35. Alan Smith Learns Important Money Lessons of Humility, Resilience and Ingenuity

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This week I speak to financial services entrepreneur Alan Smith.

Alan tells how his relationship with money was influenced by the childhood experience of his family going from living a life of opulence and luxury, to one of living on the breadline, following the collapse of his father’s property business in the 1970s.

A brief brush with debt and high living early in Alan’s career was brought into check by a doubling of his mortgage payments following the interest rate hikes of the early 1990s. Alan explains why and how he made the leap from comfortable, successful corporate executive to unprepared small business owner with an uncertain future.

And be sure to listen to the end when Alan shares what he has learned about money from his clients and the money success framework that he know teaches his children.

www.capital.co.uk

Episode Transcript

Jason Butler 0:08
Hello, and welcome to the Real Money Stories podcast. Real Money Stories is the only UK podcast which shares personal money stories of everyday people. So their insights can help you to be better with money. My name is Jason Butler. And I invite you to join me as I have intimate money conversations with people from all walks of life. Whether you're just starting out on your money, journey, or world on the track, there's bound to be something you can learn from the stories about taking more control of your money, so you worry less and enjoy life more.

Well, hello there and thanks for joining me Jason Butler on another episode of Real Money Stories, the podcasts where we talk to real people from diverse backgrounds about their whole money journey. Now this week, I'm really excited and really pleased to be joined by someone who's got a great deal of respect. And I would like to count him as a friend, Alan Smith. Hello, Alan.

Alan Smith 1:12
Hello, Jason, how are you?

Jason Butler 1:13
Yeah, I'm rockin in this. So I've got very long hair, probably not as not as long as it could be, but it's getting longer. And we just got that decision as to whether we get the kitchen scissors out and have a bit of a trim. So is that is that these are all the problems we've got to face these days. First of all problems. Yeah. Now Alan, before we get into your story, do you want to just tell our listeners if they don't know the legend that you are just just be who you are and kind of what you do now and then we can go back?

Alan Smith 1:44
Sure, yeah. As you say, alan alan Smith I am. I'm founder and the CEO of a an independent wealth management business called Capital Asset Management, who are based in London, the city building business about About 16 years, and, you know, we've enjoyed a degree of success over that period of time, you know, interesting ups and downs and maybe get a chance to share some of that.

Jason Butler 2:09
Hmm, great. Yeah. And I love your business and people know, you're one of my, you know, sort of our recommended firms for people who have got quite complex affairs. Do you need more help? So, you know, very, very, very repressive. Okay, now, Alan, I first saw you on stage I think about 13 or 14 years ago, I think at an event and you were talking about your sort of you were sort of in the early days of your business. And I remember thinking to myself, What an interesting character very articulate and very dynamic and interesting. But you grew up in Scotland, didn't you? So do you want to take us back to your early childhood and and kind of your earliest memories and what you started to learn about money in those early days?

Alan Smith 2:54
Yeah, sure. I think this is a you know, it's a great point. It's a great podcast. You've got between As you know, people's money stories, you know, we talk a lot about that in our, in our own business, because they're they're really relevant to how people operate, you know, as adults and grown ups, the experiences they had as kids. So, yeah, you're right. I grew up in the west coast of Scotland, and I'm the eldest of four kids. And when I look back on on those days, you know, kind of my relationship with money was an interesting one in that my father was actually still is to some degree in his 70s. But back in those days, he was a property guy, property entrepreneur, so he would buy and sell and trade real estate properties, you know, started off with one or two flats and he bought them and rented them out and scaled it and scaled and I think at its peak, he had, you know, several hundred flats, he branched into hotels, pubs, restaurants, that sort of thing. And so, there were times in my life where there was, clearly there was plenty of money around. He was somebody that you know, he aren't a lot of money and we lived a high quality life for a period of time. And you know the return I reflect back in my childhood there were times I remember as it's a story that I remember very clearly and it's really indelibly etched in my mind in the I used to get driven to school which is a local Comprehensive Primary School in his Rolls Royce. So I get sort of dropped dropped off there I didn't I knew this was a big expensive car but I'm so I'm so nine years old or something, but didn't really get the context of really what it was because rest of my mates, you know, their parents were what are called sort of more more more regular. They didn't have the big expensive house, the big expensive car. So we had that sort of lifestyle live in a big big house with with tennis courts and stables and so on. And then what seemed like you know, literally a couple of weeks, it was about a year later, and this is the 1970s. So, those students of history or anyone who's living around that time will know that there was a humongous sort of market crash rash three day week, the oil crisis of its time, and the property market just absolutely created and collapse and effectively lost his business. what felt like overnight and literally for me being driven to school in a Rolls Royce, I was I was taking the bus. And that, you know, when you're a young kid at school and you've got, you know, children can be quite cruel. And there was a degree of Yeah, I suppose it was a form of bullying, you know, one, you know, I was getting bullied because my dad was rich, and I was getting bullied because my dad was poor. And that's, that's, that was that, you know, I remember those days, you know, almost as if they were yesterday. I remember the feelings that I had, I didn't really understand it in a great detail. But I knew that you know, life for one on one side was was good and comfortable. And another another time and the knock on effect of this was what it created within my family life. Because my childhood recollection is just lots and lots of arguments. My parents Lots of sort of screaming and shouting and slam doors and all that sort of thing. And I knew to some degree, then and I certainly know now that a huge part of that, that anxiety and that conflict within the family unit. And the source of that was money was just issues about money about not having enough money about worries about money. And I remember clearly, again, as I said before, the eldest of four kids so my younger siblings got two younger brothers, the youngest sister coming through to my bedroom, you know, late at night, when mommy and daddy are sort of shouting and screaming the next day and just saying, What am I What are they fighting about what's going on? And I said, I don't really know. But I think it's something to do with money. And those are the you know, some of the you know, the stories that we tell ourselves, but I definitely felt at a young age, I need to learn a bit more about this magical concept called money because what I've what I've seen in my personal life, is that it can create it can create joy, happiness, opportunity. And it can create a hell of a lot of sadness. But the end result of that my parents eventually got divorced. And the family was split up and but the US kids went stayed my mom and mom. And you know, it was it was okay. And my dad was still in touch and and I still see my dad regularly now my mom passed away a few years ago. But the knock on effect of that whole sort of that sort of effectively, the breakdown of the family units is something that is a sort of a very profound lesson to me. And to some degree, although I took a, you know, recently circuitous route, has led me to be in the business that I am now sort of leading an independent wealth advisory wealth management business, because I'm really driven by a purpose, which is to try to help educate and inform other families so that they can kind of navigate those treacherous waters around their relationship with finance and with money. Hmm.

