Adviser or enabler?

We – and those we employ to help us – are set-up to make mistakes with money, but they’re not unavoidable

The comfort-challenge conundrum

Those we employ to help us overcome spending self-deception unwittingly curtail such contemplation when it gets uncomfortable… which is the exact point it starts to become helpful

We’re wired to make money mistakes. Society is set-up to encourage and enhance them. Recognising them, and knowing what to do about them isn’t always enough. They can be so deep-rooted, and so self-deceiving, that they cry out for some external assistance. However, the people in the best place to help are incentivised to make things worse, not better.

We know what we need to do:

  • We need to psychologically zoom out (recall construal level theory).

  • We need to move beyond a narrow view shaped only by propositional and procedural knowing, to a more realistic and relevant one including perspectival and participatory knowing.

  • We need to change our brains to change our behaviour.

  • We need to alter what we see as salient through systemic change, not surface-level tactics.

  • We need to mould our identities in a way that more helpfully attunes them to the world.

All this can – and to a certain extent must – be done solo. But it’s easier and more effective with help. We know what help we need in general terms:

  • We want the help of an interrogative editor helping us to tell our story better, not a well-meaning co-author trying to merge our story with theirs.

  • We want help that understands that however tempting it is to believe otherwise, it’s never about the numbers.

  • We want help that confronts and combats errors in problem formulation and reasoning, that leverages the experiences of people in similar situations to ours to help us ask better questions and better reason through to answers.

  • We want help that doesn’t answer questions for us, but propels us away from paralysis and towards practical wisdom.

  • We want help that uses managed discomfort to build character and courage, rather than padding and pampering you into a lifetime of pain.

We also know what specific help we need within the context of thinking more wisely about income and expenditure:

  • We need an ‘alignment coach’ (not a facilitator of accumulation); someone that reminds us to check that our expenditure is expressing the story we actually want to tell.

  • We need someone with inside knowledge not of how much and how people spent, but how well it worked.

  • We need someone to challenge our decisions, knowing that if they were good decisions, they’ll meet this challenge, and if they weren’t, it’s better to know, to make better ones next time.

Being inside the heads of the wealthy – being able to follow money actions to quality of life consequences, to build up a repository of those lessons that helps people like you learn from other people like you – is the single most valuable piece of professional knowledge there is. That’s what you should be paying for. Not data entry of your expenditure into categories in a cash-flow model.[1]

Is this the help on offer?

Is this what people pay for even when it is?

Is it bollocks.

With maybe a handful of heroic exceptions, those best placed to play ‘alignment coach’ pay no attention to whether something works or not. The average adviser will put you in touch with their ‘car guy’, but they won’t follow-up and ask if the new motor sustainably upgraded the quality of your life more than the alternative uses of that money would have done.[2]

Typical advisers favour an orthotic padding of poor positions over building of strength in good ones. Yet a bad thing done more efficiently doesn’t become a good thing. They may discuss hypothetically ‘cutting one’s cloth to fit’ if (relatively) hard times hit, but this isn’t in the sense of tailoring (which is valuable at any time) but of getting by without, as if excessive expenditure were a leg or a kidney when it's more like a tumour.

Plenty of advisers also like to encourage spending almost for the sake of it. ‘You don’t want to die with money in the bank!’ This can be wise… if someone’s miserly wiring is leading them to misery. But ordinarily the advice comes from an adviser stuck believing that numbers are the source of all meaning and confusing ‘more expensive’ with ‘better’.

In a way, none of this is mad. It’s often commercially sane, and therefore completely understandable. Righting wrongs has explosive consequences when the wrong has been done so long that it’s become a part of who someone is. Challenging, let alone removing, parts of an identity, even obviously malignant parts, hurts like hell. Not least because chances are it’s part of an adviser’s identity too, and to challenge your expenditure is to challenge their own.[3] It’s simply so much more comfortable for everyone to create a numbers-based need to remove apparent complexity, and have the sort of conversations that encourage nodding along for a few hours a year, rather than questioning if your life choices were as non-idiotic as they could be.

This is exacerbated by the fact most clients are relatively old. Free of children and career-building responsibilities, and full of money, time, and life lessons, most 50- and 60-year-olds have as much productive time left as they’ve used up, but it doesn’t feel like it. So while admitting you’ve been in the wrong career for a few decades could spur you to spend the next few decades living a more fulfilling life, for the sake of illusory short-term ‘comfort’, it’s easier to admit nothing, and just wait to die without becoming too scared of running out of money instead.

Clients hire advisers to help them blindly accumulate money, not use it to make their life any better, even though the first without the second is suicidally pointless. We all want challenge, because without it we cannot grow, but we run from it all the same. An advisory relationship is the perfect place to conduct life-choice challenges within a comfortingly controlled environment. But it’s incentivised to support deception, not defeat it.

