Are we just a set of numbers?

This article was first published in March 2016

You may recognise the above image from the film The Matrix. While not the easiest film to explain, it depicts a future where humans do not live in the real world, but rather experience a simulated reality created by machines. The world that people see is just computer code fed into their brains. For those humans not “plugged into The Matrix”, they view the simulated world by reading the code, which is what this image shows.

I was thinking about this recently when talking about my practice with another financial planner. We discussed numbers such as ages of clients, average funds under advice per client, amounts in particular investments, insurance covers and premiums in force.

It may seem cold to think of ourselves as just “a set of numbers” but from a financial planning angle we are just that. To the outside world we are defined by our lifestyle, where we live and work, our family situation, our friends and hobbies or activities. But we are also defined by our assets, liabilities, incomes and expenses and how these balance out, though these details are not usually on public display.

Except to someone’s financial planner, like myself.

When given sound financial advice, I have a fundamental legal and moral obligation to “know my clients” and have a “reasonable basis” for any advice. In getting to know clients, there must be discussion about their higher level objectives, lifestyle goals and aspirations, and this is one of the most enjoyable parts of my role. But ultimately the discussion comes back to numbers.

And this is where I do start thinking of clients as a set of numbers:

• What portion of their total asset base relates to lifestyle assets (house, car, boat etc.) compared to investment assets (savings, superannuation etc.)?
• What is the mix of shares, property or cash?
• Are debts manageable and structured properly?
• Is there enough income to meet current expenses? What about future expenses?
• What if something goes wrong? Will insurance benefits be enough?

How do you view yourself? I hope firstly you think of yourself in terms of your lifestyle or place in this world as described above, but do you ever properly consider your own set of numbers? Do you ever produce a personal balance sheet or profit and loss statement? If not, it is a great exercise although you may not like some of the results!

Ultimately, these numbers must be in harmony, otherwise your overall financial plan and the achievement of your lifestyle (or non-numeric) goals will fail.

This article is the opinion of the writer and does not consider the circumstances of any individual. This document has been prepared by Peter Keogh (Authorised Representative No. 253538 of Paragem Pty Ltd AFSL 297276) and is intended to be a general overview of the subject matter. The document is not intended to be comprehensive and should not be relied upon as such. We have not taken into account the individual objectives or circumstances of any person. Legal, financial and other professional advice should be sought prior to applying the information contained in this document. No responsibility is accepted by Peter Keogh, Paragem or its officers.