Jason Butler 7:54
So basically, that was a traumatic event for you. Looking back, is that right? It was a it was a kind of pivotal moment.

Alan Smith 8:01
Or anyone who's been through as a child when you're eight 910 1112, that sort of age very, very formative years for a kid. And if you've, if anyone's had any sort of experience of that, then you know, it is traumatic. It really is. You don't know what's good as a kid, you're your own emotions aren't fully formed yet if it happened when I was 17, or 18 had been different as a young kid with a new job. So in my situation, I felt kind of responsibility for my younger siblings as well. I mean, they were my number. My sister's 10 years younger than me. So she was literally a baby. And I knew my brothers we're kind of in the middle of that. And so yeah, it was a traumatic experience. And you know, I've only kind of it kind of reverberates as this is like, like an earthquake or something. You you feel the ripple and the tremors for years after that, and little things can can, can set you off or can certainly trigger some emotion. So it really made me realize that money and emotion two sides of the same coin. They're just they're inextricably linked. And it can be a source of one's feelings towards money can definitely be a source of anxiety.

Jason Butler 9:12
So, let's think about that was a traumatic event. So you'd seen the good times or you weren't aware of it, but you had, you know, tennis courts and all this sort of stuff, which is certainly not normal. You know, I could still remember, as I say, in my early, same sort of age, I going to a friend's house and he had tennis courts, a swimming pool and an enormous house and our house was the size of his sort of stable block. Yeah. And so you presumably had a change in circumstances, you know, to downscale the house Did you know modest lifestyle? Your mom and dad split up? So and you had to cope with the bullying that all the different form of bullying now that you sort of said, Did you somehow How did you how did that affect your identity and sense of self worth and resilience and sort of self esteem as you are going through your comprehensive school, now you're in sort of what I call modest world and you were in the same boat as everyone else, right?

Alan Smith 10:03
Yeah, that's right. So I just I had to it was a very quick lesson in humility. I don't think I was overly arrogant. And really because I didn't really know, I didn't know how relatively rich we work to other people. I mean, don't get me wrong wasn't ridiculous, but certainly, in our community, you know, we own the biggest, biggest house in the area. And my dad was kind of well known, because it was a village that we lived in. But, you know, I still hang out and had sort of regular meats. I was at that stage. I wasn't going to a private school I did in high school into boarding school, which is a whole other sort of set of experiences. But it was a quick lesson in humility in that you know, you think things are are pretty relaxed and everything is going well for you and what it felt like it really did I say that sincerely. It felt like it was overnight or it fell over the space of a week. It clearly was longer than that was over about a year or so that our financial circumstances changed. So I learned to humility and I learned that I had to be resilient. And I learned that, you know, there are you know, people can be cruel and there is a kind of certain shortened Freud about it, you know if people and it's you know, against well known people who have people in the public eye who come on stop people who were wealthy, they lost all their money, whether they you know, they won the lottery and they lost the role or the sports people, I do notice a sort of a general sort of view that a lot of people in the public take, which is, you know, is kind of laughing down the sleeve at these people. And so I think I experienced a bit of that. And so, to me, this was just something that I felt I just, I was very, on educated about money, about impact. And of course, the other thing about this was, which has led, you know, led me to formulate a lot of my current beliefs. And some of your listeners will probably have some will have their own views on this, but because we could be very influenced by our parents When you know when the kids naturally will most people are and I certainly wasn't my dad is quite literally larger than life character six foot six x Scott Scotsman you know real sort of center of attention kind of guy and his his passion and his his whole thing and it was then it is to this day his property. And he says the only way to make money is buy real estate buy property. And what I realized later on it wasn't necessary in property can be a good thing to invest in, I don't think it's the only game in town. It can be what property is, is a play on leverage. So it's about borrowing primarily, he could take a relatively small amount of money, and a bank would lend him a big chunk of money. And he could do a few things. And he turned that around and the return he would make on his capital, ie the small amount that he put in, you know, he could double his money in quite a quick period of time, which he said you can never do in the stock market or anything else. But then it took me a long time to realize it wasn't about the asset. It was about the ability to borrow and leverage. And so I began to learn more about that word. You know, borrowing can be, it can be a really good thing to do. But it can be a very, very dangerous thing to do. And you really need to know what you're doing.

Jason Butler 13:10
Yeah, provides gains, but it also amplifies losses. I think that's what you're, you've got to isn't it there with that?

Alan Smith 13:15
Yeah, yeah. Yeah, exactly. And you'd be careful what you're borrowing in order to do if you're borrowing if you're borrowing to purchase an asset that you believe is going to increase in value over the longer term, then fine, that probably works out. And there's lots of other risks involved. And lots of other sort of factors and activity and a hassle, I suppose. But it can definitely work in your favor. But sometimes, yeah, I learned about that, but then sometimes you got to have your own personal lessons as well. You can sort of there's a difference between you know, practical experience and theory. Yeah, you know, as I say, I got the theory on on borrowing relatively early on, but then I needed to have a personal lessons and I thought, I probably No, I did I overstretched myself in my early adult.

