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‘Sages, Saints and Saddies’ Observations on Matters of Money Created by a Retired Businessman with serious ‘Man in the Street’ experience ARTICLE 7: Some Sages Are Far Closer Than We Think Short topics, tight pages: Some sages live under the same roof 3 A favourable introduction 4 Most things are rarely as they seem 5 A mystery explained 6 A visit to Palmer’s (1) 7 A visit to Palmer’s (2) 8 Thanks Dad. Thanks Mum. 9 To quickly sum up 10 Since we are talking about money 11 Disclaimer 12 From Malcolm Palmer & contact details 13 1What this series is about … This series has nothing to do with religion. In the context of money, saints simply refers to people who have a positive impact, while saddies often lean in the opposite direction – and sages are those wise enough to know the difference. In keeping with the standards we uphold, also avoided is any reference to politics The idea for the series comes from the reflection that, while numerous aspects of managing finances have changed in recent times (they always do), rapid advances in both technology and terminology have not changed the basics (and never will). The focus is on the perspectives of ‘a man in the street’ who has been in business long enough to witness decades of both wisdom and folly in equal measure … and has learned that the former comes from long exposure to the latter. When it comes to money, having enough of it relies upon the need to get more things right than wrong. And this series suggests simple perspectives that may help readers reflect on financial choices. As with all these short articles: no preaching, no personal advice—instead our aims are simply: 1. to inform (using reliable sources); 2. to entertain (by providing interesting content); 3. to challenge (by raising ‘crunchy’ topics). Welcome to ‘Sages, Saints, and Saddies’ On behalf of Joseph Palmer & Sons E.W. (Eddie) Lees Contributor 2Amazing what a parent can learn in a few short years. There wouldn’t be a household in Australia where young adults haven’t frequently rolled their eyes at remarks made by their parents. It’s all part of how we grow up. From a teenage perspective most people over 25 are fuddy-duddy; at thirty they’re getting seriously old while those over forty are positively ancient … and let’s not even mention fossils in their fifties. Years pass. Swords cross less often. A conditional truce is accepted by all. The calm betokens a time for reflection. And reflecting was exactly what David W (names changed throughout) was doing shortly after he learned that long-time friend Bill S had died following a stroke at work. As near neighbours, both families had shared ‘growing family’ stories for years. Both were pleased with the way their kids had eventually turned out. Both had laughed at the increased toleration their maturing offspring moved towards. The joke was that the former parental ‘enemies’ were now seen as far wiser than originally thought. In less than ten years, both sets of parents had become sages. How times change. Yet how so much is the same for so many. Some sages live under the same roof … 3A favourable introduction … 4 It happens occasionally. David and Helen’s family moved through life’s familiar passages with mercifully few dramas. The name of the law firm David ran stood clearly on the directory of a toney office block just twenty minutes’ drive from home. Helen had worked as his office manager but resigned to spend more time on her charitable causes. Daughter Hayley, on graduation, and after a gap year, took up a medical-related career, later marrying and having two children of her own. Son Tom chose banking (and bachelorhood) and became an accomplished amateur sportsman. By the time David and Helen reached their fifties, the parents of both had passed away, leaving modest bequests to each. Unfamiliar with investing, the couple initially took advice from a friend working in the wealth division of a bank; following patchy service and results not much better, one of David’s clients recommended him to Joseph Palmer & Sons. Helen was hesitant; she’d never heard of this boutique firm and, despite the recent bank relationship, felt that a large organisation should be preferable to a small one. On deeper reflection, however, the fact that no sooner had they become used to a bank official, s/he was either transferred to another department or left altogether. This lack of continuity became highly frustrating. After four years of engagement with Palmer’s, receiving quarterly reports, multiple articles and personalised service from their account manager, David and Helen had grown sufficiently confident to also transfer the firm’s super fund. They figured that when a family firm has been in business since 1872, there must be sound reasons for its longevity.Most things are rarely as they seem. 5 You think you know someone, and then … David had always been slightly mystified by certain aspects of Bill and his family, despite the warm relationship between them. Take holidays, for example. While their children were young, David and Helen chose economical camping trips, whereas Bill, Rose and their children often stayed in hotels. Only when David’s children reached their teens did his take hotel stays — by which time Bill’s family were travelling overseas. From their conversations over the years, David assumed that he and Bill earned roughly similar incomes from their respective businesses. Yet, as Helen occasionally observed, Bill’s family always seemed a few steps ahead financially. It was only a year after Bill’s passing that the picture became clearer. During a quiet conversation over a sandwich, his widow, Rose, reminisced about their life together and shared something David had never known. In his early thirties, Bill had joined a small group making a real-estate investment that delivered a strong early gain. From Rose’s perspective, that experience shaped the way he approached opportunities thereafter. She recalled that he continued to pursue similar ventures over the years — some worked out, some did not, and most were unpredictable. By the end of his life, Bill left Rose the accounting practice, a modest superannuation balance, and the proceeds of a life insurance policy. Sad indeed after all his good intentions. For David, hearing Rose’s account prompted a moment of reflection.A mystery explained … 6 Better sure than sorry … Bill’s passing had come as a shock to most in his circle, not least to David. It underscored a simple truth about the fragility of existence: we don’t own life; we merely lease it for a while. Mindful of this — and aware that he and his staff spent their days attending to the life-matters of others — David decided it was time to take stock of his own family’s circumstances: where things stood now, and where they were heading. He and Helen took a few days away from the office to think about themselves for once. They agreed to consider several key “what-ifs”: what if either of them suffered a serious health event; were contingency plans documented; did their accountant know the details; were their children aware of arrangements; what plans existed for the business; were their Wills and other end-of-life