We’ll revisit reversing this unhelpful mess in Part Four.[4]

Typical approaches to expenditure analysis provide only illusory benefits

Common tools used to analyse expenditure do not measure what we most need to know

In the traditional numbers-focused world of most financial advisers, expenditure analysis falls into one of three categories:

  1. Ignore it. Either because the client is so wealthy it doesn’t matter, or because you manage only a specific pot of their money, so it’s irrelevant.

  2. Ask the client for a ball-park total. Occasionally accompanied by a request to divide this into categories like essential, discretionary, and aspirational.

  3. Ask the client for a detailed breakdown. Usually via a questionnaire divided into as many categories as the cash-flow software that produced it believes best. As we saw earlier, this is filled in only under duress.[5]

Clients can sidestep the burden of work in the last two options by dumping a year’s worth of bank and credit-card statements on the adviser’s desk. Some clients go to the other extreme and turn up with spreadsheets so snazzy that they blind their user to the fact quantification doesn’t equal edification.

The purpose of each of these approaches is two-fold: a) to estimate a total expenditure and check it isn’t going to lead someone to run out of money before they run out of breath; and b) to keep the compliance gods happy. Keeping the client happy is not the job of expenditure analysis, save for avoiding the discomfort of filling in a boring questionnaire or justifying what the hell they are doing with their lives.

Expenditure estimations are commonly centred on bunging the numbers into a cash-flow model.[6] While intuitively this may feel like the core of a financial-planning service (and indeed many advisory businesses are basically payment for an annually updated cash-flow-modelling exercise), this is a mistake. It’s the monetisation of the Micawber Fallacy – thinking that as long as your income:expenditure ratio is at a sustainable level across your lifetime, all will be well.[7]

When it comes to turning your resources into a Good Life, the ratio you want is not income:expenditure but whether something works to whether it doesn’t; whether your resource allocation is in alignment with your centre of narrative gravity. It is this we need to improve, and thus this we need to measure. Your income:expenditure ratio is ultimately a little pointless, because one way or another you always ‘spend’ all of your resources. If you ‘save’ some, you are allocating them to your future self. Everything you do symbolises a life choice, even the stuff you don’t do.


This presents us with a categorisation problem. Your expenditure is a great – and very honest – guide to who you are, regardless of its relation to your income. But categorisation into wise and poor life choices doesn’t come easily. As we saw earlier in relation to house purchases, a single item can reflect wise and poor choices simultaneously, and what may be wise at one point – a glass of wine, say – may be unwise at another, e.g. when you’ve had ten already, or when you’re drinking it with a stockbroker.

Life choices are a dance, not a series of steps. A life can benefit from being broken down, but it always needs putting back together before reaching any conclusions. An isolated expenditure may be ‘aligned’ with a high priority, but if it comes at the cost of a higher one, it may not be so smart.[8]

Whether something works or not isn’t determined by what shop it was bought in, or whether you can ‘afford it’ or not. Good expenditure analysis asks questions; bad analysis blindly accepts answers.

The categorisation problem is rooted in our three chief sources of self-deception. The categorisations of poor expenditure analysis measure numbers, not narrative, what we have rather than who we are becoming, and by favouring ticking checklists over challenging actions, it encourages unthinking over thinking. A better model would meet the need for an observation stage in a modal shift from having money to living better with it, and act as a systematic set of triggers for thinking through what sort of life our choices are creating.

Many advisers are well aware of the categorisation problem, which is why they’re often so apologetic about providing expenditure questionnaires, knowing that the effort to fill them in is likely to be wasted. But because they’re stuck in numbers world, they don’t see a solution.

The typical approach isn’t wholly without use. Filling in a questionnaire can act like a food diary for a fatty: the very act of observation can inspire wiser choices. But it’s highly unlikely to lead to a transformation in how someone sees themselves and the world.

At some level an expenditure questionnaire can highlight inconsistencies in the alignment of your values and your actions, e.g. if you claim to be a generous, charitable person, but donate less than you spend on stuff you never use. But the brain that made those choices isn’t going to flip into one that makes better ones simply by seeing the most obvious transgressions in a spreadsheet.

page2.2.1.5: The game of life is not a numbers game

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[1] We’ll revisit the dangerous allure of cash-flow modelling in Part 3.

[2] Or, if they do, it’ll be in the socially fluffy, non-challenging way that demands a positive response, even when it’s a total lie. Like telling your grandma you love her cooking.

[3] I’ve noticed many times over the years that the only times an adviser did challenge a client’s expenditure was not when it was at odds with the client’s preferred narrative, but when it was at odds with the adviser’s own dreams.

[4] Part 4, Section 1.4.

[5] App-based solutions are increasingly available, though they all end up at the same place.

[6] Cash-flow modelling is important enough to get its own section later (Part 3, Section 2.3).

[7] See Section 2.1.2.

[8] Recall the couple from the story that opened this chapter. Their expenditure was ‘aligned’ with what mattered most to them – their children, but they were still doing it hopelessly poorly.

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