Jason Butler 14:05
Alright, well, let's just say let's just stay at school for a minute. So as you're going through school, did you do things like paper round or a part time job? Or do you do what did you do something to earn money and how did that affect and shape you?

Alan Smith 14:16
Yeah, I did. I did a paper round. And I'll tell you why I'm doing it doing a paper round in the west coast of Scotland getting up at six o'clock in the morning.

Unknown Speaker 14:27
I can imagine

Alan Smith 14:29
talking about building resilience. I'm from the west coast, a small town called Troon. And it's just windy. It's just here, this key wouldn't be and but it'll tell you what, it doesn't half and make you realize, you know, the values and the fact you've got to, you know, you've got to exchange labor and efforts and creativity of some degree to get some sort of reward. So and I was doing that and earning five pounds a week and there's a bit of inflation in the meantime, but it was it was not bad money, actually, but that was I think that was 16 A week here was six days a week I was doing that and cycling around the area for my my pay on a weekend. And it was good. I was certainly encouraged, you know, my own children to be doing that to be doing jobs because without it, there was no concept or no sense of what one has to do and what one has to give up in exchange for some economic reward. So yeah, I was I was I've always done something I've always had an opportunity to have a few jobs I've worked in pubs and bars I've done those sort of part time work and so on and I've always quite enjoyed that experience.

Jason Butler 15:36
And what did you learn what did that teach you that that so doing the paper around in the horrible wind in the west coast of Scotland, Ecuador, what did that teach you about money?

Alan Smith 15:45
Simply the, to use the the, the often overused, cliche phrase but money doesn't grow on trees. Money is created out of something and it's something that I have noticed with my own kids now there was this kind of strange, magical sense about money. Where's it come from? If you don't know if he will just come from banks or just as he just appears. But I learned that even though because you know, so go back to my early childhood, this sort of up and down roller coaster ride about finances. I didn't I knew that my dad had some had work and he did things, they got money, but then he didn't get money. And so that I was a bit confused by that. But eventually when I get to the agent some what would it be I'm sort of early teenage years, I'm doing my paper round. And I just got that. And there was another interesting thing, so knock on effect because I live in a much more humble and modest life. And then my my friends and my next door neighbors and so on, were much more like me, and they had parents who were they certainly weren't wealthy. And it was just it was the dumb thing. It would have been strange for us. You know, my our next door neighbors were before boys and four brothers, and we'd and they were just our friends, our pals, and they were just everyone or every one of them and all are sort of local people that we hung out with the nospace the oldest some sort of word, the older the paper around Or they worked in a shop but they did something else. So it was an interesting thing about community where it's just it's just a dumb thing. So normal thing, whereas maybe in other societies or other communities to be strange to send out a, you know, a young boy to do a paper around at six o'clock in the morning, but so yeah, it was the I don't regret that at all. I think it was a very good thing. And I was and I always look forward to payday

Jason Butler 17:25
and what did you do with your money when you were earning it while I was still at school? You know, young person?

Alan Smith 17:30
Well, I was I would spend it I pray I never really the interesting thing as well. I just had the sense I was always going to earn it, you know, in seven days that another five pounds in seven days, another five pounds. I can't remember what I spent it on. But no doubt it would have been on comic books, sweets, fizzy drinks, you know, all the usual wasteful childhood stuff, but I certainly wasn't somebody that says you know, I'm going to save half of it and invest half of it and spend some of it and then give away half of it to charity. I wasn't doing that. I was I was a very sort of consumptive child I would earn it, spend it, earn it, spend it.

Jason Butler 18:06
Okay, so So what did you do? Do you did you go? Did you do a levels or college or what did you what happened after school? Yeah,

Alan Smith 18:13
yeah, I did both of those. And I went to college and I because I had this sort of overall, I didn't have any sort of burning passionate desire, I didn't want to necessarily want to be a doctor or a lawyer or I've seen my dad being, you know, never having a not my, my sort of growing up time anyway, they have sort of a job. He was self employed entrepreneurial character. But what I'd seen about that was the negative impact. So what did my budget reflect back in on my thought process, but I'm leaving school and going to college and so on. I wanted to learn about business. I want to learn more about that. But the money side of things I ended up doing a general business studies degree which was a bit of economics. Bit of law but legal a bit of just kind of general practice bit of everything which was helpful some degree. But again, probably bitten by my experience of you know, I had sort of two opposing influences my mum and my dad but this time of divorce but you know relatively friendly divorce no no one was sort of killing each other they were getting along. But my dad saying that you if you want to create you know economic security and financial success for yourself, you got to run your own show you got to be an entrepreneur, you can be creative and do your own thing. And I've got my mom saying, you know, no, you just need to get a safe and stable job is going to pay your salary. And I was living with my mom and and having been seen the negative side of running your own business and seeing all sort of disappear up and smoke overnight. I followed that route. So I had an opportunity following college I just had an opportunity to do this at a graduate trainee thing. In London, which again to me when you're when you're when you're from a small town in Scotland You're thinking about London London's a different countries are different, it Everything about it is just scary and big and sort of challenging and complex and so on. But, you know, in with credit to myself, I did, you know, get on my bike as it were, or get on a train. And to and started work in as a young trainee early early 20s at one of the biggest what is now one sort of biggest investment and asset management companies in Europe. And I didn't have a clue what I was doing, but I was always on the right path. And I definitely took the advice of my mother rather than my father and just got to what was actually you know, a good quality stable job pay me a regular salary and and you know, all the fringe benefits that come from working with a large corporate, such as you know, at a pension scheme. I didn't really realize the value of it at the time, but I you know, and had life insurance, those sort of automatic stuff that companies certainly in those days 20 years ago 20 or 30 years ago were offerings for the far less prevalent nowadays. But that was the route I took sort of school college and I'm straight into a job.

Jason Butler 21:10
Sure. So before we go on there, interestingly, you took your mum's advice and you discarded your dad's assess what was your dad's advice? What was he suggesting you do become a property developer?

