Know Your Money with Bronwyn Waner and Craig Finch

88. The Impact of Confidence on Your Financial Success 2 of 7

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What if your financial future could be secured with just a bit more confidence in your financial plan? In this episode of "Know Your Money," we unravel the essential role confidence plays in financial planning for both clients and advisors. We tackle the lasting damage caused by unethical practices among financial advisors and the importance of finding trusted professionals. Listen to Craig's touching story of a man who suffered financially after a severe illness because he lacked a financial plan, underscoring the necessity of income protection. Plus, we delve into why maintaining faith in long-term financial plans is crucial, especially in turbulent markets, and how bad news often overshadows the benefits of sound financial planning.

Clear and specific financial goals are the cornerstone of effective planning. Join us as we spotlight the importance of goal clarity and how aligning your financial choices with personal values can lead to greater achievement. We explore the role of financial planners as thinking partners who help clients navigate the emotional aspects of financial decisions. Through examples like Warren Buffett's frugal breakfast habits, we illustrate the balance between rational and irrational behaviours in personal finance. Rob provides valuable insights into how clarity and confidence in financial advice can make all the difference in achieving your financial aspirations.

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Speaker 1:

Welcome to Know your Money, where we will explore our relationship with money and how the psychology of it impacts our financial decisions, as everyone thinks about money differently. In our podcast, we'll be presenting a variety of financial topics in an easy to understand way, which we hope will assist you with managing your money. Hello everybody, Welcome to Know your Money, Gaz. How are you today?

Speaker 2:

Very well, and you, bronwyn Craig, you're looking well, thank you. Warren, always good, never a chore and look who's in the studio again with us. Yes, we're fortunate again, Rob. How?

Speaker 4:

are you Good? Thanks, warren Good to be back. Thank you, nice to be in warm, sunny Joburg.

Speaker 2:

Yeah, I believe Cotan's had a lot of rain this year, hasn't it? No, it has.

Speaker 4:

Huge amount of rain, but yeah, so it's good to be nice and warm.

Speaker 3:

So, rob, we're going through your book, yes, yeah.

Speaker 1:

Last Good to be nice and warm. So, rob, we're going through your book, yes, yeah. Last week we spoke about clarity and today we're going to be talking about confidence.

Speaker 4:

Yeah, that's right, bronwyn. Yeah, confidence might seem like an unusual topic to be talking about when it comes to people's money, but I think it's something that is very important, both from a financial planner's perspective as well as a client perspective. And maybe to open the conversation is to say that I think that a lot of people often don't have a lot of confidence in financial advice generally because of the sort of tainted image that I think sometimes the profession has from bad behavior of financial advisors who missell products or put people into dodgy investments. So I think confidence is critically important for clients to have in financial advisors and financial planners and for financial planners themselves and maybe you guys can talk to us to have confidence in what you offer your clients and what you do for your clients.

Speaker 3:

Yeah, absolutely. And you, I think, what you always hear? The bad news. You hear the bad Ponzi schemes and the clients get caught up like that, and that's what the press often you always hear, that you never hear the good stories. And there are many, many good stories, as we know and the environments we mix in. We know those financial planners that do the good work for clients. Unfortunately, the client doesn't always see it because they hear the bad stories and then unfortunately, you might not connect with a financial planner and then down the line something tragic could go wrong in your life. And if you had connected with a financial planner and had the confidence of going with them, you'd be in a far better situation.

Speaker 4:

Yeah, of going with them, you'd be in a far better situation. Yeah, I mean, I firmly believe that financial planning is one of the two most important professions of this century, and that is medical. And Craig, you shared a story.

Speaker 3:

Yeah, the chap I bought my electric bike from. I hadn't seen him for a year and he said the next week he contracted I think it was encephalitis or some really severe illness, and he was in hospital for a year and unfortunately so. I said, oh well, you know, were you okay Because? Did your income protection pay out while you were in hospital? He said no, I don't have a financial planner and I didn't have income protection and I lost everything. And that was just you know. So you know, if somebody had gone to see him put a financial plan in place, had loss of income protection in place, then he would have been able to recover perhaps a lot quicker because he didn't have the financial pressure on him of making sure his salary still got paid. It was a really sad story when I heard it.

Speaker 1:

Absolutely. And I think when you do financial planning or as a financial advisor, you often go to people and they say, like I can't afford this, I can't afford that. And this is where having confidence in what you believe in I think is so important. So in our practice, income protection is one of those things severe illness. So, as the advisor, you need to have the confidence to say, like, without this, where are you going to put yourself, instead of just saying, okay, well, you can't afford it. You know I won't push you, but I think sometimes we all need a little bit of a nudge just to understand things like that.

