Can money buy you happiness

14 June 2021 Linda Sherlock, Executive Head: Wealth Advisory at PPS

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, namely: social relationships, adaptation society and culture, positive thinking styles and money.

Working in financial services and specifically servicing the wealth market, it was interesting to observe that money (or wealth) is correlated with happiness, but it has declining marginal utility, according to Diener. Those first few rands that move someone out of poverty, contribute much more to a person’s happiness than a billionaire earning his/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. 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.

So, does it mean that the role of a wealth manager will 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:

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?

How prepared are you for the big-ticket life events that can and will take place? Have you thought about the risks that your lifestyle choices, business arrangements, investment or economic fall-outs may play out? And, do you think you are prepared in the event of mental health, physical injury or critical illness? The big questions to ask yourself are am I prepared for the uneventful risk and am I able to leave a legacy for my loved ones.

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). While this is low, we also need to consider the impact of the pandemic on our psyches. However, according to research, political concerns are the biggest concern amongst wealthy individuals in South Africa and this filters into discussions, thoughts and actioning whether emigration is a consideration.

The statistics show that for every professional person coming to South Africa, eight are leaving. Where are you on this spectrum? Are you thinking of leaving or staying?? And, if you plan to leave have you thought through all the aspects of whether the grass is greener on the other side?? What would you specifically need to consider? Are you involved in any philanthropy work that you contribute to financially as well as give of your time? Or, do you have a full perspective on what emigration could mean and whether you retain your assets in South Africa or pursue full financial emigration? And, if you stay, what is your horizon and what will shift your mindset?

Thinking styles
According to Socrates, "The secret of happiness, you see, is not found in seeking more, but in developing the capacity to enjoy less." The past 12 months have brought this into stark reality where the way we consider happiness is more closely aligned to relationships and health as the purpose to life and that less is more. What is your view and style towards money and wealth? How does this factor into your mindset and approach to creating, protecting and accelerating your wealth?

Money, although a vital part of the discussion, is not the only path to happiness, although it can provide a level of comfort to protect you from the hard knocks that life can deal you. It certainly provides a buffer in tough times and with an optimal strategy in place, can ensure that your wealth is not eroded. 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. Your wealth strategy must take into account income streams and net asset value as well as all of the above factors to achieve peace of mind and true happiness.

PPS Wealth Advisory aims to be a financial coach with insight and expertise to match our members’ hopes and dreams with wealth strategies to ensure that all aspects of wealth protection, wealth creation, and wealth acceleration are addressed.

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