Unveiling the Seven Main Flaws in Wealth Administration
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In a thought-provoking talk held in a former church, financial expert Sean Jackson identified the seven deadly sins of wealth management that often hinder individuals from achieving their financial goals. These sins, as Jackson pointed out, can lead to a misguided path towards wealth accumulation and ultimately, financial ruin.
1. Not Starting with Purpose
The first deadly sin, according to Jackson, is failing to start with a clear purpose. Without a well-defined objective, individuals may find themselves wandering aimlessly, unsure of where they are headed or what they are striving for. To avoid this pitfall, one should begin by identifying their power emotion - whether it is happiness, contentment, success, or fulfillment - and craft a personal statement of financial purpose that aligns with these feelings.
2. Not Making Cash the King
The third deadly sin is neglecting the importance of cash flow management. Jackson emphasised that cash should be treated as the king, as it is the lifeblood of any financial endeavour. By ensuring that cash is managed effectively, individuals can avoid financial distress and make informed decisions about their investments.
3. Assuming Investments are an End Rather Than a Means
The fifth deadly sin in wealth management is the assumption that investments are an end in themselves. According to Jackson, investing should be seen as a means to an end, with the ultimate goal being to fulfil one's financial purpose. By keeping this in mind, individuals can make more informed investment decisions that align with their objectives.
4. Letting Dollars be Lazy
The fourth deadly sin is allowing dollars to be lazy. This means not putting one's money to work for them, either through investment or other means of wealth creation. By being proactive with one's finances, individuals can ensure that their money is working hard for them, rather than sitting idle.
5. Starting for your Destination without Guidance
The second deadly sin is embarking on a financial journey without a clear plan or guidance. Without a roadmap, individuals may find themselves lost, unsure of the steps they need to take to reach their destination. A good financial plan should guide spending, both on what and when, and provide active guidance that stays true to one's purpose.
6. Walking up – and Especially down – the Mountain without a Sherpa
The sixth deadly sin is making the mistake of navigating the liquidation (decumulation) phase without a guide. This is particularly important, as mistakes made during this phase can have long-lasting consequences. By seeking the advice of a trusted financial adviser, individuals can ensure that they avoid common pitfalls and make informed decisions about their financial future.
7. Buying into the Dream but Ignoring the Process
The seventh deadly sin is getting caught up in the dream of wealth accumulation, without paying attention to the necessary steps required to achieve it. Execution requires a combination of a compelling purpose, a solid strategy, aligned behaviours, controlled emotions, and a little luck. The best financial advisers, according to Jackson, start as a biographer, financial analyst, and coach, helping individuals navigate the complexities of wealth management and stay focused on their goals.
According to a 75-year Harvard study, people are happiest when they're spending their time and money on things that matter to them. By avoiding the seven deadly sins of wealth management and staying true to their purpose, individuals can ensure that their financial journey leads to a life filled with happiness, contentment, success, and fulfillment. Solid investment performance, in turn, means that one can fulfill their objectives more fully, whatever they may be.
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