants interpret the information they deem to be relevant. “Simply put, context is what gives information meaning for investors,” he says. In other words, stock prices will be affected by investors’ perception (framing) of the information.

He goes further to explain how the “textual tone” of market reports mimics the current feeling of the participants and therefore influence the way information is interpreted. The marketplace context and information-based sentiment are the key factors for explaining stock price returns.

In the past, researchers concluded that investor sentiment was not directly related to prices, but the present research shows that sentiment and tone have a direct impact on behaviour.

In another paper, Aggregate Investor Confidence in the Stock Market, Chris Meier concluded that overconfidence is directly associated with excessive trading and risk taking. He shows how various impulses affect investors’ beliefs about their ability to predict security prices and interestingly enough, also how this increased confidence results in higher trading for around two months. As this overconfidence subsides, trading reverses in the third month implying that rational traders correct the initial overreaction. The first frame is replaced by another.

Use framing to win debates
From a social perspective, it is easy to win debates with friends or family by simply changing the frame. When we hear somebody with a strong opinion who has based their view on their own anecdotal evidence, by quoting broad-based statistics or some alternative anecdotal evidence, the argument can be easily won. Millennials are regarded as being impatient, and have a ‘frame’ – “I need it now“ – that often results in overspending.

From a financial perspective, the topic of framing is so important because it has a massive influence on all short-term decisions, and this is where most cost is incurred. People often make decisions about money based on short-term information, and long-term implications are seldom effectively analysed.

Every day we encounter facts and then make up stories to get these facts into some order so they make sense. The problem with this natural behaviour is that it creates frames, and given our natural inclination to find the shortest way to an answer, we repeat the frames at potentially the wrong time.
A useful antidote is to change or remove the frame. Let’s say your portfolio produced a 20% return. Based on average returns, you conclude it’s good and you’re very happy. If you reframe it by looking at similar portfolios and find they averaged 25%, it now makes you unhappy. Alternatively, you can simply remove the frame and just accept the fact that the returns are 20%.
Removing the frame and accepting the facts as they are is possibly too difficult a step for most people. To some extent, it requires us to suspend thought and evaluation – and this is challenging. Context is always going to affect decisions whether we like it or not. It’s more about being aware of the context and how it’s influencing the decision, and being clear about the ultimate purpose, in order to make appropriate decisions.

Australia day & Australia’s future

It’s Australia Day weekend, and time for festivities. It’s a time to stop to appreciate the good in Australia, and equally, time to contemplate what it means to be Australian. As a relatively new citizen that’s only been here for 20 years, I always find this a time to reflect and appreciate.

Life is good in this country, and we are very lucky. But, how do we ensure that the people who come after us feel the same way in 20, 30 or even 50 years? When I reflect, I think about how it came to be so good. What have been the key ingredients and how do we keep the good and change the bad? First, we need to be able to analyse without bias. This is not easy when involved, but important.

My views may be wrong, but the way I see it is that:

  • We were born with it – the resources under the ground have had a lot to do with success
  • Right place, right time – the rapid and massive growth of China has helped fuel our own development
  • Having the right relations – being part of the Commonwealth during the days of ‘growing up’ must have had a useful effect
  • Good education — education isn’t behind a barrier for Australians
  • Experienced tough times, and learned
  • Tolerance
  • Invested for the long view — the Sydney Harbour Bridge, for example.

During the times of plenty over the past 30 years, there has been some neglect, in the areas of infrastructure and education in particular. We have potentially also lived beyond our means. The debt levels are unacceptable.

Countries need to be looked after, because they can and do degrade if they are not curated and developed effectively.

While it is natural for matter to form, grow and then disintegrate — and it occurs with humans, companies and countries — prevention is achieved through growth. We’ve had a wonderful recent history but the challenge now is to beat the odds and make our recent run of good times persist.

So what will it take? 

First of all, I’d be happy if Australia is as good as this in 50 years. Most people around the world would do anything to live in this country. Many do. That means we have choice around what skills we need and should grow.

