25 Mar Recommending funds isn’t enough. You need to manage behaviour.
In a ZERO inflation economy, if you are levied a 100% tax on your interest income of 5%, you’ll be livid with the government.
But you would be quite OK if the tax rate was ZERO in a 5% inflationary economy.
This is because a 5% inflation does not pinch as hard as a 100% tax on interest does although both mean the same.
This is yet another example of how investor behaviour management is key for any IFA.
Small numbers feel small while big numbers feel big.
Hence a 5% inflation felt small but 100% tax felt big.
What the mind can’t visualise is that 100% is of 5% which actually works out to the same 5%.