Alan Smith 21:19
Yeah, well, just just do. run your own business, be an entrepreneur, be creative. Come up with just some idea get property would be good if you do, but if not, just do something think of just don't rely on someone else to pay. You know, he has all these various phrases that you if you, you are the work hard for yourself and create something for yourself or you work hard for someone else. And you're far better off doing it for yourself. That was his that was his experience and his view. And of course, there is truth in that. And there's no doubt there's there's a number of people over the age of 1718 1920 that have that ambition, have that idea, and they go off and create their own on businesses, but no, I think I just been stung by that. It seems to be a higher risk approach. And having gone through that somewhat traumatic experience myself younger, I thought, No, I'm going to listen to my mom the idea of getting a what would be a sort of safe, stable job with a paycheck at the end of every month. And I could rely on as long as I showed up, did what I was supposed to do my job. I was going to get paid for it. That was that was far more appealing to me, certainly at that age. So that's the resources. So

Jason Butler 22:27
that was giving you a little bit more clarity, a little bit more stability in your mind, but you hadn't closed off the idea of our entrepreneurial thing or running your own business. It just wasn't ready. You weren't right. Ready for that? Right there. Right.

Alan Smith 22:37
I definitely wasn't ready for it myself.

Jason Butler 22:39
head wasn't ready for it. Yeah. So the key takeaway there for anyone listening is that, that one, there's no shame in not running a business and there's no shame in working for someone. Because it's not right for everyone, because there's lots of people who run businesses who are very poor or don't get ahead or working enormous hours for no money, but equally, it might not be the right time for you to run your own business and easy business. To go and work in other people's businesses and find out who you are and what you work best with and whether you work best alone or with people or in a job so so that was an interesting takeaway there for you. So, okay, so you went to that you're working with a big asset manager and take us through the early days did you were you were you very tight water when you're a big spender were you were you a player or you're mister quiet guy sitting in the corner? How was what was your lifestyle like in your relationship with money there?

Alan Smith 23:29
I've got to say that this is where I probably did all the things wrong things happen quite quickly. I was you know, everything is relative to his time but as a young man I'd moved down from Scotland I'm in this sort of the bright lights big city I got a shout

Jason Butler 23:43
out to you move down south by that it.

Alan Smith 23:45
Yeah, no, that was the job. I see downside to get the job I've never actually worked in in my hometown in my home country. My first job is in London. Well second job after my paper round. Well, I will say only ever had three jobs that's including the paper on but yeah, so the first first sort of proper grown up job was in London. And so I had to move down to London and I got into a flatshare with a couple of mates of mine who were doing the same thing. But what all of a sudden, I felt, I felt pretty wealthy because they were paying me again, not huge amounts anymore by today's standards, but relative to where I've come from and other mates of mine that other sort of my peers, I was doing pretty well. And I you know, as again, probably that my experiences my paper on with a continued in as much as I was spending as much as I was earning. And in fact more so because we're now coming out of the candidate into the 1990s sort of tail end of the Thatcher years that john major years there was still the sense of boom time, especially in London, there was a few things going on in financial services world. So there was a whole series of sort of booms and pensions were becoming liberated if you like you okay the access of pension funds was funny how things go in cycles and there was a lot of business around I was dealing with I my job was as a trainee but eventually what what is known as a broker consultant so my my, my clients and customers were intermediaries were advisors and accounting firms and so on and my role was to go and promote our our services and our products to the intermediary the advisory market and there's a lot of business being done. And I was paid a guaranteed salary but also bonuses on sales made and so on. People around me were starting to buy flash cars and started to spend a lot more that was kind of very much it was very, that sort of era of you know, the yuppies and people with the first mobile phones were coming in these huge bricks which cost about 1000 pounds because you know, it made you look cool as you're driving along if your roof down so Yeah, and that's all I did. I got myself into some debt. I was very, you know, it was one of these things. I don't know if you remember was his name Harry Enfield loads of money carrier? Yeah, yeah, there was plenty of that going on of course, and I was working in a very much kind of alpha male background. There was very few females in the whole office and some of my you know, that my peers and the older guys in the team, they were literally driving Ferraris and Porsches or any of them are either here arrive in the gallery died my little company car for three or nine I was quite happy with that. But they always used to get in the office quite early in the morning you hear these his cars arriving and all these sort of VA engines are whatever they are, I'm not I'm not really a petrol head but and then but I sort of be because I like these characters. I like look at them and what they were saying and the language they spoke and the holidays they went and they're always getting these big expensive ski holidays and Caribbean in the summer and so on. And I definitely must definitely strive to be a bit like them. So even my, my quite good salary and bonus, their meals wasn't quite enough. So I ended up sort of leveraging leveraging a few credit cards, you know, those are the days that to have a wallet full of credit cards was considered a cool thing. You know, the more you had, the better, you know, you got your wallet out and they got 10 credit cards, you were considered cooler than the next guy. So I did get sort of sucked into that, that that sort of way of life within you know that the London financial services markets.

Jason Butler 27:20
So let's just stop there a minute. So that's another takeaway there is he were very much influenced by the environment, right. So this is a key part of about 40% of your spending and your money habits come from your environment. So you were very much influenced by what you saw and heard and experienced around you is the very much a consumption and we're talking about the late 80s, early 90s. So, yeah, yeah, so you've got a very consumptive, materialistic sort of spend high rolling spenders and they might be spending the money they've got they might be spending money they're borrowing, but it's got nothing really to do with what matters to you has it you've got drawn on to their sort of slipstream.

Alan Smith 27:59
Exactly. Right. And of course, we all you know, I think humans wants to, you know, be want to be liked who wants to be part of the part of the gang part of the crowd? And and I had these people were people who I aspired to because we're just successful. They were older than me. And they clearly did they did achieve the degree of success, how I define success, material success. Yeah, yeah. And the material part part was the visible parts. You never know what goes on in people's minds or their lives behind closed doors and so on. But the visible part the bit that we don't see everyday was the suits. The people talking to you know about wearing Armani suits that 1000 pounds a throw at the time, way years ago. So the suits that the clothes you wore the car, you drove, all these other things where they were very visible, and you want to be that so that, you know, I'm in my early 20s I just want to I want to be one of the boys I want to be in the gang. And so I was very influenced.