I would love to hear one of our leaders describe their vision for the country. With an election coming up, it would be a wonderful start. It is important because vision dictates strategy.

In addition, I think we should continue to appreciate and be grateful for what we have, while remaining self-sufficient, and independent of others.

We need to educate, educate, educate. This is how we will develop the skills we will need to build our country of the future.
And then there are things we need to be aware of, that mirror or emulate the behaviours of a successful investor — because that us what we are doing, investing in the Australia of the future.

We need to accept that tougher times aren’t necessarily bad, because it is in tough times that opportunities can be found.

We also need to focus on the vision, and long-term view— while enjoying the journey and living in the present.

Any investment is ultimately only as good as the country in which it resides. Financial success needs an honest assessment of where we are and how we got here – good or bad. But the foundations on which they are built significantly impact investment returns.

Celebrating Australia Day is better if done at both a superficial and fun level, as well as at a deeper level.

Better to wade, or plunge?

With summer now in full swing, the ocean has warmed up sufficiently for me to commence my annual ‘swim season’. I’ve always enjoyed body-surfing – once I’m in, that is. Not being one for cold water, getting in is the problem.
There are many who are advocates of the plunge in and get it over with approach. My view is avoid unnecessary ‘pain’ whenever possible, so I’ve developed a process that involves, what I would call, a phased approach. I get used to the water up to knee level, then waist, then a splash around the face and neck, and then all in. It works for me and while in my younger days I had to accept the peer scrutiny that came with it, over time I learned that it worked.
Be comfortable with your way
When entering the investment markets, there’s no perfect way to do it. What’s most important is to be comfortable with your way. Investor behaviour is the greatest contributor to investment performance and regret is one of the key influences of investor error. So being comfortable with the prices paid for investments will go a long way to avoiding bad decisions later.
Investment data exists in various forms for up to 200 years and for the US markets we have very detailed data back to 1926. Over this time, it would have generally been statistically better to have ‘plunged’ into the markets most of the time. It makes sense because market prices have risen over this time so the sooner the investment is made, the greater the return.
Balance statistics with specifics
However, investors have individual investment horizons – statistics only provide guidance around broad principles. Investors invest real dollars over a real lifetime – not statistical averages. So, whether to plunge in or wade in will depend on several factors, including:

  • Risk propensity and risk tolerance – how comfortable the investor is with taking risk compared to how much loss can be tolerated before a change is required. Losses are felt twice as great as gains, and ‘pain’ usually causes a change in strategy.
  • The price at the time – it is logically easier to invest quicker but emotionally more difficult after major price falls, 
  •  Time horizon – the longer the time horizon the more rapid the plunge. A 25-year-old investing their superannuation wouldn’t be phasing. 

Phasing in is all about regret avoidance – i.e. avoiding feeling that the original decision was wrong. It’s as simple as applying whatever method makes sense logically and wouldn’t be regretted no matter the outcome. 
Many methods
There are many methods to making investments. Plunge or phase is overly simplistic. For example, phasing could take various forms including:

  • ‘dollar-cost-averaging’ – a very common and regularly recommended method where the investment is made over a fixed time horizon in equal instalments at regular intervals.
  • ‘value averaging’  –  based on phasing in over a period, but where the primary trigger for determining exactly when the next investment is made is price. If the price falls, more money is invested. If it rises, less.

In both cases, the total investment will be completed within the agreed time frame. 
As we continue through this period of increased volatility, for those with money to invest it has become that much more important to be comfortable with the method and timing of investments.
I seldom regret my method of entering the ocean for a swim – there’s no real downside. However, investment returns are definitely impacted by time and timing and just like an ocean swim, you have to be very careful about choosing the most appropriate waves to catch to have the most fun without getting injured. Sometimes it’s necessary to just hold your breath and wait for the froth to pass overhead.  

