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Sometimes it isn’t success that’s difficult so much as working out what success is - news article image

Sometimes it isn’t success that’s difficult so much as working out what success is

19 Jun 2020

3 minute read

With the return to the office this week, life if anything has become stranger. No traffic in Bicester (Bicester Village opens after I’ve gone through); no traffic at the M40/A34 roundabout; no queues at Kidlington or Cutteslowe; a handful of people on each floor; it’s like going into the office on a Sunday, three days a week!

Meanwhile, in the real world, people argue about whether or not we are “winning the war against the virus”; are the five tests set to ease lockdown being met or not?; is the science for or against reducing from 2m to 1m?; who should we be comparing ourselves to and what does world beating mean for us in the context of top flight rugby with crowds recommencing in New Zealand (sorry – still feeling the cancellation of Saints v Chiefs and my planned jaunt to the West Country).

What we’re seeing is the age old problem of lack of clarity of what “success” means and from that, lack of clarity on what benchmarks should be being used to monitor progress and determine if success is being met or not. There are competing objectives, political, medical and economic, and in the current environment a big problem in prioritising the different objectives, hence lack of clarity on success and benchmarking.

It’s a common problem in financial planning, and one related to our previous piece on reviewing and setting your objectives. Having taken the time to think through what is really important to you, to define what “success” means, to deal with conflicting objectives, it is easy to then slip when thinking about benchmarks or indeed to not really think about them at all. Objectives and success tend to be longer term things however, the thing with any long term is that it is made up of a whole series of short terms and this is where benchmarking sits; measuring in the short term, progress towards the long term.

The question then is how do you benchmark your progress? Invariably people gravitate towards the most available and reported benchmarks and this is where things can start to go wrong. One thing we have seen over the last few months is that what’s available and reported doesn’t necessarily bear any relation to what’s happening with individual financial plans. In this case it’s been a positive experience because when the news is full of “the FTSE has fallen by 10%”, “the Dow has had the biggest one day fall in history”, to see your own portfolio is only down by five or six percent can be reassuring.

However, one of the most common manifestations of benchmarking that we come across is the disappointment that comes when someone says “the FTSE did X but my investments have only done Y”. This is fine if you’re objective is to match or beat “the FTSE” and your investments are set up to target that objective, but that tends only to be the case where this is an objective given to a client by an investment manager. I’ve yet to come across anyone in the real world who when asked what they really, really want out of life, says to beat the FTSE (I’ve probably had more whose response was to zig-a-zig-ah). If you need to average 5% a year and you’re doing so, it doesn’t matter what the FTSE is doing; if you need to pay your mortgage off by 55 and you’re on track to do that still, why worry about what the Dow is up to?

So if you’ve done all the good work of looking at what you spend your money on and what out of that is actually important, of writing down what you really want in life and setting timescales and values and priorities to them, in thinking about how you would feel if you didn’t achieve these or when your investments fall rather than rise, don’t then spoil it all by using something irrelevant as a benchmark as you will risk undoing the good you’ve done. 

Sometimes it isn’t success that’s difficult so much as working out what success is - news article image


Ed Gibson

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