Andrew Bradley knows money. His long career in the wealth and investment industry proves that. But in How Much Is Enough? he and his co-authors reveal the side of money that seldom gets discussed: the emotional side. Karin Schimke interviewed him.
Hearing you speak and reading your book, I got the impression that you became interested in psychology only after many years as a financial adviser. Is this correct, or had you always had an interest in psychology?
I was always a people watcher and was fascinated with how people behaved and conducted themselves – even as a young boy. However, only much later, after many years of being a financial adviser and then working with and guiding other financial advisers, did I realise that all this behaviour had a psychological basis. This has led me to informally study and read extensively in the field.
Psychology and emotions are often taboo subjects in the corporate and financial worlds. I suppose I remain under the impression that in certain sectors of society talking about how things make you feel is a sign of weakness. Is that erroneous? And if not, do you think there’s a chance this is changing any time soon?
I agree. Psychology and emotions have always been viewed as something to avoid at work. However, things are changing fast in corporates as organisations grapple to compete in the market place for quality employees. Today’s employees want to be engaged and inspired so they can connect with the company’s purpose and link this with their purpose. If they do not connect they will move to where they get this. We all have ‘life issues’ and behavioural biases and we cannot ignore them.
They are not weaknesses but strengths – if we can understand them and harness them.
What we are talking about in the book is more about understanding these dynamics in our consumer/client base. In my opinion if organisations do not get in tune with this and connect with their clients they will not thrive. In fact they will struggle to survive – certainly in the financial services segment. This is a challenge in this segment as we are not naturally endowed with skills.
Our clients are not looking for a transaction. They are looking for a relationship. So a focus on these dynamics is critical – not taboo.
This book is clearly the product of a journey of research. What were the absolute “a-ha” moments for you? What really struck you about the research you were doing? And did any of your a-ha moments resonate on a personal level?
There were a number of a-ha moments that resonated with me. These include:
Investment markets perform well but most investors fail over time
Behavioural biases are the primary cause of wealth-destroying behaviour
Money does not bring happiness. Happiness generally brings money
Happy people are better investors than unhappy people
It is possible to significantly enhance your happiness with conscious awareness and behaviour. Based on these learning I have made a number of changes to my approach, with good results – not least of these is a happier relationship with my wife.
It is possible to prevent wealth-destroying behaviour, just like it is possible to change behaviour regarding exercise and eating habits. Yes, this takes effort but the results are significant.
We can help our children improve their happiness and set them up to live a happy and meaningful life. We can also help them to understand how to create wealth for themselves. Personally, I was trying to teach my kids about money, but I realised that I was going about it the wrong way. The result was that it was having the opposite effect. I have now changed my behaviour.
You embarked on this research because you were puzzled by something that you’d been seeing in your business for years – something that wasn’t clear to you. What was this puzzle?
Investment markets were performing well over time. All the information to capture this in investment portfolios was available. Only some investment managers and investors were making use of this. Many were taking bets against the market to try and beat it rather than optimise it. Those that take bets against the market generally do not beat the system. This results in unnecessary losses.
In addition to this, most of the investors we came across in these portfolios were also trying to second guess what was happening and trying to outsmart the investment managers – and failing.
For our clients we discovered that our biggest challenge was for them to stick to their plans after we helped them put them in place. This specifically occurred when investment markets were either performing very well or going through a slump – these were the times when they felt the need to second guess their decisions.
Why was this all happening? Our conclusion – bad human behaviour. Our hard wiring from generations of survival behaviour means that we try and follow the crowd. In investments the opposite is usually required.
You and your fellow writers show very clearly that money is not a “neutral” tender, but a highly emotional one. What, in your experience, are the most common emotions around money and which of these are most destructive?
Yes, it is emotional. In our society money is largely and unfortunately seen as a reflection of self worth – when it should not be. Money is also the means to live the life we desire to live.
The most common behaviours that can and do destroy wealth are:
Getting the short-term and long-term trade-offs wrong
Not coming to terms with the trade-off of the tangible versus the intangible
Uncertainty and lack of control
Using price as a proxy for quality
Living for the day
Peer pressure and status
Loss aversion and particularly myopic loss aversion
Rules of thumb, saliency, and over-confidence
What do you think is an appropriate and useful emotion towards or response to the concept of “money”?
Money is not the end itself, but a means to an end. Knowing the life you want to live that will bring you happiness is the most important start. How can you achieve that in the most efficient manner? This includes trying to win the hedonic arbitrage war – how to you get more happiness for the same money (or same happiness for less money). As an example if you have R100 to spend what will bring you the most happiness? Spending the day on the beach with your family or going to the mall to buy something. Understanding the difference between a need and a want is a helpful guide as well.
And finally, is it that achievable? Can people really change their attitudes towards money in time increase their wealth?
Yes. Absolutely. Just like many people have successfully changed their health and fitness habits/behaviours, you can do that with your wealth behaviours. We have seen many examples of where clients have made very meaningful changes that have had positive results.