Do any of these additional topics appeal to you?
In my last blog post (http://donezra.com/96-where-next/) I asked for your assistance and input. I think that post generated more comments than any before it, thanks very much! Decumulation came though as the topic of most interest to you, followed by engagement. And you also provided me with angles I had not considered before. It’s already clear to me that dialogue with you will enhance my view of any topic I’m interested in.
Now I continue my request.
You’ll remember the background. Having completed researching and writing Life Two and Freedom, Time, Happiness, I have a number of new research avenues I’d like to travel along. And while I’ll travel along all of them eventually, it’ll help me very much to prioritize them if you tell me which ones are most interesting to you.
Last time I outlined four of them: individual financial dilemmas; emergency savings; increasing participant engagement in connection with retirement issues; and decumulation. Here are four other avenues that interest me.
As before, I request your input.
5) Issues that affect investment indirectly
Climate change is the obvious one. But more broadly, issues called “ESG” for short are what I’m thinking of here. “E” stands for “environmental,” and relates to issues that affect the depletion of natural resources and their sustainability for future use. “S” stands for “social,” and relates to issues that are of concern to the future of society, such as human rights, consumer protection and diversity. “G” stands for “governance,” and includes issues relating to how companies are run, such as the power/management structure, executive compensation and employee relations.
Some people consider these to be moralistic issues, others don’t. Regardless, if they affect asset prices and prospects, they need to be taken into account in making investment decisions, whether the relevant time horizon is long (they’ll affect prices some time, but don’t seem to do so now) or short (they affect prices today).
Mike Clark’s comment on the previous post adds another angle: whether different generations view the issues in different ways.
My interest in these issues is partly to understand the issues better and partly to understand how they affect individuals’ investment choices.
6) Accumulate health
In the same way that we can build up assets that we then draw upon for financial health later in life, we can do something similar with our physical health: build it up early so that we have more to draw upon as we age. This is a notion that was introduced to me by my doctor, who knows exactly how to get inside my head! He knows about my book, and encouraged me to study the health analogue of accumulation and decumulation; he’ll help me once I’ve done my own independent research into the subject. My personal trainer, with whom I have many fascinating conversations and who also knows how to get inside my head (I’m a lucky guy!), also encourages me to look in this direction.
I’ll include as a part of this topic (though it may prove to be entirely different) the difference between chronological and biological age, a topic that my longevity guru Dr Moshe Milevsky has written about many times, most recently in a book (https://www.amazon.com/Longevity-Insurance-Biological-Age-retirement/dp/1790658268/ref=sr_1_1?qid=1553104443&refinements=p_27%3ADr.+Moshe+Arye+Milevsky&s=books&sr=1-1&text=Dr.+Moshe+Arye+Milevsky). It’s obvious that as individuals we age at different rates, and even that different parts of our body age at different rates: for example, in their later years some people are more capable physically than mentally, others more capable mentally than physically. What stage has the science of measuring biological age reached?
In my mind the connection between the two issues here is my vague hypothesis that if one succeeds in accumulating health, it ought to improve the chance that one’s biological age is younger than one’s chronological age, and therefore that one’s future life expectancy is higher than average.
7) Financial wellness
Increasingly, employers are introducing services for the benefit of their employees, in connection with physical, mental and financial wellness (or wellbeing – there doesn’t seem to be standardized terminology yet, as these services are relatively new). This seems to be a win-win introduction, because not only are the employees healthier, the employer gains via enhanced contributions to productivity. As far as financial wellness is concerned, this goes far beyond retirement-related considerations; indeed, the need is very great at younger ages too, particularly in countries where student debt is high.
My interest here is to understand the state of the art today, and what it may become in the future: topics covered; how information is collected, used and reported back; the extent to which it engages and educates and benefits employees; measures of employer benefits; and even (though this is much broader) related social policy issues.
I’m also wondering about the relationship between financial literacy and financial wellness: is there a correlation, and if so, is there causation in either direction? To take out the geek-speak: which comes first, literacy or wellness? It seems like a chicken-and-egg situation.
8) A new map of life
This is a notion that the Stanford (University) Center on Longevity (http://longevity.stanford.edu ) is pursuing. I’m lucky enough to know some of the people involved and some of those on their advisory council, so I hope I can stay in touch with developments. (I don’t expect to contribute to their research, just to follow it.) The idea (at least in my understanding) started with Dr Laura Carstensen’s book (https://www.amazon.com/s?k=a+long+bright+future+laura+carstensen&crid=Z51VPSF5ITUM&sprefix=a+long+bright+future,aps,159&ref=nb_sb_ss_i_3_20) A Long Bright Future, which says: if we knew in advance that we were likely to live for 100 years, how would we re-pace our lives? If you’ve read my books, you’ll know that I’m very taken with Laura’s premise and ideas, and have cited them in my last three books.
These four directions seem to be broader in their scope than the four in my last blog post – not that that matters, really. And inevitably they’re all inter-related too – which again doesn’t matter. If you know me at all, you’ll understand why all eight topics are very interesting to me, and excite me as I delve into them.
I said at the start that I plan to look at all of them. My purpose in seeking your input is to prioritize them.
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.
As you note, this and the previous blog cover a lot of diverse territory. Your readers have expressed their priorities. Might I suggest, as this is not a biweekly column on the topic of the fortnight, that the sequence be one of building blocks and that we are reminded periodically of where we are headed.
I am among those who suspect that decumulation requires more attention than the endless CHIP commercials on TV.
I’ve been pleasantly surprised by statistics I’ve seen about RRSP and pension coverage in Canada so, to me, “engagement” refers to ‘refinement’ for the majority and initial engagement for the rest. Like many of your readers, I’ve given seminars to plan members where audience questions vary from ‘what is a stock?’ to ‘what do you think about the impact of X on security Y?’
