This month marks the 25th anniversary of my career in wealth advisory. Time really flies. I had a good career, not that it was worry-free. Instead, it was all the crises that I have gone through that made it good because I learnt so much through them and the feeling of surviving and supporting clients through these difficult periods made my journey meaningful. There were many pivotal moments but the one which was most significant happened sometime in 2010, just after the Global Financial Crisis (GFC) when many investors lost their wealth.
I remembered vividly that I was walking outside of the McDonald’s restaurant near the Tampines Bus Interchange when suddenly, an inner voice spoke to me. It went like this: “Money has been used as a weapon of mass destruction to destroy many lives in the western world. It is now coming to the East. You have the knowledge, skills and license (our MAS license), what are you going to do about it?”. As a result of that epiphany, Providend’s Philosophy of Sufficiency was birthed. At the heart of this philosophy is contentment. Contentment is when you no longer crave or desire anything that you do not have. But it is not a passive acceptance of your situation. Rather, it is an active pursuit of things that are most important to you knowing that you cannot have everything. It is a conscious choice to enjoy, appreciate and accept what you have, while giving up the cravings for things that you do not have. So, it requires you to know what is most important to you. Since then, the way we plan and invest for our clients is anchored on the Philosophy of Sufficiency. So how is this philosophy expressed in the way decisions are made?
The primary purpose of insurance is for protection against loss of income due to death, disability, a medical crisis as well as paying for huge medical expenses. So while you should buy as much insurance coverage as you need, please pay as little premiums as you can using term insurance. Many have told me that they have been asked to buy insurance even when they don’t need it, just in case, as the advice goes. Of course, if you have excess resources, you can always do that but otherwise, there is always an opportunity cost to over-insurance. We can’t live life trying to mitigate every risk.
More than a year ago, in one of our webinars, we were asked if we will include cryptocurrency in our core investment portfolios. At that time, cryptocurrency was doing very well. Our answer then was a simple “no”. Not that we had the foresight to know that it will crash months later, but because not only is there insufficient evidence to show that crypto will be able to reliably give long-term positive returns, it entails too much risks that our clients need not take to get the returns they need. In fact, this is the same reason why we don’t use investments that try to outguess the markets. Evidence has shown that most fund managers who use this approach do worse than the markets and those who did better, can’t achieve it consistently. So if there are evidence-based instruments that are more reliable in giving long-term returns that are enough for our clients to meet their life goals and events, why do we want to expose them to much higher risks of loss just for the hope of getting returns that they do not need? Can you see the philosophy of sufficiency at work?
Legacy and Estate Planning
Some time back, while working on their legacy and estate plan, my clients were discussing the various clauses they want the lawyer to put in place in their wills and trust deeds to ringfence their assets from certain individuals as well as control how their assets will be distributed to their children in their lifetime and upon their demise. As they brought up more permutations, I felt the need to ask them 2 questions. “How do you think your children will feel when they finally see these documents?” For which they replied after some thinking, “I think they will feel that we don’t trust them”. “Is that really how you feel about them?”, I pressed. Both husband and wife looked at each other and they got what I was trying to help them see. We then went on to discuss how to make their plans simpler while keeping to their main intentions. Sometimes, we want to control everything even from our graves. But in sufficiency, we say enough is enough. We just need to achieve our primary purpose and accept that there will be trade-offs. We cannot have everything.
Short-Term Financial Planning
During the 2008 GFC, my firm’s revenue was badly affected. I was not earning much then and had poured my life savings into the business. I had a huge mortgage, and with 2 young children and being the sole breadwinner, I was stressed. I also did not have the cash to participate in the fallen equities market. In 2010, I reflected and distilled the things that mattered most to me that will make me really happy and over the past 15 years restructured my personal finance to not spend on things that I don’t need, especially with the money that I don’t have (loans). Even though the firm has grown exponentially today and my wealth has multiplied manifold, I never felt the need to move to a bigger property, buy a flashy car and spend more. When the pandemic struck and markets came tumbling in 2022, not only could I buy more into the markets, my heart was at rest.
The benefit of being in a position of sufficiency is not just peace of mind, but it allows us to make the right decisions without being held hostage by money. When there is a need to be generous, I can. I also can make business decisions in the best interest of my clients without thinking about how I can upkeep an unnecessarily expensive lifestyle. I can never understand advisers who feel that they need to look rich so that they can serve wealthy clients. I am perfectly at peace with my clients being a lot wealthier than me. My clients did not choose Providend because of our advisers’ wealth. They choose us because of our wisdom. And finally, knowing what is enough for me allows me to be a servant leader. It is a known fact in my firm that I am not the highest paid and when needed, they know that I have and will cut my own compensation so that others can have enough. What makes me happier is not that I have more but that their families are well taken care of.
In the wealth management industry where it is always about accumulating more and maximising returns, to aim for enough is counter-cultural and for some, corporate suicide. But having walked this journey for the past 25 years observing what has happened and is happening in the world; and having gone through major crashes in the financial markets; and having the privilege to walk in the lives of many clients, I am convinced that achieving contentment is the greatest gain.
The writer, Christopher Tan, is Chief Executive Officer of Providend, Singapore’s first fee-only wealth advisory firm and author of the book “Money Wisdom: Simple Truths for Financial Wellness“.
The edited version of this article has been published in The Business Times on 20th March 2023.
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