Jason Butler 28:51
so you got spending got carried away with spending you you enlisted the help of some credit cards and overdrafts? How did you progress through the 20s do you know do How did that ended? That's it or when did that phase? What? What turned that? What changed? Was there? Was there a turning point? Was there a blow up? Was there a realization? Or did you just carry on sinking deeper into spending money didn't have.

Alan Smith 29:12
I think it just got to a point. I mean, seriously, I have quite a lot of money on credit card debt. And the thing to me again, that was maybe as hard as I'm just thinking it through now. But I was always confident in my cash flow. I always felt I had enough money next month. And to some degree, you know, having, you know, some controlled level of financial pressure can be incentivizing can drive you and if you really need to earn X amount of money to pay your bills next month, then you know, the chances are it might motivate you more than if everything was sort of pretty laid back and you had no need to generate revenue, but it's a very fine line. And it's a dangerous one as well. But no, eventually I think I just had a, you know, a long hard talk with myself. And so you know, I've seen in 10s of thousands of pounds of credit card debt, and I didn't took me a long time to really work out the compounding effect of interest rates. Because interest rates at the time were high. Of course, there are other things that I did buy. I bought my first property. And, Jason, you're you're much younger than me, but you might remember that when was that the UK left the EU Rm 92. Yeah. Yeah, I mean, interest rates. So I'm sort of, you know, taking along with a mortgage overnight. 15%.

Jason Butler 30:30
Yeah. Double Julia payments in about a month. Yeah, yeah,

Alan Smith 30:33
doubled or tripled or something just overnight. And all of a sudden, well, that was a big slap in the face, because all of a sudden, that wasn't quite so relaxed anymore. My cash flow, monthly income was not going to be quite so relaxed and the ability to you know, just to meet my payments, so that whole thing was a big wake up call to me. I started paying much more attention to this stuff. And I thought, well, things that can happen. It's probably another lesson is things beyond your control that you'd never anticipated. Who knew that was gonna happen? Literally. was literally overnight. And so I just had to sort of financially sober up and just have a good good look at what my position was, what my cash flow was what my sort of personal balance sheet assets and liabilities. And I just took a view that I'm going to have to clear off these credit cards, I'm just gonna have to just batten down the hatches and that there was a sense at the time of you know, a lot of people were struggling and you know, and as a consequence of all this, having been a kind of a period of bubble economics and property prices were going through the roof and so on, particularly London, all of a sudden loads of people underwater negative equity, which is a huge thing. People had borrowed a lot of money, property prices fell. And so for me, it was just a period of sort of your calm reflection is almost like a drug addicts are just weaning themselves off. The drug of choice. My drug of choice was lifestyle and money. And I thought I'm just gonna have to go cold turkey on this. I can't afford to go out with all these guys anymore. In fact, they can't afford to go to the second hand, Ferrari It's called mark it was

Jason Butler 32:03
yeah yeah exactly. I was it easier for you to do that because the general economic environment and all the people around you are in a similar boat like like we are now we're Coronavirus. Did you find that easier?

Alan Smith 32:14
Yeah, definitely it would have been much harder for me to have that wake up call and do it everyone else was carrying on as normal. It was just there was a general sense in the in the country in the economy, that like there is right now that we're all gonna have to just sort of cut our cloth life is a bit different now. It might not last forever hope it doesn't last forever. But, you know, people, seriously, people's mortgage payments have doubled in some cases trebled. And that's the biggest single your monthly expense. That's That's huge. The chances of us sort of Goodyear buying expensive suits and so on have suddenly disappeared. So the whole my peer group, my community, people are new. We're all pretty much in the same boat. And we learned to create our entertainment in more modest ways. You say you weren't necessarily buying a bottle of vintage champagne is more than a pie a pint The pines you know, join the you know the company of your friends.

Jason Butler 33:02
Yeah, yeah, there's just a different different different sort of focusing on what's matters. All right. So you went through the what I call your austerity period or your epiphany or your yes you say your you sobered up financially? Tell us what happened then you did you gradually sort of did you carry on with those good habits? And did you start to build up capital and get your mortgage down and stuff like that?

Alan Smith 33:23
Yeah, exactly. I did. I just began to learn what against the interesting thing the fact that I was working in you know, right in the heart of financial services and dealing with lots of financial advisors and other people, there's still a great lack of understanding about basic rules. So a lot of this was I didn't learn it from from the work I was doing because that was more about product manufacture products, product distribution, product sales. Yeah, I used to use that one that what was the was the was the product for this thing called it wasn't a nice as a pet or a unit trust and things of that at the time. But what is the purpose of it? So I bought one of my I think that's a characteristic I've got is curiosity. I'm always Thank you Well, what is what is kind of was like this, you know, five year old kid? Why? Why is that? Why is that? Why is that? I keep asking the questions. And so eventually I realized that, you know, creating better money habits were going to be beneficial for me in the long term. And so I did over time, I recognized some of the, you know, the key things I started to save and started to put money aside to invest. I started to well and overtime to pay down, pick you to understand, you know, good debt and bad debt and make, you know, having credit expensive credit card debt to fund some ridiculous purchases that you've forgotten about three years ago to buy some, you know, Sony Walkman design, and they no longer use that is that is not good debt. And, you know, as I said earlier, you're buying it at a property that you're going to hope is going to increase in value, but also things that that people you saw, tell me about, you know, my home is my pension and all that sort of stuff. Again, I got that earlier on your home is not your home, is the place to live and it's actually an asset is an asset, hopefully, but it It cost you quite a lot to, to upkeep it and so on. So begin to understand the difference the difference in different types of assets

Jason Butler 35:07
rather than investment. Yeah,

Alan Smith 35:08
yeah, yeah, exactly. So, and this wasn't I didn't go on any course I would just be quite curious. I'd read books, bit by bit, try to understand a bit more about the basic fundamental rules, and then you realize that it's not overly complicated, you know, work and I still work in an industry which tends to overcomplicate things and make things more complex than they ever needed to be. So I just and so my it was it was, if you like, was an epiphany, but it wasn't an overnight It was a period of time that I just weaned myself off some of the other bad habits and started to take on some of the better habits. And yeah,

Jason Butler 35:45
and how does that make you feel as a person as you work? So we're coming into what mid to late 20s or 30s How does it make you feel emotionally?

