Financial planning: the modern alternative to human sacrifice

Over the centuries, few myths and superstitions have been half as potent as those offering control over the uncontrollable. Some have promised specific, focused control: the Incas, unless it was the Aztecs, went for human sacrifice as a way to propitiate the gods and ensure a good harvest. Others have made much bigger, broader promises: organised religions stands for nothing less than control over an eternal afterlife.

On this basis, financial planning is closer to human sacrifice than to organised religion. Here, the promise is that the priestly authority figure can lead you through a bunch of rituals that will give you control over your financial future – will enable you, as so many of their websites say, to lead the future life you want to lead.

It’s a seductive idea: a little incense, some muttered incantations and a cashflow modelling spreadsheet, and as if by magic the considerable gap between your miserably inadequate pension savings and a scenario involving a large yacht and a sun-drenched Caribbean beach will be eradicated.

But there are two reasons why it isn’t actually going to work like that. The first, and more obvious, is the miserable-inadequacy issue – an averagely-sized £40k DC pension pot won’t even put you into a pedalo at Paignton.

The second goes back to the key word in my first sentence: the word “uncontrollable.” The myths I’m talking about are appealing precisely because they promise control over the uncontrollable. And that means, inescapably, that they don’t work. When it comes to guaranteeing the harvest, all sorts of complex and powerful forces in the natural world determine the climate, utterly beyond the control of any number of human sacrifices. And exactly the same is true of the world’s investment markets.

Not so long ago, my wife and I started working with a new adviser. Lovely chap, very good firm, process including all the bells and whistles, spreadsheets, bar charts, you name it. The outcome was highly satisfactory: Judy and I could afford to have a lovely time.

The trouble is, if I can switch over to a rather different kind of myth, that here in the labyrinth that represents our future, there lives a horrible, savage, murderous minotaur. He can appear, quite unexpectedly, at any moment, at any point in the labyrinth. And when he does, he will roar, and grind his teeth, and tear our financial plans to pieces. Overnight, some stupid virus visited upon us by vengeful pangolins sick and tired of their treatment in what are rather horribly known as the “wet markets” of China, will spread like wildfire round the world and reduce the size of all our lovely, carefully-planned decumulation pots by 10, 20, 30, 50 per cent. Time to retouch that dream-retirement image: anyone got a pic of a pedalo?

Of course our minotaur doesn’t always take the form of a virus. Last time it was a crash in the sub-prime mortgage market. The time before, a crisis of confidence in the first generation of dotcoms. The point is, you never know what form the minotaur will take next time, or when he will appear – or quite how much damage he’ll do to our finances.

But he will keep on appearing, and he will keep on doing damage, and all those lovely dreams in all those financial plans are all going to evaporate. And all the human sacrifices in the world are never going to stop him.

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