Also, it can’t be overstated that you need to manage your own stress during these periods. If you are feeling anxious, it will impact the advice you give.
One of Housel’s most important points is, “Wealth is financial assets that haven’t been converted into the stuff you see.” Living large doesn’t mean we are wealthy, it simply means we are spending our income or investments. Buying a luxury car doesn’t mean we are wealthy, it means that we have less wealth than before we bought the car.
Many of our clients will ask why their neighbor can do something they can’t do. It often involves choices, not wealth. We don’t know their neighbor’s situation or how they choose to spend or invest.
Housel goes on to write that, “Modern capitalism is a pro at two things: generating wealth and generating envy.” I think this speaks to us as planners.
In our society, it’s easy to compare ourselves to others. Unfortunately, that can be a problem for financial advisors too: In a May 16, 2022, article on the Nerd’s Eye View blog, Michael Kitces and co-author Meghaan Lurtz suggest “there is a small but clear pattern in which advisors’ self-worth declines as the net worth of their clients grow[s], with a steep drop-off coming as clients surpass $2.5 million in net worth.” When advisors can clearly see someone’s financial situation, according to this research, it impacts how they feel about their own lives.
True wealth comes from wanting what we have. So what are the steps we can take to want what we have? The most effective thing to do is be of service to others. When we focus on helping others get what they want, eventually we get what we want.
Another thing we can do is be happy for others. One of the things I meditate on is sympathetic joy. How can I be happy for good things that others experience? I know that I am not always the model for this.
When I read about someone selling their business to private equity, even though our firm consciously doesn’t engage in those discussions (because we wish to remain independent), there is a piece of me that is envious. But our businesses are not zero-sum games. Someone else’s success does not detract from my own.
This is true with clients as well. Even if someone who is interviewing to become a client of our firm chooses to go with another one, if I focus on that person’s happiness rather than my loss, I will feel better.
OK, The Wealth Management Index is not one of the greatest financial planning books ever written, but Morgan Housel’s book is. Save yourself some money and just buy his book. Mine is out of print anyway.
Ross Levin is co-founder of Accredited Investors Wealth Management in Edina, Minn.