And my responses to some deep questions that followed
[For the new (or curious) reader, here is a link to Blog Post #200, which is an Index to the previous 199 posts, under the headings: Happiness and the Psychology of Life Two; Investment; Longevity; Retirement Finance; and some other topics. I update the Index at the end of each year, so #200 is complete to the end of 2023. Each listing in the index includes the post number, a link to the full post, the blurb describing the contents of the post, and any takeaways. That should enable you to find exactly what you’re looking for. Now read on … ]
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I was honored to be asked by the folks at Allan Gray to be a keynote speaker at a two-day conference they held in September. As I’m located in Toronto, we recorded the session in advance via a Microsoft Teams call. What struck me most about our session was the depth of the questions they asked, after my talk — by far the deepest questions I’ve ever been asked on such an occasion, and in my life I’ve given many, many talks. So I thought I’d reproduce those questions and use them as the basis for a couple of blog posts, to share them with you. I have their permission to do so.
As background, let me start with a little bit about the Allan Gray organization and the people I dealt with, and what topics my talk covered, so that you’ll have a context for the questions and my responses.
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Established in 1973, Allan Gray is a South African investment company, offering investment services that include consulting and management to institutions and individuals. It is Africa’s largest such organization. The company’s website focuses on “building long-term wealth for our clients,” and they stress that they avoid (not manage) conflicts of interest, with a fee structure that makes their income more sensitive to long-term investment performance than size of assets under management, and with senior executives who are shareholders in the business, and all other staff having a substantial portion of their remuneration in the form of performance-based bonuses. In other words, they all do well if and when their clients do well.
The South African retirement system transitioned on September 1, 2024 to a two-pot system, under which all future contributions are split, with one-third credited to a savings account (permitting one withdrawal per tax year until retirement) and two-thirds to a retirement component that must, at retirement, be used to purchase a product that provides retirement income (whether or not guaranteed) for life. Essentially, then, a “defined contribution” system, plus what I think of as an emergency “Life Happens” fund.
The executive who got in touch with me out of the blue and engaged me in a delightful initial chat was Pavini Solanki, a young lady whose formal title is Specialist, Group Savings and Investments. I can vouch for her talents in the field of organization, as she set everything up and was my go-to person for anything at any level of detail.
Giving a recorded talk is a bit dull from the perspective of the presenter, so Pavini arranged for the talk to take the form of an interview on topics I was comfortable with. And the role of the interviewer (and the person who then came up with those deep questions) was taken by another delightful young lady, Nshalati Hlungwane, who had experience as a manager in the firm’s Retail Client Service Centre before becoming a manager in the Institutional Clients team, so she clearly understood both the institutional and the individual perspectives. Further professional depth came from degrees at the Bachelors and Masters levels, as well as being a CFA charterholder. But most impressive of all was Nshalati’s personal depth, in her comfort during our interview and the follow-up questions she asked.
In the background, making sure everything went all right, was Chris Basson, manager of Allan Gray’s Umbrella Fund.
All in all, they made this an enjoyable and memorable experience for me — my gratitude to them all.
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We covered a variety of topics in the interview. I’ll mention a few, just for context as Nshalati framed her after-the-interview questions, which I’ll get into in detail.
I told them that I divide adult life into three financial stages. First, Get Started (from around age 20 or your mid 20s, to somewhere around 40 to 45, the often experimental time). Then Get Serious, when we’ve normally settled into a routine, whether at work or in a relationship. And then Enjoy (not “retirement”!), which is typically the happiest stage of life. [See blog post #22 for much more on financial stages of life.] So of course I explained the “U-curve of happiness,” revealed by surveys around the world, showing that our life satisfaction (as measured by national averages, not necessarily for each individual) tends to start off high, declines as we age until somewhere between 45 and 55, and then turns up again until it surpasses the high youthful levels. [See blog post #3 for much more on the U-curve on happiness.]
We covered what to do in each stage, financially.
- In Get Started, start saving, in as automated a way as possible, for the Enjoy stage – but only after first creating your emergency (“Life Happens”) fund – and register for any form of glide path for investment.
- In Get Serious (if not now, when will you get serious?), make sure you’re saving enough to get any employer “free match,” and increase your contributions every time you get a pay increase. If you can, probably with professional help, customize your investment glide path. And get into an income mindset, meaning that you think of your accumulated assets in terms of the annual (monthly, whatever) income they are likely to generate, because that’s the only way to understand what’s sufficient. Possibly more professional help is needed for that, in which case expand the discussion to include mortgage and other debt and child support.
- It’s not all financial. Perhaps 5 years before you plan to start your Enjoy stage, take time for a mental transition. I didn’t, and I experienced three years of total discombobulation when I left full-time work. I explained how I eventually discovered three big questions that confront most of us (Psychological: Who am I? Practical: How will I fill my time? Financial: Will I outlive my assets?). And I went through how to deal with these questions in some detail.
And I mentioned that we leave not only a financial legacy, but also an emotional legacy, which is how people think of us after we’re gone.
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Now for those deep questions. I’ll skip one on institutional arrangements and focus on the six questions Nshalati asked about individuals.
Question: You have written about the behavioral pitfalls (e.g. the “resist the amygdala” paper) that we as humans are programmed to make. What are the biggest psychological traps to look out for, as we move through the various stages of the journey you have outlined?
I think the way to get to an answer on that outstanding question of yours is to consider it at the end of each stage, and ask yourself: “What are my regrets?”
During every stage we’re likely to say: “I’m too busy now, I’ll look at that tomorrow, or next month, or whenever.” And then, at the end of that stage, as you realize you’re now actually in the next stage, you regret that you didn’t take the time to make it today’s focal point rather than next month’s.
