When life changes, money changes. And when money changes, life changes. Transitions in life are not only inevitable, they are constant. In fact, life is not linear but a set of many transitions. And with these transitions, come setbacks.
I am currently moving house. I was away with my son during the key moving weekend and, perhaps naively, imagined I would come back to my new home, with my wife and movers having seamlessly taken care of everything while I was away.
But a series of setbacks prevented this. In my frustration and amid a sea of boxes and bubble wrap, I glanced over to see my son playing Super Mario on his Switch. He was celebrating moving up a level.
This helped me to remember that challenges exist at every stage or transition. Finishing one change means you advance to another.
As a professional planner, I commonly guide clients through more than 30 familiar life transitions such as moving countries, marital issues, retirement and estate planning. Like Super Mario, life without setbacks, challenges, opportunities or struggles would be a boring existence. Not only would we be bored but we would never be able to learn and better ourselves.
Financial setbacks should not only be expected but also welcomed.
If you ask people what a perfect world looks like, you might get a world where life is effortless, with no stress and no worries.
Even though it seems like paradise on the surface, this mythical world falls apart with a little bit of thought. Humans adapt to their surroundings very quickly, something known as hedonic adaptation, so being happy all the time would become our new normal.
And if that is normal, then we would need to feel extra happy to feel a little bit of joy. And what we consider normal today would be sad in this new world.
There will be challenges and setbacks in your financial life. Benjamin Franklin once said that the only guarantees in life are death and taxes. However, Franklin missed one other guarantee: setbacks.
Setbacks will happen and pretending that they will not is futile. If you assume there will be no setbacks, then you, almost by definition, will feel bad when the next setback comes (which it inevitably will).
But since you should have known setbacks will happen, feeling bad is effectively your choice. This does not mean we can predict the future.
If we are talking about investments, we know from data there will be a severe downmarket in the future. After all, an economic cycle goes around and comes around.
What we do not know is when it will happen, why it happened or how long it will last. Those are the unknowns.
Similarly, you will face unexpected expenses. You do not know how big that expense will be, when it is going to happen or why it will happen, but it is a guarantee there will be unexpected expenses in your future.
Other setbacks are not guaranteed, but possible. For example, my son might have failed that exam I took him away to do. I might get gazumped on the house I wanted to buy.
The promotion you wanted might go to an outside hire. Your company could go out of business. You can argue with your partner about money. Your children might run into financial struggles and need money from you. Your parents might need financial help.
These are all possible. Some of them are not very likely but others are more likely than you think. Again, we do not know when they will happen, why or how long they will last. Only that they are possible.
Changing our mindset to expect setbacks will make us more resilient in the future.
Instead of being upset when the next setback happens, we can reframe it as a learning opportunity or invitations to solve interesting problems
Sam Instone,
co-chief executive of AES
It is important to understand adversity is necessary for growth. If you have never had to solve a problem, then you have no skills to solve problems. Setbacks and adversity give us the tools that we need.
Instead of being upset when the next setback happens, we can reframe it as a learning opportunity or invitation to solve interesting problems. We can view setbacks in such a way that we look forward to coming out on the other side with our new skill set, knowledge and ability.
As with the case with my moving day misery, setbacks will happen to you. Pretending they will not happen is not going to help you. Instead, reframe setbacks as opportunities for growth. Train yourself to reframe a setback as soon as you are aware of it as it may prevent you from feeling angry about it. Not being angry is necessary to come up with the best solution we can for the setbacks that life throws our way.
Life is not linear and your plan for it should not be either. Setbacks are not our enemy; they should be welcomed. It simply takes a little bit of a mindset change.
Sam Instone is co-chief executive of wealth management company AES
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