Alan Smith 35:55
What I realized was, you know, I wasn't even though I mean, I Didn't have huge money problems, but it's certainly I had a degree of anxiety. And it's been like people saying, you know, banging your head against the wall, you don't know how good it is until you stop. And then you think, oh, that I didn't you know, I wasn't waking up in the middle of the night and cold sweats and they get Oh my God, I'm really screwed here. But what I realized when I began to come out the other side of that was this is a kind of a low level anxiety. It wasn't keeping me awake at night, but it was sort of always there gnawing away and nibbling away at my conscious of my thoughts. And, and it was, it was the ever present. And until such times as I began to clean my act up and get better, all this stuff, and then the personal money management and taking care of a lot of these other other things. I did, as I say, it wasn't apparent to me and I'm very, I really believe that now. This affects the money in one's relationship with money. It affects all of us. And I always I use this phrase, low level anxiety for most people is not that running around screaming my head off just with some people. You It is for the majority of people. And I was one of those who had this, this level of anxiety that as I began to get better over time, it was it was just my relationship just became better. But I think even now, to this day, I still have a level of anxiety about money, my relationship with it, I think most people do to some degree or other I don't think that ever necessarily leaves you.

Jason Butler 37:23
Oh, well, john Armstrong, the philosopher says that you should worry about money because it's important. The key is you've got to make sure that that worries is rational and, and as sort of why called reasonably contained and doesn't dominate and overwhelm you and, you know, sort of, is out of proportion. So it's a it's a kind of a, an awareness and a respect for it. Yeah. Okay. So, okay, so you, you, you, you went into you did, you sort of got to a stage when you then decided that work into someone wasn't you wasn't it So tell us about that time.

Alan Smith 37:54
Again, it was I think reflecting all this, I don't really have these overnight epiphanies I have sort of graduate realizations over time because they're constantly. Yeah, I think and I reflect on a regular basis. So it just happened. I was with this company and I had a great run. I was there for 14 years. And I ended I was I was in the city, I was in the centre of London, I was a big office in Regent Street in the West End of London again, good, good lifestyle. It was so highly enjoyable. thing was I am, I got married quite late, actually, because I was still I was enjoying myself too much as in my, then I'm in my early 30s. And I had been doing this job for quite a while, and I, I just I got to know the market really well, so that the London advisory market and I could at least have some very interesting conversations with kind of the owners and leaders of these, these advisory businesses. And I would recognize some, some which some of these firms I knew well, we're doing some aspects of the business you know, super well. So for example, the client proposition was brilliant how they just articulated, explained what they did for clients was great. And another firm just had a brilliant investment proposition in my thought the way that they they've managed their clients money and assets, I think that's really good. And someone else the way that they charge their fees, and so on. And I begin to own the sort of, you know, put this kind of a jigsaw puzzle together, what would be the, you know, the ideal wealth management, financial planning advisory business, what would it look like? You'd be a bit of his firm a bit of her firm bit of that one, I'll sort of talk together. And then a specific opportunity arose. It was one of the advisory firms. So it was a small business it was it was a sole trader, one man band, but in a very, very, very well connected, very good client bank. But this gentleman was he was getting older, he was getting well into his 60s and he was looking for an exit and, you know, that sort of business which is very transactional. It doesn't have a lot of inherent value. But he approached me and said, Would you like to come You know, leave where you are now and effectively take over My business and again that That in itself wasn't an overnight decision. There's lots to weigh up again back to you know, get back to this work for someone else or work for yourself. You want to be an entrepreneur, do you want to work for large corporate where you've got all this these packages of services?

Jason Butler 40:17
You're still single estate, right?

Alan Smith 40:19
So single? Yeah, yeah, still single. And that I think, is that is it another huge point because I'm not sure if I would find a, you know, a few children and mouths to feed and so on the decision. I'm not sure if it made the same decision, I'd like to think I would, but there's a fair chance that I wouldn't but when you've just got yourself to do after and you've you've built up a bit of backing you know, I wasn't I wasn't super wealthy by any stretch, but I certainly had enough resilience in my finances to know that if it didn't work out, I you know, I could last a while with with not not much in the way of income. So I wake that up. So this is an opportunity presented itself having been in a particular job in a big corporate life for 14 years, which is a long time actually. I thought you know, this is a This is an opportunity it's not like I'm starting a business from scratch with no clients, no nothing and a sort of a, you know, a telephone and a directory or whatever is doing fine business and find clients there is a basic business has a very unsophisticated business, and the guy who started it, he's going to go off and retire, but he is there is an opportunity. And I was weighing all these things this is this is another area about decision making. I often reflect that in life, we tend to have maybe four or five big decisions, you know, those forks in the road decisions, I can turn left or turn right. And you know, the big ones are like are things like getting married are about jobs and career opportunities. And there's, there's a few we don't we don't tend to have that many in life, but there are a few and they they tend to dictate the future path and the way that your life goes and this was one of those ones for me I could carry on where I was good job well paid enjoying it, or I could take the you know, the low dress the road less traveled the you know, take the fork in the road and go and do this. And I was always I was chatting to a few friends of mine. And one guy in particular said, I thought he's being he was being very kind of philosophical turned up. I think it was a Mark Twain quote that he didn't have. But he said, when you when you get older, and you look back in your life, you tend not to regret so much the things you've done, as you regret the things that you haven't done. So I thought that's probably true. If I never did this, and carried on where it was, I always wonder what would have happened, what might have been so weighed up everything this is about sort of risk assessment risk analysis about what's the worst that could happen? Well, it doesn't work out it's complete disaster. Well, I was confident enough in my own human capital, my own ability to generate future revenue and income. If it doesn't work out, you know, I'll take a couple of months off and I go and get another job. So my downside was was manageable. And my upside was potentially good. So weighing all these things up and the my, my desire to avoid this kind of fear of missing out what would have happened if I'd done it. So I eventually took the leap and I saw I left The corporate life and started off in this small business and and the guy who I took over from Yeah, it worked out perfectly for him he went down to three days a week paid more golf than eventually fully retired. And it went from being a one person business to a two person and then he and I, and then he retired back to one person. So we just meet me in a secretary pa at the time, and I had no idea what I was doing. It was a very steep learning curve, I can tell you.