documents current? In the quiet of their “space-to-think” environment, they worked through ten key issues. Most had been addressed over the years, but they still created a fresh to-do list. One matter they discussed early on related to their investments. Unlike Bill, whose early experiences had shaped his own choices, David and Helen had always preferred to avoid approaches that felt speculative to them. Their work in the law firm had exposed them to many difficult human situations — greed, envy, deception among them — and those experiences had influenced the level of financial risk they felt comfortable taking. For that reason, a prime item on their new to-do list was ensuring the next generation was more fully informed about ‘the how and the who’ of the family’s investment plans.A visit to Palmer’s (1) … 7 There’s great value in the ‘show, don’t tell’ principle. David ‘herded the cats’ and confirmed an appointment at Palmer’s three Thursdays hence; his request was that Malcolm would explain how the investments were managed and answer any questions arising. It was agreed. The group was welcomed, introduced, provided with coffee and biscuits, then seated comfortably in the board room. With the account manager also present, Malcolm began with an overview of the firm’s history and purpose, including how the firm describes its approach within the broader industry. And then he moved to the ‘how we manage your investments’ phase and asked the group to view the large screen as he took control of the keyboard. • Malcolm explained that many clients express a familiar theme when discussing their financial arrangements: they want current and intergenerational affairs managed with attention both to long-term growth and to the preservation of what they have built. • He noted that one structure some clients choose for this purpose is a managed discretionary account (MDA), which allows a portfolio to be administered in line with the client’s documented preferences. • This was the arrangement already in place for David and his family. They had two such accounts: one for the law firm’s superannuation fund and one for their non-superannuation investments..A visit to Palmer’s (2) … 8 The great value of ‘show, don’t tell’ (continued). • No work is undertaken on a client portfolio until the client has been interviewed about their circumstances, preferences, and attitudes toward risk and reward — in short, until the firm has a clear understanding of the key objectives they have documented. • Once those details are known, the team can review the numerous model portfolios the firm administers and identify which approach aligns with the client’s stated preferences. • Malcolm explained that the model portfolios draw on a range of inputs, including external research sources, independent views sought by the Investment Committee, and the firm’s own analytical frameworks. He added that the investment process operates within the protocols set out in the firm’s Investment Committee Charter. • By this stage, Malcolm had outlined much of the philosophy and structure behind the firm’s methodology for administering portfolios in accordance with clients’ documented objectives. • With about twenty minutes remaining, Malcolm invited questions. Tom asked about the main regions in which international investments are commonly made, and Malcolm noted that many global exposures relate to the United States, Europe, and Japan. • Hayley’s final question concerned what would happen to the family’s investments if either of the two main platform facilities — Praemium or Netwealth — encountered difficulties. Malcolm explained that client assets are not held by the platforms. They are held by an independent custodian or trustee, in line with Australian client-asset and custody requirements. If a platform were to cease operating, the underlying assets would remain legally separate and continue to be held in trust for the client. In that situation, the administrative functions of the platform may be interrupted while a new service provider is appointed. Throughout that transition, the custodian maintains responsibility for safeguarding the assets and for overseeing the transfer of records to the replacement administrator. Investment management arrangements with Joseph Palmer & Sons continue as they are, as they sit outside the platform’s operational structure. With the presentation complete, the group thanked Malcolm and the team for the session before heading home.Thanks Dad. Thanks Mum. 9 Not every sage lives in academia … some are far closer. None of us are saints, and we are all guilty of taking certain aspects of life for granted — and people, too. This is especially true within families. Small and medium enterprises in Australia, as in many countries, are built on the efforts of people like David, Helen, Bill and Rose: decent, hard-working, Mums and Dads – and often far smarter than given credit for. They establish service businesses, open retail stores, and create professional practices in medicine, law, accounting and beyond. They live within their communities and contribute in countless ways. Their role in the nation’s fabric is substantial. Australia’s superannuation framework provides a structured way for individuals, families and businesses to manage long-term, inter-generational financial arrangements. Within that framework, various firms — large and small — offer different forms of investment administration and support. This article has simply outlined, in narrative form, how one such firm approaches its work with clients. Family businesses do their best to carry forward these traditions. Some continue across generations; others do not — that is the nature of enterprise. One that has continued for over 150 years is Joseph Palmer & Sons. Although names have been changed here, the underlying story is true — and reflects an approach to ongoing client care and communication that the team at this long-established firm regards as important in its work. Simplifying investment complexity for existing and prospective clients is something Malcolm Palmer and his team are rather good at.The sages close by • Older people, especially parents, are often underrated for their level of knowledge – ‘sage-hood’ takes time. • Unfortunately, many families experience sad events, both human and financial. • Appearances, especially related to money, can be deceptive. • When planning for the future, it pays to keep key members of the family in-the-loop on financial matters. • A ‘show-don’t-tell’ presentation can be extremely valuable in explaining complex issues … on inter-generational investing in particular. • Done by such an expert as Malcolm Palmer, the benefits for the audience can truly aid big-picture comprehension Learn more about Joseph Palmer & Sons via a series of One-Minute-ish videos Click here We look forward to your company on this journey, and your candid feedback as we make it. To quickly sum up … 10 Previous articles in this series 1. I had Six Serving Men – Link here 2. Maslow’s Hierarchy of Needs – Link here 3. Solly Gets Wise – Link here 4. Protecting Us from Ourselves – Link here 5. Randomness – Link here 6. Saints, Saddies & the Endowment effect – Link here