Halloween is a time of candy, costumes and trick or treating. But mostly it's a time for people to dress up and “become” someone else for a night. How many people are really happy with who they are the rest of their days?
This is one of the central questions for most humans when they think about their financial life: What are we willing to give up to be the ideal version of ourselves and avoid a scary ending?
We
completed research that asked families to share their financial life stories and tell us about the lessons they learned at major turning points. There were many interesting facts but, by far, the most fascinating to me was that human financial life is an enduring struggle between the ideal life we want and the lives we end up living. Money and how we spend it is at the core of this conflict.
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Let's illustrate with the story of Sam, an accomplished gentleman in his 70s who had successfully amassed a seven-figure fortune. He had worked hard his whole life to build his nest egg, sacrificing mightily along the way to get there. Whenever there was a choice between living the life he wanted or building his net worth, he went for the money. That meant endless work and constant travel. It meant always placing his own desires for his ideal life behind his quest for wealth. Surely many of us know our own version of Sam. Perhaps we have budding Sams who are our clients today.
Ultimately his choices led to several failed marriages and broken relationships with his children. Now in his 70s, he had built a multimillion dollar net worth and a life filled with regret. Sam had worked with wealth managers for decades, but none of them thought it was their job to help him align his financial life ideals with his money.
This might be an extreme example, but every day, people battle with this struggle. How involved should we advisers be in helping people live a life that is rich and not filled with regret?
There are three questions most people have to answer to find the right balance between building their net worth and building their best financial life:
1. Why do you work? What is the primary purpose of your money? We all have our own reasons and things we want, whether it's to spend time with people we love or to spoil our families. Having a systematic way of identifying people's ideals and priorities is the single most important way of ensuring they make the right choices.
2. When you have to choose, how will you? Human desires are limitless, so life is a constant set of trade-offs. When you have to decide between a higher paying job that requires time away from your family or staying put — or whether to pay for a child's private school education or move into a nicer home — how will you decide? Having a clear set of priorities is crucial, but so too is a process to make the inevitable trade-offs in a way that maximizes the outcome and aligns with your ideals.
3. How do you overcome your biases? We all have biases that cloud our judgment. Perhaps few roles matter more for any adviser than helping clients to be objective and make the right choices. Along the way, we advisers also have to break our own long-held bias that our primary job is to focus on building people's net worth above all else. Money is not the destination, it is the gas in the car.
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A LIFE WITHOUT REGRET
Regret happens when we make choices that do not live up to our ideals. Money is often at the central point of compromise between who we are and who we'd like to be. Is there any greater purpose we can serve than helping people ensure their money serves them and not the other way around? There is no better way to avoid the scary ending for the people we work with than doing what we can to help them make the right choices right now. Happy Halloween!
Joe Duran is chief executive of United Capital. Follow him @DuranMoney.