Speaker 3:

Implications? Yeah, it'll never happen to me. You know that's what you always think, that Another thing is retirement. Don't worry, I'm only 30, plenty of years ahead of me. And when you see the effect of compounding interest, I mean, we've heard this. We've spoken about this in length, haven't we? You Warren, about that snowball? Yeah, you've heard that a hundred times. But it's so important to to have the confidence to say my financial advisor advised me to put this plan in place. It's going to be a very good outcome at age 65 or 70, whatever it might be, and you must confidently go and do it.

Speaker 2:

I think so from the outside perspective here.

Speaker 1:

From the client.

Speaker 2:

From the client. Yeah, the confidence sides of things. It's not only limited to financial advisors and your plans as the clients. I think the horror stories which the media loves to play on because bad news sells, of the financial crisis, the meltdown of this, the meltdown of that, these people lost their pensions. I know Craig's told me now since then, because I used to be skeptical about putting money into funds and markets because I thought, well, what happens if it all gets lost one day. So I think that part of your job is also to let people know that, yeah, these things come along every now and then they're. You know, like anything in life, bad things happen in the financial markets but, like Craig said to me, as long as you stay in it, it always comes back.

Speaker 1:

Yeah.

Speaker 2:

And it always continues to grow. So I think a lot of people myself if I spoke about myself. The reason I was always very skeptical and wasn't confident in putting money into a future is because I remember when I was I must have been about 20 when the 2008 thing happened and I was like, well, if that's what they do, then why would I put my money there?

Speaker 1:

But that's where I also think, like in our practice, to put my money there. But that's where I also think, like in our practice, your time horizon is the most important information that you can provide a financial planner and you have to have confidence in that. So if you say I want to put this amount of money away and I only need it in 10 years time, if you need that money before things like those crashes will impact it Because, like Craig said, the market can always correct itself. So understanding a time horizon is to me, a crux of confidence from both the client and the advisor.

Speaker 2:

Hi everyone, if you would like to get a copy of Rob's book the Seven Pillars of Financial Health, we have shared a link in the bio with the web address as well as a discount code you can use. The book retails for 375 Rand excluding delivery, and with this promo code you will pay 370, which includes delivery. Alternatively, you can find the book at exclusive books or other bookstores. We would like to thank you for listening and please remember to like, subscribe and share the podcast so that we can bring on more exciting guests like Rob to help you with knowing yourself and knowing your money.

Speaker 3:

So if the market, as you said, comes off and it's still five years to go you know it's going to recover and you're going to get your outcome that you mostly want.

Speaker 4:

Yeah, I mean, I think that. So if we think about what confidence, in its pure definition, that means intense trust in yourself, particularly because you're confident in yourself. But if we use that word intense trust, I mean I think we're saying that I mean trust really is the currency of financial advice, you know, without trust, and that's part of the reason why people don't get advice, because they're not sure if they can trust somebody. But the other part of this is that I think confidence is built on understanding what are the fundamental principles of financial planning and of investing, so that if you understand what those fundamentals are and I think that's the challenge you as financial planners face is to be able to, as you say, warren, educate somebody. But also you guys have to believe it yourselves, because I mean, you know that sometimes is a problem when a financial planner doesn't have clear idea of the principles and fundamentals that are involved in financial planning. You know.

Speaker 4:

So, if we talk about time horizon, that's one key principle. The principle of time in the market is more important than trying to time the market, because we know that we can't do that as an example. Another fundamental principle might be because clients come to you and they say I want the best return. Every client wants low risk, high return. That is contrary to the fundamentals of investing. So what do we know? We know we don't know what the best return is going to be, but we do know that over time, if we diversify our investments, then over time we'll achieve the outcomes we need. Sorry, I'm just going to make one more point. Craig, I can see you want to say something, but the last point I want to make is and that's the key is achieve what the client wants or needs to achieve. And that's the key here, because the research shows that the clearer a client is on their outcome you know so the more specific I can tell you the more confident they will feel in the process.

Speaker 4:

So your job is obviously to try and help people articulate that, and they have to articulate it, because that's the other part of confidence is, I'm not going to be confident if you tell me that's what I must do. I'm going to feel more confident if I say, craig, this is what I've been thinking. I really do want to save for my children's education and I don't want to touch the money and I'm very clear that I want them to go to university and I want them to have the opportunity to study for five years. That's quite specific, those are quite specifics, you know. So if I'm very clear on that, craig, can you help me put together a strategy to achieve that? You know, but I need you to help me articulate my goals, and I think that's what we perhaps miss on is because people don't necessarily know what they want you know, and Bronwyn, I don't know what you think, but do you think everybody can have whatever they want?

