An anniversary: The 10th Finance Talks took place on October 8, 2020. And yet nothing was as usual. In times of coronavirus, the Finance Talks moved from the university auditorium to a large lecture hall, where the seats were widely spaced. This meant that around 80 people were able to attend, only around a quarter of the usual number. In addition, guest speaker Monika Müller from FCM Coaching was connected via video for her parts of the lecture. Finally, the much-appreciated get-together and exchange of ideas after the event was not held. The 10th Finance Talks were therefore special in many respects. However, the summary is: with commitment and discipline, all participants experienced a knowledgeable, humorous and successful event.
Event initiator Prof. Dr. Hartmut Walz from the Department of Services and Consulting therefore thanked everyone involved for the good organization and the now customary corona-compliant behavior of the participants. And this despite the fact that the experience and perception of risks is demonstrably very subjective.
This brought him straight to the topic: "Your money and risk - the interplay of intuition, reason and emotions" was the title of these financial talks. Guest speaker Monika Müller, a qualified psychologist and founder of FCM Finanz Coaching in Wiesbaden, made a convincing plea, based on various scientific studies, for three things to be taken into account when making financial decisions: Reason, feelings (emotions) and intuition. She is convinced that the ideal financial decision is the postponed intuitive decision. Müller pointed out two central dimensions of how we define, understand and experience financial risks. On the one hand, everyone should be clear about whether they perceive risk only one-sidedly, as damage, or two-sidedly, as an opportunity for gain and loss. Secondly, it is important whether we see risk as fateful, as "God-given" so to speak, or as something we can shape ourselves. When making decisions as a couple, but also in discussions between clients and financial advisors, it is important to make each other aware of the respective definition of financial risk. Otherwise you end up talking past each other, Müller confirmed from her coaching practice.
Walz added that risk is relative - and offered two further considerations. Firstly, he recommended asking yourself: do I measure loss and profit in nominal terms (money, currency) or real terms (cups of cappuccino, kilos of potatoes)? Secondly: Is my financial risk increasing or decreasing over time? While the price risks of shares or funds, for example, become less significant as the time horizon increases, the risk of inflation and default increases with time. Incidentally, this also applies to life insurers, said Walz. In doing so, he impressively questioned what, for example, nominal premium guarantees for Riester and Rürup contracts are actually worth. Here, customers are looking for security, but are guaranteed the risk of inflation and the vehicle risk (risk of insolvency or imbalance of the insurer).
Walz also reminded the audience of the valuable distinction between deep risk and shallow risk, i.e. the distinction between serious, long-term and irreversible risks on the one hand and only temporary and non-existential risks on the other. Walz counted fluctuating share and currency prices among these superficial risks, which we should not allow to drive us crazy. What fluctuates lives and what bends does not break. We would do better to focus our attention on the five deep risks, namely inflation, deflation, destruction, expropriation or insolvency. This is where the real financial and economic dangers lurk.
In the second part of her presentation, Müller addressed financial risk appetite as a personality trait. She cited the universally accepted definition of financial risk-taking as the extent to which a person accepts negative consequences (losses) in order to achieve a positive outcome (gains). Müller emphasized that financial decisions improve when we know our risk appetite and do not act against it. We feel more comfortable with our financial decisions and we stick to them (e.g. we don't bail out immediately in the event of a share crash) the more they correspond to our own risk appetite. This is the only way to achieve a long-term, robust investment strategy.
Without the usual relaxed break, the popular Q&A session with the audience began immediately. Walz responded eloquently, precisely and with a twinkle in his eye to the audience's thoughts. He repeatedly made reference to Monika Müller in Wiesbaden. In the end, Walz acknowledged the manageable risk that the participants had taken by attending this evening and wished everyone a healthy time.
The Finance Talks at the Ludwigshafen University of Business and Society are an independent, neutral information series for the interested public. They take place twice a year under the direction of Professor Dr. Hartmut Walz. Walz teaches business administration at Ludwigshafen University of Applied Sciences; his specialty is the interface between economics and psychology. He is the author of several specialist books, including "Ihre Finanzen fest im Griff" and "Einfach genial entscheiden im Falle einer Finanzkrise", both published by HAUFE-Verlag. Walz also runs the independent and free Hartmut Walz finance blog.
The next Finance Talks will take place on April 22, 2021 at 7 p.m. in the auditorium of the Ludwigshafen University of Business and Society in Ludwigshafen am Rhein as a provocative panel discussion entitled "The bank always wins!(?)". Guest: Dr. Gerhard Schick, founder and chairman of the Bürgerbewegung Finanzwende e.V. Registration at: Finanzgespraeche@hwg-lu.de.
Image sources: Prof. Dr. Hartmut Walz © private
Professional contact:
Ludwigshafen University of Business and Society
Departments of Services and Consulting
Prof. Dr. Hartmut Walz
E-Mail: F inanzgespraeche@hwg-lu.de