Good health and a long life. I look forward to continuing this journey with you and your readers, be they in Life 1, Life 2, or anywhere in-between.
Thanks very much, Ted — I appreciate your comments very much (and your good wishes!). OK, I’ll take the “building blocks” approach — makes good sense, rather than waiting until a topic has been thoroughly studied — that will help me too, as I can get your guidance along the way, and that will clarify and sharpen my understanding. Your experience has been and will continue to be terrific input for me. Thanks for the time and the interest!
Hi again Don,
While all four topics are worthy, I see an ESG discussion as a ‘must have’ to the extent that it is becoming an integral part of the investment landscape. It has been on the agenda in every conference I have attended in recent years, and the institutional side of the investment industry seems to transitioning to a state where ESG (or more broadly SRI – socially responsible investing) is becoming integral. This is largely being driven by investors’ demand, but is also being embraced as part of managing the risks. This issue entails a sizeable element of personal belief and choice, and can get pretty complex. Setting out the landscape might be really valuable for your audience.
One topic that is not on your list, and I don’t recall you covering, is how to deal with (ie prepare for) cognitive decline as you age. You might give this some thought as an important missing piece of the puzzle of how to successfully get navigate through life two.
Thanks very much, Geoff, both for the ESG/SRI comment and also for identifying an important and (unfortunately) practical topic. I dealt with it lightly in my piece on talking to your adult children about this phase of life, but that’s not enough: the risk of cognitive decline is one that deserves explicit consideration.
You won’t be surprised by my choice! ESG.
Here is where I am in my own thinking:
Sometimes ESG is used as a noun (a bit silly), sometimes as an adjective (ESG issues, ESG matters). As an investor (and also a citizen saver…) I prefer to think in terms of ESG risks. I could then choose to argue that every risk in a pool of assets is an ESG risk! For a portfolio manager (operating fiduciary), it’s mostly about individual securities and alpha. For a governing fiduciary or managing fiduciary it can be more about beta. Beta is a choice, not a given, because the GF/MF begins to tilt their overall strategy away from (under-) mispriced “big” risks (say climate/carbon) and towards (over-) mispriced risks (I have a personal stake in a business with a fund investing in (underpriced, I fondly believe!) Emissions Trading Scheme (ETS) Allowances (think: price of carbon) in various jurisdictions.
I have started to talk about strategic risk management (SRM) as a precursor to SAA. Also, SRM can link the Universal Owner governing fiduciary decisions on ownership (proxy/engagement) with the portfolio securities where those ownership rights seem (mistakenly?) to reside, often too close to a portfolio manager with a short time horizon.
Enough! I’ll send you a deck for a talk I gave recently. It shows where my thinking has reached.
Hopefully you are tempted…
Thanks very much, Mike. It’s clear that you will be an invaluable guide for me, both on the underlying issues and on how investors are taking and ought to take them into account (which — again clearly — are not the same).
My passion is for Retirement Related Investing – a new phrase coined at a conference in Berlin last week trying to bring to life the relevant S in ESG for our future happiness. Better housing and tech and silver support. So I think this links across a number of areas of your research …
Thanks very much, Sally. That pulls it all together. You’ll be one of the experts I’ll tap for information and updates! Until you explained it (in a separate email), I hadn’t realized that “silver support” meant retraining and other help (apps, technology) which help those with grey hair live a more fulfilling life — thanks for that piece of education too.
These are all huge and fascinating topics. As always, I am impressed at the scale of your ambition. I do feel that you have left out number 9 – “How to achieve world peace” :).
My top five from your combined list (plus my reasoning) are:
1. Accumulate health: I’m sure that most people believe that our health is our most important asset. If we are fit and healthy (physically and mentally), we can cope with most things. However, I doubt whether we allocate enough time and importance to activities which protect and enhance our health. If you could prove your hypothesis that accumulating health ought to improve one’s biological age, this may also encourage a younger audience to appreciate your work, and possibly encourage them to make an earlier start on preparing their financial assets for Life Two.
2. Decumulation. I covered my reasoning in my response to blog 96 but Geoff has made a critical point about cognitive decline. Making decisions about which investments to sell as we progress along the glidepath is difficult enough in our 60s but there must be many retirees who have chosen to manage their SIPPs themselves and this will become increasingly challenging in their 80s, 90s and even 100s (ref your point 8 – A new map of life). Exploring the options of how to manage our portfolios as our cognitive powers decline and most importantly, who to trust, is a subject that would be welcomed and hopefully provide peace of minds for many of your readers.
3. Issues that affect investment indirectly (ESG): I agree with the reasoning from Geoff and Mike.
4. A new map of life: This subject is the foundation for most of your others. If we knew we were likely to live until 100 the thought of living the last 20 years in a care home might be enough incentive for us to focus on Accumulating our Health Assets in addition to our financial assets. Lynda Gratton & Andrew Scott from London Business School have done a lot of work on this subject and their book – The 100 Year Life is worth a read. How we re-invent our skills through our 100 years is an excellent challenge.
5. Individual financial dilemmas: I covered my reasoning in my response to blog 96.
Do let us know which you have decided to follow and please take us with you on your journey through your blogs.
Thanks very much, Jeremy, this is very valuable input, both for the prioritization and for the reasoning behind it. And also for the book reference, which I will follow up quickly. Thanks again!
I prefer a new map of life.
Thank you, I hear you!
My priority order: topic 6 (accumulate health), then 7, 8 and 5.
Thank you, I appreciate the ranking!