The Algebra of Wealth by Scott Galloway

Author:Scott Galloway [Galloway, Scott]
Language: eng
Format: epub
Publisher: Penguin Publishing Group
Published: 2024-04-23T00:00:00+00:00

Planning and Advisers

In the introduction, I provided a quick and dirty way to estimate what you’d need in assets to achieve economic security. Take your desired burn rate—your annual spend, plus taxes—and multiply it by 25 (sometimes called the 4% Rule because it assumes a 4% investment return above inflation). It’s a good way to get your planning started, but it’s only a start.

As your earning power increases, and if you’ve applied these lessons, your savings have grown with it, your obligations have likely increased, as well as the overall complexity of your tax and investment needs. That 25x burn number is a useful target, but it’s not a plan. If you’re über-organized—you make a spreadsheet to go on vacation—and you’ve developed good budgeting discipline, it’s possible to continue on your own. But seriously consider bringing in professionals. Depending on your wealth and complexity, this may mean a tax adviser, an accountant, perhaps a lawyer. But the key figure is a financial planner.

All kinds of people offer their services as financial planners, but you want something very specific. You want someone who is professionally trained and licensed, and—this is crucial—is a fiduciary. Meaning someone who is legally obligated to put your interests before their own. You are looking for two formal designations: first, that the company your adviser works for is a registered investment adviser (RIA) and, second, that the adviser personally holds either a certified financial planner (CFP) or a chartered financial analyst (CFA) license.

There are plenty of qualified advisers, so don’t deviate from these requirements. Don’t hire someone to guide you on the path to economic security because they were in your sorority pledge class or they get great sports tickets. It will be the most expensive Knicks game you’ve ever been to.

Here’s the critical thing about advisers. You aren’t paying them for investment returns. Over the long term, nobody beats the market. And if someone does have the secret to above-market returns, they aren’t going to be sharing it with you for a fixed percentage. You’re paying an adviser for planning, accountability, and confidence. The more wealth you accumulate and the more complex your life gets, the more valuable these services become.

The one person more important to your economic security than your financial adviser is your spouse. No matter how compatible or similar you are with your partner, you won’t be identical with respect to money. No two people are. Our relationship with money goes deep, and we often don’t perceive the roots or the full complexity of that relationship. You will need to take time, and have many conversations, to pull back the layers and truly sync up your approaches to saving, spending, and planning. A good financial planner can help with this; it’s a big part of the job. Always remember, you are building economic security so you can invest time in your relationships and enjoy them. That’s the real end game here.

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