Being a wildebeest investor is dangerous

While watching a documentary on wildebeest migrating, there was one scene where after days of traversing the African veld, the wildebeest arrive at the Mara river. As the herd starts drinking, a crocodile pops its head through the water no more than a metre directly in front of one wildebeest. There was no reaction – it simply carried on drinking.

“No wonder they get chomped – they’re stupid,” I said. Without lifting her head from her phone, my daughter (a vet) quietly commented, “Their eyes are on the side of their heads – they can’t see what’s immediately in front of them.”

Some things seem so obvious and simple that investors find them difficult to accept and apply. It’s almost as if the issues are too easy. Investors often focus more on what they can ‘see’ in their peripheral vision than on what’s immediately ahead. An apparently complicated problem must require a complicated solution.

Over the years of managing investments, I’ve have gained some insights which are basic, but effective.

  • First, avoid bad decisions.
  • There’s always profit to be made from panic.
  • Think about the expected returns, not past returns.
  • When perceived risk is low, actual risk is high. When perceived risk is high, actual risk is low.
  • In times of major crisis, the worst asset to hold is cash.
  • Focus on the income, not the price.
  • If you want to make your life easier, only look at returns of five years or longer.
  • Just because you got away with it doesn’t mean you didn’t take risk.
  • Risk is often under-priced.
  • No investor gets it right all the time.
  • There is no signal to tell when the market is about to turn – be prepared to appear ‘wrong’ for a long time if necessary.
  • Investors who manage their own portfolios never measure their performance against the market.
  • When all else seems to fail, trust capitalism and optimism.
  • Investors worry unnecessarily about geopolitical events, but those events only count when an economy is already unstable.
  • Don’t worry about costs – focus on what you get to keep after costs.
  • Beliefs drive outcomes more than strategies.
  • Forecasts should be for direction, not detail.
  • Successful investors don’t look for the ‘holy grail’.

As obvious as these seem, it’s surprising how they are mostly ignored. Being human, investors find mixing money and emotions very difficult. Here’s why I think they are ignored.

  • No one likes selling an asset that has done well for them or buying an asset that has done badly for someone else — even though this is often the right thing to do.
  • It’s very difficult to hold a different opinion to many others when there has been strong momentum.
  • Accepting a decision can appear wrong for a long time, but still be right.
  • It’s difficult to believe in a portfolio when the prices drop.

The wildebeest are prolific breeders and the losses they incur during their migration are relatively minor to the overall success of the herd. Lions, on the other hand, don’t breed as extensively so need to be a lot more circumspect about the risks they take. They are opportunists and don’t miss the obvious.

If you’re a wildebeest investor (you keep producing more money), you can afford to be less focused on the obvious. Being a lion investor means not only the protection, but also the optimisation of assets.

Goal setting in a world of meaning

 Setting goals is all very well, but goals without a purpose will perpetuate the cycle of need and greed.

At the start of every new year, attention is often paid to setting new goals. It’s during this time that money and materialism are most prevalent. For some, goal-setting is about continual growth and striving to be better. For others, it’s a desire for more materialism in the hope that it will make them happier.

If economic differences between you and others bring up feelings of guilt or envy; if you feel trapped as if you are giving up a piece of yourself for the dollar; or if you have no idea of how much is enough, you may be at risk of one day falling prey to insatiable need and possibly even greed. And this could destroy not only your money, but also your relationships and your life.

Goals without purpose are doomed to fail – either not achieved or even if achieved,  contribute no more happiness.

A symptom not a cause

Viktor Frankl, the famous German Jewish psychologist and survivor of the concentration camps, explained in his book Man’s Search for Meaning that human beings need meaning . He gave the example of one of his friends in the camps who came to him explaining that he wanted to commit suicide. “Why don’t you do it?” he asked his friend. “I couldn’t do it to my wife,” the friend replied.
Sometimes we live for more than life itself. According to Frankl, without meaning human beings will revert to power and pleasure in the quest for happiness. We try to use these to fill the void, and having grown up in a capitalist society it is easy to be persuaded that happiness and materialism are directly related. Power and pleasure are fuelled by money, but not happiness. Happiness comes from meaning and purpose.