So, in the Get Started stage – get started! Take the time to get started. This is where the time is least costly, because, once you’ve made the initial decisions, I’ve suggested that you can set it and forget it. So it’s essentially a one-shot time commitment. And what you really need to start, is to start saving. In this stage, between being a good saver and a good investor, it’s better to be a good saver (an insight I got from interviewing Jonathan Clements). It’s your savings base that enables investment returns to compound. Without those savings, there’s nothing to multiply.
In the Get Serious stage, it’s much more difficult, because now you ought to change your perspective, and the change is from accumulation to projections of income that your savings will generate. And that takes time. But, oh my goodness, it’s so worthwhile, because changing to an income perspective will answer your own questions on how much you need to save, given your circumstances and your hopes for the future, because now you can interpret the outcome as a measure you’re used to dealing with.
Once you’re in the Enjoy stage, this may not be true, strangely enough, I mean making good plans. You’ll probably need to actually explore many aspects of your lifestyle, and even if you planned something, it may turn out that you don’t like actually living that plan. So patience is what you need in the Enjoy stage, rather than planning.
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Question: One of the biggest challenges we as an industry (and as individuals) face is being able to understand these concepts early enough for them to be of any use. If you were able to go back in time and give yourself one piece of advice for each of the three stages you have outlined – what would it be?
Gosh, another superb question!
I think it would be essentially the same answer as before. So let me add to it by using my own experience as an example.
In the Get Started stage I never got started myself, I was too busy focusing on my career and trying to succeed on my own, which I failed at. So: I wish I had said to myself, “By all means focus on your career – but not to the exclusion of having a Plan B if it doesn’t work.” Meaning: set something up now, not just for your current self, but for your future self, no matter how small that something is, and after that you can forget it. Don’t ignore your future self. It’s like what a friend, who’s a Professor of Music, told me. Singers are trained never to expel their entire breath, but always to keep something in reserve so that the next line can still come naturally. I didn’t keep a reserve. If I lived my life again, I would.
In the Get Serious stage I truly did get serious, because my career had failed, and it was only accidentally that I was rescued when a colleague suggested that we talk to Russell Investments, who were thinking of starting a Canadian operation. They chose us to start it, and that’s when my luck started. My regrets about that stage are that I was so enthusiastic about my new career that I paid little attention (in retrospect) to my family. I was on the road all the time, not just in Canada and the States but eventually around the world, and I missed so many of the everyday events in a normal family’s life. So I guess my looking-back advice to myself would be: “Again, don’t just focus on your career. Make sure you save some time to enjoy your family.” Those kids’ growing-up years are the ones that typically grandparents enjoy the most, maybe because they didn’t give themselves the time when their own kids were young.
In the Enjoy stage, it was my impatience that I recall, that three-year discombobulation spell. In retrospect I’d say: “Be patient, eventually things will come into perspective.” But honestly, I don’t think I would have taken that advice, it’s not the sort of person I am: when I plan something I expect it to work out!
But again, I was lucky. During those three years, quite unconsciously, I gradually started to realize there was a different element possible in my life, which was to finally let my wife live the life she wanted. She had given up 40 years to simply be a wife and mother, and fortunately there was still time for her to live her own dream, which was to be in England and get closer to the world of ballet, which she had always loved. And so now she commutes between London and Toronto, and runs the London Ballet Circle, the world’s oldest independent ballet appreciation society, and she’s on top of the world – and I just love it.
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I’ll stop there, and cover Nshalati’s final four questions in the next blog post.
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Takeaway
Insights into the stages of life, and my advice regarding each stage, partly derived from all that I did wrong!
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6 Comments
I have written about retirement planning before and some of that material also relates to topics or issues that are being discussed here. Where relevant I draw on material from three sources: The Retirement Plan Solution (co-authored with Bob Collie and Matt Smith, published by John Wiley & Sons, Inc., 2009), my foreword to Someday Rich (by Timothy Noonan and Matt Smith, also published by Wiley, 2012), and my occasional column The Art of Investment in the FT Money supplement of The Financial Times, published in the UK. I am grateful to the other authors and to The Financial Times for permission to use the material here.
Don
Thanks for sharing these questions and your answer. I suspect many of the readers will empathize with your comments about the Getting Serious stage and how we probably excelled at the Getting Serious part, to the detriment of other aspects.
This was a good thing to get before the long weekend.
Best
Richard
Thanks, Richard. Yes, one’s personal behaviour doesn’t always conform to the theoretically optimal! But at least one can learn from one’s regrets.
Hi Barbara:
Try Freedom, Time, Happiness at the top of the website: https://donezra.com/freedom-time-happiness/ and see if that’s helpful. There are some chapters that aren’t there, because they’re in the published book Life Two, but I’m hoping you won’t need the book itself.
Best — Don
Hi Don ~
A wonderfully-written post, as per usual! This statement caught my attention: “I explained how I eventually discovered three big questions that confront most of us (Psychological: Who am I? Practical: How will I fill my time? Financial: Will I outlive my assets?). And I went through how to deal with these questions in some detail.” Have you written any blog posts about how to deal with those 3 questions? I’m recently retired and struggling a bit with these so would love to know more about your perspective on them and how to approach them. Many thanks in advance, and have a lovely weekend! Best, Barbara.
Hi Don,
Thanks for another great contribution!
Is it possible to watch the session which was recorded on Teams?
Thank you
giovanni
Hi Giovanni, see if this link works (it’s the only one I’ve got): https://youtu.be/6FduL2Ggw0I