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The Emotional Cost of Ownership
Tuesday 31st March 2015

For the financial advisor there is a changing and interesting relationship between ownership and risk. 

According to Dittmar (1992), it is common for people to psychologically experience the connection between self and various targets of possession such as homes, automobiles, pensions, space, and other people. Possessions come to play such a dominant role in the owner's identity, that they become part of the extended self. Sartre, considered that "the totality of my possessions reflects the totality of my being ... I am what I have ... What is mine is myself".

But what is owned and how it is owned is different for different people. Among the British the ownership of property is a key measure of definition of who they are. Getting onto “the property ladder” is something that manifests itself along with the first serious pay cheque and dominates conversation second only to the weather.

The tactile experience of the ownership of things must be balanced with the risk that that ownership demands.  Take music: for some buying vinyl record albums gives them the feeling of 'accomplishment' when purchasing.  The concrete tactile and visual experience of holding an album confirms ownership. Discovering the lyrics inside the record sleeve, re reading the credits and marvelling at the cover designs brings a sense of “me and mine” .  And the music? Even the ones that disappointed grow on the owner, possibly because it is too difficult to easily move to the next track! Displaying the albums showed who you are. 

This is similar to the ownership of financial assets.  For some the ownership of houses or gold also brings a tactile and visual experience that they want because this for them becomes part of who they are. The ownership comes with the notion of collection or sometimes in the case of property, improvement; - both are romantic to those types of people.

For others there is no such romance; in music, the more things become digital, the more they respond to the intangible nature of ownership.  In terms of property and tangible assets they care little for the responsibility.

And it is worth being aware of what that ownership demands of you.

1. Ownership of anything immediately increases the perceived value to the owner. People get attachments to things that they own. This may be detrimental as it requires constant maintenance and security.  A vinyl record with a scratch loses value. The tick at 33rpm just a repeated reminded of loss.  Gold lost or stolen is valueless.
2. Ownership makes you concentrate on loss - we do not miss what we never had, but to lose what we do have can grieve the heart to the end of time.
3. Ownership categorises you. This may be what you want. You may want others to be envious of your record collection. But be careful of #2 above.
4. Remember that others do not always share your perspective. Some like what you like, others don’t.
5. The more effort that you have put into something the greater the value to you.  Hunting down that rare record or weathering financial storms to pay into your pension fund gives a much greater sense of “mine”

The financial advisor must be aware of this emotional attachment to, and the risk factors associated with ownership. Security, maintenance, diversification and speed of conversion must all be factored into the mix.
Getting to this requires subtle assessment; all too often the influencers in the life of clients are those who have disturbingly simplistic notions of the relationship between ownership and risk.
By: Alan Dempster
Director of BD Wealth Management. 
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