The best option for you may not be the best option. 

A lot of advice articles are based on theory. Theory often does not translate well in real life. 

A few years ago, I had a ‘client’ who, after a consultation with me, clearly felt like I was dictating what he needed to do with his money.

Understandably he fiercely defended his right to choose how and where he and his wife spend their money. 

They were spending/consuming about 14% of their assets  each year and had downsized their home leaving them with mostly cash in the bank.

Action needed

He was reluctant to cut back on expenses  or to take on investment risk required to generate better returns. They actually needed to do both. 

Action taken

As a middle-ground I helped him and his wife invest a large chunk of cash in RSA retail bonds, fixed for a period of 5 years at 10.5%. We used the restart option at 11.5% when the time came.

They slowly cut back their expenses in the end but they did it on their terms. In hindsight I see he just needed to come around to the idea himself. The end result was right.

The outcome is what matters

Are RSA bonds the perfect or even the most sensible investment option. Probably not.

But RSA retail bonds have been a godsend relative to cash in the bank and the couple now earns more income after tax than they spend. 

They also have some capital available to them outside of this structure. And they own a small equity portfolio.

A peer review may point out all the gaping holes in this strategy. 

Expensive financial planning software that optmises on the basis of 70 000 data points in a monte-carlo simulation (yes fancy words to impress) absolutely certainly would.

Sub-optimal investment strategy. Not as tax efficient as it could be. Sure. 

But you know what – This couple is better off than the path they were on.

Could they have been even better off? Yes of course.

But they changed their behaviour on their own terms and eventually got things done. They could stick with what was put in place, the importance of which is actually massively underestimated in real life planning. 

How do you determine what level of success to ascribe to this outcome?

Based on whose definitions?

Based on what measurements?

Off-roaders don’t go for optimal they go for what works

Commentators and pundits like to portray options as black and white.

It is convenient for product sellers to convince us there is only there to be a single right way to get things done. Their product right.

The off-roaders out there like to be a bit more adventurous.

I can work with off-roaders. I do work with off-roaders.