Purpose, goals, commitment and strategy

A purpose doesn’t need to be inspiring to others. It’s not necessarily something that will make you famous or provide admiration. It’s often very simple, and it’s always about being, not having or doing. I call these ‘deep motivators’ and we all have them no matter who we are. For example:
“To be the parent I would’ve wanted to have had”

“To share my life with a soul-mate”

“To contribute to others”

“To be the best me I can be”

“To explore and learn”

“To have fun”

A trip overseas could be the goal linked to a variety of deep motivators. Sharing the experience with a soul-mate, exploring or having fun – and knowing the real motivation is likely to not only influence the planning but also the experience of the trip itself.
Typical new year goal-setters begin with ambitious goals andthen hope that somehow they will be achieved.  Financial and health goals are often the easiest to set but usually the most common failures.
To be successful, you don’t need special talent, intellect or insight. All that’s needed is clarity around why it’s important (deep motivators), what measurable stepping stones are to be achieved (goals), a strong commitment and the ability to change strategy along the way. Purpose, goals, commitment and strategy – in that order.
Successful people are rare but their talents and abilities aren’t. They know why, they set clear goals and they are adaptable but determined. Setting goals is all very well, but goals without a purpose will perpetuate the cycle of need and greed. Goals are stepping stones to get from the present to the destination. Goals are doing and having, not being. And it’s only being that can ultimately satisfy.
As Joseph Campbell said in his book The Journey of a Thousand Faces, “The privilege of a lifetime is being who you are.” I would add, “…no matter what stage of your life.”
If you’re not conscious in your life, you cannot be conscious in financial matters.

When the swell is up, opportunities emerge

As most people make their way to work while enduring their commute, I have the privilege of enjoying one of the world’s greatest commutes – Manly to Sydney city via the fast ferry. I’ve seen whales and dolphins, but the scenery alone is amazing.

I usually catch the fast ferry which is a high-powered catamaran and creates a pretty smooth ride. But when the swell is up, I catch the old ferry, a single hull which rocks and rolls and moves up and down like a bucking bronco. It’s a bit of fun and I feel safe in the knowledge that the ferry itself is a quality vessel and the crew know what they’re doing — and that gives me the freedom to enjoy the ride.

The volatility of asset prices, being based on the swinging perceptions and emotions of humans, is completely natural. For some, the ride is very uncomfortable and they want out; for others, the volatility creates opportunities and can actually be rewarding. If the foundations are strong, it becomes a very good time even when there is apparent confusion around.

The current market volatility can appear very confusing. There’s no denying that there are many real changes in play and it’s increasingly difficult to separate them from the noise. Investors, being focused on the future, have to not only separate the fact from fiction but also try to figure out the potential long-term impact of the real issues on asset prices. It’s easy to get confused.

Trade is the biggest factor for investors, and fully understanding all the implications is complicated, especially when trade issues are in the headlines daily. With worrisome headlines, investors sell. Optimistic headlines, and investors buy.

A truce negotiated at the G20 meeting delayed tariffs on $200 billion in Chinese goods from rising 10% to 25% on January 1. But now there’s a deadline to negotiate an accord, with a deadline of the end of February. Trump is looking for structural changes on a myriad of trade and technology issues. It’s a change to the rhetoric of the past 40 years – which was previously around free trade and the ‘global village’.

The Fed
The Federal Reserve has a very big role in the US economy and therefore a big impact on market prices. It is tasked with trying to keep the economy on an even keel, and uses monetary policy (mainly interest rates) as its lever. Although rates are still at historically low levels, the Fed has increased rates eight times and its chair Jerome Powell’s comments that rates are “a long way from neutral” and “just below the broad range of estimates of the level that would be neutral” has created some uncertainty.

