In this ‘Two minutes with’ segment, we put Jason Butler, author of the FT Guide to Wealth Management and a contributor to our recent Young Money report, under the spotlight.
Since selling your stake in Bloomsbury Wealth, you’ve embarked on a new career as a ‘young people’s champion’. Can you tell us a little more about your work in this area and what drove you to pursue it full-time?
As someone who came from a poor background and who struggled with maths at school, I know from personal experience the problems that can arise with not having enough money and not feeling confident about numbers. Doing whatever I can to help improve understanding of personal finance among younger people fulfils one of my core beliefs of helping people to help themselves. Inspiring, motivating and guiding young people to have a good relationship with money and build what I call ‘money confidence’ is an essential element of self-efficacy, which is itself the foundation of developing mental resilience. Selling out of my advice firm was in part inspired by my desire to avoid having any regrets about not having pursued my passions and it has given me the time and financial means to re-boot my life.
You recently took part in our panel discussion on whether young people need to focus on saving for pensions rather than property. On which side of the argument do you fall?
Neither. Net wealth comprises human capital and financial capital. Clearly, in the absence of any legacies from family, young people start out with very high human capital but no financial capital. I actually think the best investment for young people to make is in themselves and their ability to earn an income from work or business. This is because the net present value of a person’s human capital, representing all future income, can be increased substantially by modest increases in annual earnings. For example, assuming a 40 year working period, salary escalating at 3% pa and a discount rate (used to compare costs and benefits that occur in different time periods) of 8% pa, a £1,000 per annum increase in salary would add £20,210 in human capital to a young person’s present net worth.
Do you think the government and the industry are doing enough to help young people achieve their financial goals?
I think things are improving from where they were 10 years ago but there is a lot of room for improvement. There seems to me to be three fundamental problems with current efforts. Firstly, I see a lot of duplication of effort between NGOs, schools, charities, financial companies and professional bodies. Better co-ordination of resources would mean more effective and wider reach. Secondly, some of the money education activity fails to address the behavioural aspects of money and the importance of developing good financial habits. An understanding of the role of human capital, the impact of spending decisions, self-image, self-esteem and how to transcend materialism are key. Thirdly, communication of money skills needs to done through multimedia including video, animation, infographics, avatars and personas (people like me). Through these channels, it needs to be personable and engaging, and expressed using dynamic human role models and thought leaders.
What do you think is the single most effective measure we can take to encourage young people to save?
Constantly drive home the message that they can be victors in their financial lives and not victims. They can do this by thinking about (and constantly updating) their idea of what happiness, fulfilment and success looks like and how money fits into that. Learning to defer gratification is the single most powerful mental framework aid to development.
What are your views of financial education; do you think enough is being done to educate the younger generation for their future?
I think every person aged 16-18 should have to participate in fun, interactive and practical personal finance workshops and be required to pass a basic assessment – a bit like the driving test. No lender of any type of debt would be permitted to make any form of credit available to any person who has not achieved a pass in their personal finance test.
What is your biggest pet peeve, or makes you angry?
The fact that it is so much easier for people to get into debt than it is to plan, save and invest!
What are your main hobbies/interests outside of the industry?
I am keen on mental and physical fitness and I have a disciplined exercise routine including weights, swimming, running and yoga. I also love playing the piano and am training to do my first stand-up comedy appearance later this year.
If you had a windfall of 10k what would you do with it?
I’m fortunate to have built a reasonable level of wealth and have a very comfortable lifestyle but if I received £10,000 I wasn’t expecting I’d probably invest this in a start-up business which was run by people that I respected and liked.