Jason Butler 43:25
So you started that business? And I do I do remember those early days. And just to sort of go into sort of the whole sort of was where was what did you learn in terms of how did your relationship with money evolve over all those years? You're running that wealth management business, both in terms of what you learned about running your business, and about all those conversations you had with clients and their journey so what are what were your What did you learn from that? What What did you how did you evolve your thinking, your personal thinking?

Alan Smith 43:56
Well, my I came to realize That you're working in this in this I've worked in financial services literally all my career or my life. And what I've realized is that, in terms of my, there's two aspects of one's personal one is more sort of business experience both for for business experience and and we've got ourselves in a position now, we deal with quite a number of very successful, affluent individuals and families, coming from all sorts of different walks of life. And I gotta tell you, I am constantly amazed by just people's general lack of awareness and understanding of basic money, you know, information, rules, and so on. I'm not in any way wishing to be disrespectful. It's just it's a thing. It's just people and I have conversations with your accomplished friends of mine really sort of high powered lawyers and sensible, smart people. And they kind of they don't get some of the very basics and fundamentals I think it's a real it's a Seamus it's sort of reflective of of schooling of university. of the media, the press, that it's all about sort of headlines and clickbait information and stories and the latest fund or Bitcoin or buy gold or sell something else, it's all about excitement as opposed to fundamentals, and how you sort of harness and the capital markets to you know, provide yourself with better opportunities and create and protect your own financial independence and wealth. So that's been an observation and remains an observation to this day. And I think the job that my firm does, and firms like us do, I think is very powerful and very, very valuable because what we do is we try to shake off all this complexity and misunderstanding and get get back down to basics. And the basic parts of and these are the things that I've learned from running a business. You know, there's a number of top of my head and we are going through it right now this idea of, you know, keep solving beside this concept of rainy day money, however you want to describe it. Since the day we started my business, I've always kept far more cash in the bank than when we've ever needed To do and it just made this is back to the anxiety thing. It just always made me personally feel good. I've had other consultants and business advisors and accountants looking say, Oh, you should, you should employ that capital your return on capital be far greater than having it wasting away in a bank account. And of course, the last 10 years or so your money, especially the company bank account has literally provided zero but by way of return. But what it had provided me with, and this is this is a this is a lesson that I really learned is there is there's an emotional value to money and deficit of financial value. And you know, that there are other things that when we advise people, now they've got money, and you know, should you pay off your mortgage? and some will say, well, it's interest rates and next to nothing, it's almost it's almost free. Why would it pay off a mortgage, and you realize it's before is for the mental satisfaction that you know, you have no debt against the value of the property that you happen to live in. So no one can take it away despite any of these sort of unknown Unknown that might happen in the future, you've got that sort of sense of safety and security and again to some people they don't want that they don't need it this is fine all of our downsides are establishing but for lots of people so just join it you know, that's the thing I've understood is that you're that there are financial experiences around money and there is the it's the art and the science and the work that the firm has to do is the blend of both I can give you the science all day long. The economics that why you should pay off their way should shouldn't pay off debt or anything else. But then I've got to understand how you what makes you tick. What what your family situation is. Things like this. Yeah. Yeah, just you know, what, what is what is your own? You need like, like your podcast, your Jason, what is your own money story? Because you know that those are the questions we asked when we first engaged with clients. And it's, I find it fascinating because you will, and even within couples, you'll have couples that say don't we will live in a very privileged lifestyle, you know, that the husband might say that, for example. And and the and his wife or partner might say, you know, we no money at all. We were scratching around and, and and everyone's interpretation of that it sticks with them. And so part of my job, my job job of my colleagues, is to try to drill down into that and identify what are the sort of hot buttons, what are the things that are going to make people, give them anxiety, or remove anxiety, or create clarity or create this sort of sense of, you know, people, people want vision and clarity and a sense of the road ahead. And we're able to, honestly, I've seen so many people and you will have done as well Jason over the years, that have got almost more money than they know what to do with but they are really worried they don't know about what the future holds.

Jason Butler 48:40
So that's the point is that money can never make you free or secure if you aren't free and secure internally. And that's the point I make in my next book that's coming out in the autumn is that money can't fix your life problems other than having enough for the absolute essentials. It can't fix my problems. I mean being skin talk, we know that. So I just want to sort of before we close I just wanted to touch on you've now got a young family haven't you? How are you approaching How do you approach trying to teach your family and also negotiate with your it's your wife isn't everything Yeah. How you negotiate the whole thing of of money decisions between couple and how you teach your children just a brief brief summary on your thoughts on that?

