Most mornings I drive my daughter to the train station near to our office, to catch the train to school. We have a habit of listening to Capital Radio and our 10-minute commute lines up nicely with the breakfast show’s Bong Game.
The concept is simple, a man reads out a rising series of numbers and a caller has to shout stop before the gong goes off. They then win the number that he most recently said, in cash. The Bong Man, for that is his name, usually makes it to at least £1,000 but has gone as high as £25,000. There is no skill in it and precious little in the way of patterns but that doesn’t stop callers having ‘strategies’.
Lots of callers walk away with very nice amounts of money for doing little, many walk away with nothing, if you do win the money, the presenters will play the game on to see what they would have won by holding on.
What constantly surprises me about the ones who push it too far and lose out is the risks they take. £1,000 is a serious sum of money for most people and you will receive that 9 times in 10 if you stop there. Pushing on, risks walking away with nothing for potentially not much more upside above £1,000.
A loss of £1,000 is much more in money and psychological terms than the gains above that level. A listener should always regret the total loss more than the regret of missing out on more money. They should therefore tap out a lot earlier than people do.
Prior to this year’s budget there was so much press speculation about the potential removal of pension tax-free cash, we were getting regular client calls about it. The same articles have been written by finance journalists every March in the quarter century since I started advising, as it makes good copy. We advised against withdrawing the pension tax-free cash as acting on rumour is not good advice.
Some firms went as far as recommending that their clients’ take their tax-free cash in full, on the basis that if the rules didn’t change they could put it back within the 30-day cooling off period. HMRC subsequently confirmed that you couldn’t in fact use the colling off period to do this and I assume these advisers are now the subjkect of multiple client complaints.
We didn’t manage to prevent a handful of clients drawing this cash out for one simple reason, the power of regret. They calculated that their feeling of regret would be stronger if they didn’t do it and lost the right to the cash, than if they did it and the rules didn’t change.
In that sense they took the wrong action but for the right reason.
Financial planning is never clear cut and always relies on a balance of judgements to decide the best course of action. Having an adviser to debate the tradeoffs with is crucial.
We provide a cool head for our clients to debate their planning options with, from our head office in Hook, Hampshire and across the UK using the latest technology.