Speaker 1:

Yes, we did have this debate yesterday where you can't have it all was Rob's sort of arguments and I said you can have it all. It's just being specific about those goals, because you might think that you want the new house and the new car and the holidays and the this and the that, but if you actually knuckle down to what your actual goals are, what is important to you, you can figure out your goals more clearly and have direction with them and then find it easier to achieve, because the clearer you are on something, the easier it is to achieve. You'll maybe stop having the coffee every day so that you can go on the vacations. Or if coffee means something to you, like it does to you, you'll keep having the coffee but you'll give up on the brand new car because that isn't what you confidently really want.

Speaker 4:

Yeah, yeah, absolutely yeah. So it's like helping me understand what I value, what I really value, yeah, and we don't necessarily automatically know that we need. Well, I like to say one of your roles you play is a thinking partner. I need you to help me think through what I'm facing in my life.

Speaker 1:

What you truly want. It's not just the everything kind of picture.

Speaker 3:

But also what happens in markets, like Warren mentioned, in the 2008 crash we've had many before that and there'll be many more to come. You often feel pressurized by the client saying get me out, I'm losing money, I have to go to cash. And you confidently got to say no, it's going to come right, the markets will recover. You're actually in a fortunate position because you're buying at a low rate and it will. You got to believe that and help the client believe that. But I think when we talk to our other colleagues and other financial planners, a lot of them react and they feel we better react with our clients and we push them into cash and those are really, really bad strategies to have.

Speaker 4:

Yeah, and I think that's the key to why it's so important that financial planners are confident in what they're offering and clear on what the fundamental truths are.

Speaker 1:

But again, I think it starts with the client. Like you've said, you have to have confidence in that that money is set for that time, because if they aren't clear with that, then we'll you know we have confidence in what we're going to tell them, but if they don't do it, they don't stick to it as a client.

Speaker 2:

I have to believe that you believe in what you're saying to me.

Speaker 4:

Yes.

Speaker 2:

Exactly, and I have to not only believe it, but I have to make the choices that you believe in, you've convinced me of with your confidence. Yeah, yeah, so yeah, if it matters to me that Finn goes to a private school and has five years in university education, I'd be confident that the sacrifices that we've agreed we need to make in order to make that happen are real yeah, To make those choices. Yeah, absolutely yeah.

Speaker 1:

The choice architect, like you said.

Speaker 4:

Yeah, exactly so I mean. So your first role is helping me think through things. Your second role is to play the role of choice architect. Now I have to make those choices. I can't have everything, bronwyn.

Speaker 1:

She can have everything you want.

Speaker 4:

Yeah, but you know I'll be making it.

Speaker 2:

She thinks she can have everything, and I'm slowly making her realize she can't have it. But she truly can the things that she wants may be just for no reason.

Speaker 1:

You know you've got to understand the reasons why you're going after it. But we'll pin that. Yeah, we'll get there one day.

Speaker 4:

Yeah, so the choices we make, you know, with regard to our financial lives, I mean, are both financial but are also emotional, and it's trying to get that sort of balance right, you know, and that makes what makes your job as financial planner so challenging and so, I think, so interesting you know, because you're actually, at the end of the day, working with people's emotional lives, and I think we spoke about it in the podcast on clarity, when we spoke about the fact that money goes to the core of who you are as a human being, and so you know the reason that I want to go and spend money on whatever it might be.

Speaker 2:

Good coffee.

Speaker 4:

Good coffee. You know it goes deep. You know what is it about that that I so enjoy having a decent cup of coffee and would prefer not to have a cup of coffee than to have a bad cup of coffee? That's completely irrational, as it's completely irrational that Warren Buffett goes every morning and spends $2.10 on a breakfast at McDonald's every day, and the wealthiest man in the world one of the wealthiest men in the world doesn't spend more than $2 on his breakfast every day. What is that? That's completely irrational.

Speaker 4:

Man in the world, one of the wealthiest men in the world doesn't spend more than $2 on his breakfast every day. Yeah, you know what is that I mean?

Speaker 1:

that's completely irrational, yeah, but you need that sometimes. You need that irrational behavior to get you through the day, I suppose yeah, yeah. Awesome, anything else.

Speaker 2:

No, very informative yeah.

Speaker 1:

Great episode. Thanks so much.

Speaker 3:

Thanks for having no very informative, yeah, great episode. Thanks so much. Thanks very much, guys. Thanks guys. Thank you for listening. If you have enjoyed this podcast would like to subscribe, please visit our website, wwwgrowthfpcoza. The information we have provided in this podcast is our personal opinion. For more detailed information, please discuss your financial situation with a financial planner.