What is an Ecosystem…
The traditional definition of ecology is “the scientific study of interactions among organisms and their environment”. These are collectively grouped into Ecosystems that can be as small as a teaspoon of water to the entire planet. It is an interdisciplinary field that includes Botany, Zoology, Geology, Microbiology, Chemistry and may other fields. Take the ecosystem of a beehive for example – it is made up of the different ‘castes’ of bee, the hive, the weather, disease, surrounding plants and their pollen.
“Wealth” goes far beyond merely being financially rich, it is essentially the abundance something that is valued or desired. That could be a lifestyle – or time, relationships, state of mind.
Wealth Ecology is the integration of an individual/ family/ trust/ organisation’s unique financial requirements to develop an ideal plan or ecosystem that is sustainable, protected from risk and primed for optimal abundance.
How integrated is your financial ecosystem?
The trend in financial advice is to put the disciplines into ‘silos’ run by specialists that never talk to each other and usually give conflicting advice to maximise their own specific agenda with little regard to an individual’s wealth ecosystem and the effect that their advice can have on other aspects of their wealth. Any one individual might have a short term and medical aid ‘broker’, several risk advisors or investment advisors – none of whom talk to each other and are always trying to get their pet specialty a bigger chunk of your disposable income pie.
Why is it important to have an integrated plan?
If a bee doesn’t have a secure hive, or it’s too wet to fly, or there is no pollen available in the environment then the bee hive is going to collapse. Similarly if someone doesn’t have medical aid or substantial medical savings to pay for a triple heart bypass, and has to either re-mortgage their home then the welfare of their personal ecosystem is going to be left to the mercies of the government health care system. At the same time it doesn’t make sense to be over-insured in any risk capacity – it is a waste of money that could be invested, used to pay off debt or just enjoy. Everyone’s risk ecosystem is different and it is impossible to shoehorn everyone into one type of product.
Asking the right questions
You need to ask yourself the right questions – or make sure your advisor does. The right question is not “how much can you afford” (and proceed to clean it all off the table) but what are your priorities, fears and stressors and potential above average risk. Work from there. When you build a house you design what you want it to look like ultimately (within reason) even if you can’t afford to all of it today. In order to have a holistic financial plan that is meaningful to you you will need to have at least a basic understanding of a number of terms, financial structures, tax implications so that you don’t abdicate all of those important decisions to your ‘trusted advisor’. You need to know WHERE to look for potential pitfalls, penalties and restrictions. Most advisors do not have the time to do that sort of education, and if they do it is unlikely to be all at one time. That is partially the function of this website and blog – unearthing the information you need to know. Although it might be an irritation to spend the time with your advisor doing a full financial needs analysis, estate plan and implementation scenarios – do it. It can then be updated annually and you ahve somewhere to go when you wake up with the cold sweats one night and worry about your future.
Your financial ecosystem is no different. Identify what you absolutely have to have, and what you are going to add later:
- Children : How many? Private or State schooling? Type of medical aid?
- Housing : Own ? Rent? Investment portfolio?
- Genetic risk?
- Self employed? Business owner? Employee?
Every aspect of your wealth ecosystem will change with time and it needs to be kept in balanced and not just parked off to the side to do its own thing. Your priorities change, your risk profile matures, different things worry you, you understand more about investment, you learn more about the industry and want to have more control. When you integrate all the disciplines then this transition is planned and seamless. It is important that you know when to review your portfolio, and when you can let it be.The obvious mile stones are a new house, new business, shareholding in a business, signing surety in your personal capacity, etc. less obvious perhaps are changing your occupation ( from say salesperson to manager), the amount of time you spend on the road for your job, travel to 3rd world countries ( not just the obvious Iran/ Iraq/ Afghanistan), starting or stopping smoking, starting a hazardous hobby – scuba, motocross, bungee-jumping. If you aren’t sure ask your advisor.
By Dawn Ridler