Interview with Carl Richards, author of ‘The One Page Financial Plan’

We recently reviewed Carl’s new book; our view remains that everyone should have this book on their bedside table!

In this update we interview Carl about his book.

To read our review of the book click here

To read our Q&A click here “In your last update the book was in the Top 100 Amazon List. How is it doing, and what has been the response to date?”

Carl started by explaining that he had had an amazing response with 100 plus reviews on Amazon plus numerous interviews.

When we discussed the measure of success Carl explained that it is less about the number of books sold but more about getting the message out to a wider audience. This goes against the grain and is much harder to quantify but clearly from the positive feedback he has had, the message is getting out to people and for him this is the true measure of success. “In the introduction you talk about the creation of a financial plan appearing to be overwhelming. A good example of a goal, which would be included in the financial plan, is saving for retirement. Even a basic income seems unachievable. You then mix this with other goals and everything seems impossible. How do you overcome this fear?”

When we discussed this question Carl came up with a beautiful illustration.

He was sat with his daughter doing a complex puzzle. He was busy staring at all the pieces trying to find the right ones, whereas his daughter was just grapping any piece. He explained that creating a financial plan can seem overwhelming, complex and even emotional but you just need to dive in. It is about taking one step at a time, and being prepared to make adjustments. If you do nothing, it will be overwhelming. “In the book you use the example of going to the vet and being given choices and then having to make a decision. With all the financial books, websites, marketing etc we have access to, do you feel that there is information overload which can lead to poor choices?”

Carl explained that there is a feeling that more choice brings greater happiness.

His view is simple, it doesn’t!

With more information, more noise there is a danger that poor choices will be made. “Unlike a lot of financial books you are very frank and honest, and I think this is an important aspect of the book; you are like the average person in the street. You talk about losing your house, and being sucked into the tech bubble. Looking back do you regret these decisions, given the time again do you think you would do things differently and what do you think you learned from these decisions?”

Carl’s response was enlightening.

He started by explaining that regret is bad; it is about focusing on shame and playing the blame game. His view is that you need to turn this around.

Mistakes are all part of being human. What is important is reflecting on mistakes and then looking at what can be learnt from them.

He gave a perfect example. He was recently offered the opportunity to invest in a great new company, with fantastic return potential (sounds like the tech bubble!). The first thing he did was take out the plan, and he could see that the opportunity didn’t fit. He therefore turned it down.

The point Carl was making was that we all make mistakes, but we need to learn from them. In this case it didn’t matter whether this was a $20 million opportunity or equally a zero dollar opportunity, learning from the past and reflecting on the plan enabled him to make a rational response. “The discovery meeting appears to me to be challenging for any person, asking questions about why money is important and what we value. You used an example of a couple who wanted a baby but never talked it. Are you often surprised by people’s responses?”

Carl explained that this aspect of the meeting is a unique and powerful spot, and as much as it may surprise him it often surprises those who are involved in the meeting.

As an example we might wish to travel the world with our partner to spend more time with them. The reality might be that it is just not possible; however doing things (like walks) closer to home can be just as powerful.

His point is that before we can decide on our goals we need to identify what we really value. Spending time with the family or a partner may be achievable and more affordable closer to home rather than travelling the world, and therefore our money can be better used to achieve those goals which we truly value and are achievable. “Human emotion plays a big part in what we do. You talk about individuals being scared of uncertainty, and how we need to have an acceptance that we just don’t know how things will work out. Because we can access information at a touch of a button, do you think this heightens the fear of uncertainty and is a driver for people making irrational decisions?”

Carl approached this in a very simple fashion:

Uncertainty = reality

The truth is that that is the way it is, and actually coming to terms with this brings us to a strange sense of certainty! “You talk about speculation when it comes to investing. I have my plan, I have my investments, and I can now sit back and relax! However, to some extent all investing is speculating, it’s just some carry a greater degree of risk! Investing in funds (whether passive or actively managed) lessens the degree of speculation. However, with funds you tend to get steady, boring returns. If you choose the right IPO you can get returns of 1000+%, this can change your situation overnight. How do you respond to clients who might use this argument?”

Carl explained it goes back to the plan, when he was given the opportunity to invest in this new company he went back to the plan. That is the power of having it.

But he also explained that he does have clients who invest in new start-ups. It is part of their plan, they might have 10% set aside and they are prepared to take the risk because they know that 40% of the time they will get it right and that covers the times when they get it wrong.

In summary if it’s not in the plan and it doesn’t fit then whatever the opportunity it won’t work! “When we have our financial plan, our investments etc you talk about having a third party to help us stick to our plan. If I decide to do everything myself without advice, why should I have a third party to help?”

Carl explained that money is an emotional thing and we all have blind spots.

Having a third party is not about having someone who is smarter than you, but someone who is not you! They are the ones who can see things that you might not see. Their insight is invaluable and it is proven by simple financial measures that less mistakes mean that there is a greater chance of achieving our goals. “If we approach our financial planning later (say in our forties) the natural urge is to play catch up which increases the danger of making irrational decisions. You talk about being rewarded for doing nothing but it almost pulls against the plan to play catch up. How do you respond to clients who are desperate to play catch up and therefore take greater risks?”

Carl approached this with a very simple answer – we need to remember that the world and the markets don’t care about our situation and whether we are late to the game. They won’t suspend the laws of risk and return just because we are in a hurry to catch up!

The danger is that we focus on the return which is wrong; if we focus on the goals we will get there much quicker especially if we have realistic expectations! “Finally, why write this book, is it a process you adhere to and what would you like to do next?”

Clearly Carl is still getting the message out there and that is the focus, the book has been something he has wanted to do and is a process he believes in. The next stage, as Carl explained is to ‘first recover’ and then reflect on where next.

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