It’s a delicate balancing act.
If the Fed raises rates too slowly, it’s possible that financial imbalances get embedded in the system. Raising too quickly and the Fed prematurely ends the economic expansion.

Investors are self-interested and generally short term so they worry that the current approach may be too aggressive, and will slow the economy too quickly.  A classic example was evident on the 19th December when the Fed raised rates by 0.25% and announced that they expected to raise twice in 2019. After being up 300 points, after the announcement the market fell around 600 points to close down for the day. All because the expectation was that the Fed would say there would only raise rates once in 2019.

The economy, and late cycle
In the quarter to 30 September, the biggest 500 companies had increased profits of 28.3% compared to a year ago, with 77% of companies beating analyst expectations.

Analysts expect profits for these companies to rise 16.2% for the next quarter but this is down from 20% when the quarter began. It’s highly likely that some of the market volatility we’re seeing is likely related to reduced profit expectations.

A high-level view suggests that this economic growth period has had a relatively long run. Generally, interest rate increases, excessive investor leverage, and risk-taking, or government policy mistakes bring growth periods to an end. Indications are that this US economic growth period is coming to an end — but nobody knows when and until it actually happens, there will be speculation and volatility.

The Sydney property market is, in my view, somewhat of a phenomenon — not in itself, but rather in the way it is perceived. Those who have been fortunate enough to enjoy its benefits over a long period (and particularly over the past 10 years) argue that the recent price falls are irrelevant. They feel confident knowing that Sydney has a big future. These people may be surprised to know that the US stock market has outperformed Sydney property over the same time.

Price volatility is a part of life, just as the swells are part of commuting via ferry.

My biggest learnings from 2018

As the great and wise Dr. Seuss said, “The more that you learn, the more places you’ll go.” As humans and as advisers we need to continually learn and grow. If we don’t, we stay in the same place for years and stagnate. You’re growing, or you’re going.


2018 feels like it has been a particularly strong ‘growth’ year. It’s been one for contemplation and growth and I feel like, after being tested fairly significantly, we have learned a lot and come out stronger.


There have been many learnings for me 2018; some from observation, others from pain. Some are new but many reminders. In no particular order, here’s just a few:

  • It’s tough to go against the crowd, and it never gets easier.
  • Clients appreciate direct feedback.
  • Real value comes from real listening. And listening with your ears alone can be misleading. Human beings don’t always use words to explain what they really mean, and often don’t even know what they really mean.
  • The internet was built to be unstable and accessible, and that makes it impossible to keep the bad guys out. We need much greater security around assets.
  • Geopolitics is never the core issue behind price changes.
  • I wish I was interested in fewer topics.
  • Push your strength too far and it becomes a weakness.
  • Access to the right investments is the most undervalued service.
  • The most valuable advice is often the most surprising.
  • Talking is easy; communication is difficult.
  • The most common thing about clients is that they’re all different.
  • Nobody values the foundations no matter how hard they are to lay.
  • I can spot a typo from 30,000 feet.
  • Busy does not equal productive.
  • It can take a while, but assets can’t remain overpriced forever.
  • Sometimes the process of making a decision can be fun.
  • Even though I have done eight years of study, I’ll have to do another two.
And last, after much thought and analysis, I learned that I want to continue working with clients in an advisory capacity for the next 10 to 15 years, but with a greater focus on life strategies.

What surprised me this year:

I had no idea the royal commission was going to blow the industry so wide open. (There were no exposures that I didn’t know but it feels good to know our approach has been vindicated).
Trump’s tariff war seems so unsophisticated and the impact so obvious, but maybe I’m missing something.

A new app for spouses, or anyone in a conflicted relationship, especially divorce. It warns the sender that a text message may be misinterpreted by the reader and result in an adverse reaction, and suggests how to reword it.
Being rated the 29th best adviser in Australia in the Barron’s top 50 advisers (It’s nice but I’m not sure these surveys can ever be correct).
The 12-month returns to September 2018. I thought they would be lower.
The wonderful responses to this weekly Thinking About blog from clients.
What didn’t surprise me:

The price correction in Sydney property or US stock market.


