Wealth Advisory Newsletter

Can money buy you happiness?

The age-old question, “can money buy you happiness?” gets debated every so often and got me thinking about the notion of happiness. I came across a book title Happiness – unlocking the mysteries of psychological wealth, by Ed Diener, the editor of Perspectives on Psychological Science. He identifies five factors that contribute to happiness:

• social relationships
• temperament/adaptation 
• society and culture
• positive thinking styles
• money

Working in financial services and specifically servicing the wealth market, it was interesting that money (or wealth) is correlated with happiness, but it has declining marginal utility, according to Diener. Those first few dollars that move someone out of poverty, contribute much more to a person’s happiness than a billionaire earning her next million. In fact, money can be toxic to happiness. When participants in a study were asked if money was more important than love, those who answered "yes" were less likely to be happy and seemed destined never to catch up to happiness no matter how much money they make.

Managing money, especially in the wealth segment, is shifting, and according to McKinsey, advisers or wealth managers will require a different set of skills tailored to client needs in the next decade. Advisers will gradually shed their role as investment managers and become integrated life/wealth coaches who advise clients on investments, banking, healthcare, protection, taxes, estate and financial wellness needs more broadly. 

My next thought was, will the role of a wealth manager change to that of being an agent of happiness? At PPS, I believe they already are. When you meet with a wealth manager, your conversation should unpack in detail the factors of:

Relationships

There are many questions one can ask about relationships. These are just some examples: Do you currently have a spouse or partner, and if you are married, is it in or out of community of property? Are you divorced and paying or receiving alimony? Do you have children or even grandchildren? Will you be covering their tuition fees? Where will they go to school/study? What about other relationships that you might have, such as with business partners? Do you have buy-and-sell agreements in place?

Adaptation

How prepared are you for the big-ticket life events that can and will take place? Are you prepared if ..... Do you have a legacy…

Society & culture

South Africa’s “Happiness Index” ranking according to the World Happiness Report was 4.81 last year. The scale starts at 0 (unhappy) to 10 (happy). According to research, political concerns is the biggest concern with wealthy individuals in South Africa and this filters into discussions, thoughts and actioning emigration. For every professional person coming to South Africa, eight are leaving. Where are you on this spectrum? Do you want to go, if so, how are you planning for it? Do you want to stay? Are you involved in any philanthropy work that you donate towards?

Thinking styles

"The secret of happiness, you see, is not found in seeking more, but in developing the capacity to enjoy less," – Socrates. What are your thinking style and relationship with money? How does this impact the decision you make on creating, protecting and accelerating your wealth?

Money

Money, although a vital part of the discussion, is not the only part. Your income and net asset value must be determined to put optimal wealth strategies in place. According to the African Wealth Report 2020, the use of investment assets to accumulate or preserve wealth is by far the most popular asset class. Tangible assets like property, bonds, cash or alternative investments are comparatively far less important. 

PPS Wealth Advisory aims to be an “agent of happiness”, ensuring that all aspects of wealth protection, wealth creation, and wealth acceleration needs are addressed, as well as our members’ hopes and dreams.

by Linda Sherlock, Head: Wealth Advisory

PPS Wealth Advisory | Beyond Wealth. 

Kindly note that this article does not constitute financial advice; the information provided is purely informational. In terms of the Financial Advisory and Intermediary Services Act, an FSP should not provide advice to investors without an appropriate risk analysis and thorough examination of a client’s particular financial situation. The information, opinions and any communication from PPS Insurance, whether written, oral or implied are expressed in good faith and not intended as investment advice, neither do they constitute an offer or solicitation in any manner.  PPS is a Licensed Insurer and Financial Services Provider (FSP 1044).

References:

1. McKinsey.com; https://www.mckinsey.com/industries/financial-services/our-insights/on-the-cusp-of-change-north-american-wealth-management-in-2030
2. APS (Association for Psychological Science); https://www.psychologicalscience.org/observer/serious-research-on-happiness#:~:text=Diener%20identifies%20five%20factors%20that,people%20have%20strong%20social%20relationships.
3. https://www.theglobaleconomy.com/South-Africa/happiness/
4. The South Africa Investment Migration Report 2020
5. African Wealth Report 2020