by Peter Spann
Who’d a thunk, but my iPhone has completely died. And it’s only 3 weeks old!
Isn’t Apple always banging on about how easy their stuff is to use, how it’s plug and play, and how it doesn’t get glitches and viruses?
Well mine has a big glitch – it just doesn’t work. And no before you smirk it’s not a u.s.e.r issue.
And Apple doesn’t have an obvious solution.
You’re too dumb to own a computer
My favourite story (probably an urban myth) is about the guy who rang tech support because his computer wouldn’t work and after stepping him through multiple different solutions to no luck the techie suggested he check the computer was plugged in. The guy crawled under his desk but said he couldn’t see the point. When asked why his response was “I can’t see, there’s a black out in my street.” The techie told him to pack up the computer and send it back. “Are you going to fix it?” asked the guy to which the techie responded “No, you are simply too dumb to own a computer.”
It would be great if things just worked wouldn’t it?
It would be great if people always listened, always told you everything you needed to know and always did as they said, wouldn’t it?
And it would be great if business systems always worked faultlessly?
But sometimes they don’t and that’s where customer service kicks in.
I have owned businesses in two industries where people get very, very upset when things don’t work – hospitality and finance. People plan their holidays sometimes years in advance and they build up all sorts of expectations about their experience and when those expectations aren’t met there’s going to be sparks.
And in the money business when people lose they get extremely upset… I understand why – most people work very hard for their money – they put their blood sweat and tears into making it and when some (or all) of it disappears they see all that effort going to waste and as we get older I guess it’s also harder to imagine putting the same level of effort into getting it back.
And if ever a person is ready to blame somebody else for their losses it’s investing. If it was our mistake and that’s clear we’d do everything we can to make it up, even compensate people, but worse still sometimes it’s impossible to fix. And mostly, legally, it wasn’t our fault.
Some people don’t see it that way however. They say because we gave the advice any downward movement any loss that they suffered is my fault. I’ve even received death threats from people who lost money in the GFC. What happened to personal responsibility? When they signed that they had read and understood the PDS and the risks involved were they lieing?
Markets move up and unfortunately down and there’s not a lot anybody can do about that, so how do you ensure you are not stuck with massive losses?
First – get a real understanding of what your risk profile is. Every piece of formal advice an adviser gives is based around this.
Problem is when people get enthusiastic about investing or sometimes even worried they are going to miss out they can overstate their tolerance to risk.
There is a nasty saying in the industry that “every client’s risk profile is high until they start losing money” but I have now seen enough examples of that to know there is a basis of truth in it.
What’s the worst case scenario?
So, the money you are investing – how would you feel if you lost it all? Most of it? Some of it? How long until you need it? How much worry would it cause you if you lost it? These are thing you can not rely on your adviser to tell you – you must tell them, and you must be adamant about it.
And when you get your advice you have to be comfortable that it fits that risk profile you have, and if it doesn’t be adamant about it. Ask questions, get clear.
Product Disclosure Statements and Statements of Advice are documents that have meaning under law. They have to address certain issues including (as the name would indicate) disclosure about risks and fees. And those disclosures are in there for a very good reason – so you are fully informed about your decision to invest.
It is your responsibility to read and understand those disclosures and you will be asked to sign that you have read and understand them. This is not like some internet “terms and conditions” that everybody just clicks through saying “I agree”.
When you do sign you’re saying “not only is the information I gave you complete and accurate, but you have interpreted it correctly and your advice meets my needs and circumstances. I understand the risks and agree that they are appropriate for me.”
You should take as much care with this as signing a mortgage and no promise, assertion or dismissal from your adviser should override the necessity of your comfort here.
Yes, it’s a good idea for personal development to push yourself out of your comfort zone but it’s not always a good idea in investing.
If you are uncomfortable with the risks don’t do it. And to be comfortable you have to be informed and aware. All investment strategies, no matter how good they are have risks, and while one strategy may be perfectly good for one person it may not suit another.
It’s a fact that I believed in everything I promoted but I have seen people get over enthusiastic about things and I’ve spent many a consultation talking a client out of an investment. Most advisers would not be as strong as that and if you insisted they would go ahead with you. Don’t make that mistake.
Never kid yourself or your adviser about you risk profile – that’s highly likely to end in tears.
If you are going to get involved in a high risk investment do it with a small amount of your overall capital – that way if the worst happens you won’t be too badly affected.
Take care with leverage
The other real thing you have to pay attention to is leverage – or borrowing to invest. The standard risk warning her is “leverage can accelerate returns and losses”. My best advice to you is be conservative in your leverage. Or find ways to mitigate your risk.
Diversification is a key component of mitigation of risk – make sure you have different investments in different asset classes and different investments within those asset classes. If you are just starting out invest in a diversified managed fund that takes care of that for you.
In my experience it is a combination of those two things – inaccurate risk profile and leverage that has caused most pain to people through investing.
Unfortunately those are two things that you must take responsibility for. It’s better to work it out at the beginning than to try to reconstruct your portfolio when things go wrong later.
As you become more experienced at investing it is likely that your risk profile will expand. I still consider myself a conservative investor – I hate losing money but yet I will invest in things that I would never recommend to clients with the same arbitrary risk profile. But never get ahead of yourself.
Sometimes even things that are supposed to work seamlessly (like Apples) don’t work, and that’s what you’ve got to be prepared for.
And as for my silly phone – it’s going back to Apple – maybe they can sort it out.
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About Peter Spann
Teacher and Coach: His courses have been presented to over 270,000 people worldwide and include:
- Property Pay Day – http://www.propertypayday.com.au/
- Billion Dollar Sales Machine – http://www.billiondollarsalesmachine.com.au/
30 years experience in business:
- Marketing – Award winning copywriter – Australia’s Number One ringing Yellow Pages ad
- Financial Services (BRW’s 41st fastest growing company in Australia – 2008, Telstra Business Awards Finalist)
- Real Estate and Property development
- Retail (Australia’s fastest growing Pharmacy chain)
- Tourism and Hospitality (Trip Adviser’s Number One Ranked Property in the South Pacific for 3 years running, Steve Irwin Eco Tourism Award Hall of Fame winner)
- Venture capital – raised funds for an floated 3 public companies
He has had the privilege to serve on the boards and advised a number of private and public entities.
Author – 3 Best Selling Books published by Harper Collins
- “Wealth Magic: From Broke to Multi-millionaire in Just 7 Years” – translated into seven languages, and was a best seller
- “How to Build a $10 Million Property Portfolio in 10 Years“
- “Little Pot of Gold”
He is listed in ‘Who’s Who’ Queensland Edition, and his charity, Fox Smile helps underprivileged children with health and education.
He is well known for his inspirational seminars and films on life success, business, wealth creation and personal development. His goal is to help people reach their full potential.
His personal interests include travel, boating, aviation, fine art, writing, and film.
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