As I reflect on 2018, it reminds me how much I appreciate the fact that I can actually reflect on this, and on the life we live in Australia. It has been quite a difficult year in many ways and in the ‘heat of battle’ it’s often too easy to lose sight of the real issues and get caught in the noise.


It has been a year of building stronger foundations at Sentinel Wealth, and I feel that we are ready for a very good 2019 and am already looking forward to it. I’d love to hear your learnings and surprises for 2018.


Beliefs about Christmas and money

If the holiday season fills you with dread as financial conversations emerge with well-meaning family, there is a way to make those moments more interesting, and less challenging. It comes back to understanding what someone’s money beliefs are.

I caught a taxi recently and as we started driving we encountered a traffic jam. “I hate this time of the year”, the driver said. “Christmas fever – everyone goes mad. It’s terrible!”

“What’s the likelihood of you enjoying the next four weeks?“ I asked.

“I doubt it,” he replied.

As I got out of the taxi, I felt sorry for him. Although understanding what he means, he has set himself up for an unnecessarily difficult time. He has convinced himself that the next few weeks are going to be crazy, that he’s going to have passengers arguing with him, and he’s not going to enjoy it – all because of his beliefs. It’s also likely that if anything happens he will use it to confirm his beliefs and exaggerate the impact.

Many people have the opposite beliefs about this time of the year. They love the holiday period. Often these people can be heard saying something like, “it reminds me of my childhood.”

The correlation between beliefs and outcomes is very high, and confirmation bias reinforces and conflates the outcomes.

Beliefs are formed in early years, usually from emotional experiences (particularly those where joy and fear are present). At the time, the emotion almost  ‘glues’ the belief to the subconscious. And it becomes very difficult to move.

Money beliefs are also correlated to outcomes, and many are likely to be reinforced during the holiday period, and it is at these times that family elders pass on their money beliefs to the next generations. The elders will never know the impact they’re having – their beliefs are ‘the truth’, so they’re doing the young a favour, right?

Whether a money belief will be supporting or limiting should be left to the believer themselves to determine. It’s not for the listener to decide. They have their own beliefs.

Limiting Beliefs
Overall, though, there are a number of beliefs that I’ve found are generally accepted as being limiting or destructive:

– “Good people don’t care about money, and aren’t materialistic.”
– “It just has to be done, regardless of the expense.”
– “The cost of the gift shows the value of the relationship.”
– “Money will solve all my problems.”
– “It’s only money.”
– “Your self worth equals your net worth.”
– “Somehow, it always works out.”
– “People judge you by how much money you have.”

More valuable and fun conversations
Unfortunately, research shows that the holiday period is a time of increased stress for many people. As family members get together, often having not seen much of each other in some time, conflict in conversations may arise. It’s often a clash of beliefs that each person in the conversation is convinced is the truth.

An interesting and fun change to these conversations is to raise the topic of money in the form of experiences.

“What’s your first memory of money?” is a question that elicits very interesting responses. Critical, however, is to let it flow without interruption. Be the inquisitive listener, nothing more. It’s not about telling them their memories are wrong or their beliefs irrational. It’s not about proving anything. It is simply about enhancing understanding and being interested.

After the story about their first memory, ask what impact it had. Then ask whether that impact has served or limited their relationship with money.
Even between spouses – there are insights to be gained and relationships will be enhanced. These are the conversations that can make family gatherings more enjoyable, and enhance relationships.

One of the most powerful and valuable learnings to pass on, is awareness.

When I think back to my taxi driver, I still feel sorry for him. He has chosen a job that puts him in the middle of the movement of people and as he wakes up every day, he sees the world through a negative prism. I wonder what the knock-on effects of his daily beliefs are on aspects of his life that are more important.

But maybe, that’s just what I believe.