Alan Smith 49:19
Yeah sure in terms of the the couple's situation again mine is pretty typical and it's not ideal in that most of the financial decisions are a left to me. We do so we've actually got it sounds ridiculous we've got a little sort of family financial plan for like, you know, what are we where are we today? What does good look like what is it look at a life well lived and we've, we've mapped all that out sort of day to day if you like tactical decisions are more left to me. But one thing I and the we've got and I and we do for all most of our clients, I really recommend that everyone has picked it in a family unit because you tend to find we find that the client work we do that you have one one dominant partner In terms of the family finances, without being sexist, it is usually the male. Not always, but it usually is that the male also takes care of their the bank accounts, the pensions and all that sort of stuff. And we've been very clear to make sure that all this this stuff is cleared is documented. And you know, God forbid anything happens to me or that the cat, my wife, she knows where the information, he knows how to access the data, she knows what it all means I was all pulled together. And so you need this kind of, I call it like, it's like a lifeboat drill or something. You're just anything happens. This is more than just your will, you know,

Jason Butler 50:34
your digital assets as well and where everything is Yeah,

Alan Smith 50:36
yeah, exactly. And everyone should have a vote, particularly if one person sort of takes care more of the family finances than the other. So we've all we've got all that we've got an understanding of our individual roles and but we do discuss it as a family together. In terms of my kids, I think is is fast then we've got a I've got a 11 year old boy so he's you know, he's, he's young but he's interested he's fascinating he knows is that works and sums of money. Business he doesn't he's not sure exactly what it is. But so I think one of the things we've done is open investment accounts for them and then spend some time drilling into it so I'd be a fan of just if you're sort of starting off what for me for a lot of people but for children particular buying a simple low cost index funds so we use Vanguard I mean other fund managers are available but we buy their their funds directly so we bought for for both my kids we bought these globally diversified low cost, classic low. Forget it.

Jason Butler 51:37
Yeah. Don't forget

Alan Smith 51:39
that. But what we've done what I've done, which was shown as we've drilled into it, because you can, you can see because this is it, I think I've noticed a lot and it's not just kids, it's adults, everyone, there's a disconnect. The people have got this kind of weird thing called in this mindset about something called as they call it the stock market and every night on the news at night and use it 10 or something someone says and the See, we're up to 17 points today and no one really knows what it means. But they know it's the thing that exists and people have got relationship I find this quite a lot that the stock market is a bad thing. I just know that the remember the, you know, the down the down days much more than remember the updates. Yeah. So, so what you're trying to do, what I've tried to do is kind of dismantle that or unpack what is the stock market? Shawn, what are we invested in? It says the vanguard, you know, global globally diversified equity fund, what, what, what, what in it? That's just sort of jumbled words you don't really know. So let's see what we actually invested in. Oh, look, number one company you own is called Apple App, you know that, that company that make your iPad? Well, I own a bit of that, dad. Yes. Very, very, very, very small bit a bit. But yes, you do. And look, you want a bit of Amazon and you're a bit so somehow just joining the dots between what investing is as opposed to as another thing investing versus saving your money, rainy day money held in cash, but investing for the longer term live

Jason Butler 52:56
versus speculating, right because that's different, right?

Alan Smith 52:58
Yeah, absolutely. Because we're so we're going to buy these companies, and we're going to hold them for decades for as long long as possible. But this is who the companies are. And every time you go and into a store, and every time you order something on Amazon, every time you do something else, it's a master Spence's or, or you or you buy petrol for the car or whatever it might be, look, you're putting some money into that organization. And so trying to educate children to try to make sure they understand what investing is and what the actual impact is, you know, the point is, we're investing in capitalism, we're investing in human ingenuity. We're investing in human beings around the world. You know, waking up in the morning and going and doing something and creating an idea, building a product, building a service, and just by you providing your own capital to it. You can participate in their success, their creativity and their genius. And I mean, my my speech before these big sort of current crisis, my son was looking at his investment account and it was gone up quite a lot. He said, But how does that happen? That that's that's just that's the nature of the markets, because the companies are doing well. And they're making more profits. He said to me that this is magic.

Jason Butler 54:07
Harry Potter is still some still smaller to do a show and I think they're But anyway, yeah. Yeah, so that's great. I'm talking all day Alan. But obviously we've only got so many minutes on the pod. So look, before we close, have you got any kind of just two or three top tips or keep nugget of wisdom that you want to impart with the listeners before we before we finished

Alan Smith 54:32
there's there's a, there's a sort of a short list of things to do. And again, you may well have covered you probably have covered them, you certainly cover them in your books, but there is a hierarchy of your relationship with money ends up you need a hierarchy there's a higher level one it's below Maslow's Hierarchy level one's is protect, protect what you've got. So build your rainy day money before you start investing. Make sure that if you know the wheels come off your life or you lose your job or something like that, ideally Got a bit of money kept aside, so you aren't too desperate. And then the next the next level is, is getting into understanding long term investing, versus saving that putting money aside, using low cost, diversified instruments, and then forgetting about it. Another thing is just that this idea of you know, investing is the kind of the sexy side of money is the interesting bit that people like, but there's the other side of it is having to deal with what I call bad surprises. Things happen in life, whether individually to your circumstances to your family, or to to the economy, and making sure that you've got your resilience built into your life. So that's basic stuff like life insurance and protecting your income. You know, you're on your human capital, your ability to generate income for yourself is worth a lot huge amounts of money. So you need to be able to protect them. So to say just start with the basics fundamentals, protect what you've got and invest for the long term

Jason Butler 55:55
stuff. Fallon You are a fountain of great knowledge. It's always lovely to Hear, speak to us. You've got lots of energy. And I know you've got great integrity. And I really appreciate you spending the time with us. It's been it's been fascinating hearing your story.

Alan Smith 56:09
It's been my pleasure, Jason. I love what you're doing with this podcast and all your books. So good luck and nice to speak with you.

Jason Butler 56:19
Thanks for listening to Real Money Stories with me, Jason Butler. If you like what you hear, please do tell your friends. And more importantly, please rate us on your preferred podcast app, because it really does help us get the message out there. So until next time, good luck with your money journey.

Transcribed by https://otter.ai