Insightfully written by a very young and successful businessman… despite his youth, his wisdom is way beyond his age. People like this author makes you realize that wisdom has nothing to do with age. Re-blogged with permission from the author…

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Greater Expectations by David Bonifacio

Last week, I began moving things into my apartment. At the moment all i have are basic furniture and books, lots of books, and more books waiting to be moved. I intend to keep it that way: simple, clean, with a lot of bookshelves, and some space for my interests in art and music.

Shopping for home stuff is a lot of fun. If you’re like me, and you like details, discovering the differences in mattresses, thread counts, materials, technologies, and products can be an amazing learning experience. But if again, you’re like me, inflexibly particular, it can be quite expensive, in my case, too expensive, so I’ve drawn up master plan which I have divided into spending phases focusing on the most basic and important to me and getting fancier later on.

It’s a lot of adjusting for me. Having no internet, or not using the AC as much, and not having a piano are just some of the things new to me. And while they’re not essentials, a lot of people don’t live with these conveniences, they’re things I’ve gotten used to, things I’ve come to expect as a norm of life. The truth is, if I hadn’t gotten used to a lot of the comforts I enjoyed I would be much more flexible than I am today.

I realized I have two choices: content myself with lower standards or increase my capacity, through discipline and faith, to earn more.

I thought about it: With every higher level we reach we create a higher expectation. When you’ve past grade 1 you’re expected to be able to handle grade 2 and so forth. When you’re used to a certain standard of living it’s not so easy to lower it. When you’ve tried McDonalds you expect all McDonalds to be the same, which they strive to do, to meet your expectation so that’s why you’re always satisfied. It’s like exchanging numbers with a girl, then giving her a call, then it’s lunch, then it’s dinner, then it’s breakfast, then before you know it, she expects you to give yourself away with a ring included. Expectations escalate.

Here’s the principle on expectations: Not meeting an expectation disappoints, meeting an expectation satisfies, beating an expectation impresses – but it also creates a greater expectation, a greater expectation we now need to at least satisfy. And when we consistently meet or surpass expectations we start acquiring that most precious of currencies: trust.

This is one great challenge the next generation will face: the expectations created by the previous generation. For some the standards have been so low that the expectations are also so low, and the danger here is settling at a low level and we see examples of this in highly impoverished areas – a lowering of standards with each new generation. Some are content with the good or have not been exposed or prepared to take things to the next level. They don’t realize that standards are dynamic what was good before may no longer make the cut, so while they may satisfy at the very least, lurking close by is the very real possibility that someday other things will be more satisfactory and cause people to stop trusting in us and erode our relevance. (See my post on The Survival of the Irrelevant)

And there are those who follow a great generation.

In a visit to a partner’s factory, I was talking to one of the managers about the new family member who joined the company. This company is a respected firm that has been around since before the war. It’s on its fourth generation I believe, with the crown prince about to take over. I remember telling the manager, “Must be nice to inherit such a great company. At least it isn’t so hard.” She looked at me and said, “I think it’s actually harder. Imagine being in your twenties, having little experience, but having responsibility over hundreds of employees right away?” She was right. While this guy had a lot going for him by being heir to success, his inheritance brought a burden with it – a burden of greater expectations.

This is why building a strong next generation is so critical. Because with each changing of the guard we are posed the question: will we raise the standard? Raising the standard will require more from us and it will increase expectations of us. We will then have to respond with an even higher standard. But if the generations are prepared well, prepared to be strong, to fight, not to settle, to persevere, to sacrifice, and most of all to have faith to rely more on God, then we need not fear expectations. Besides the alternative is a lower standard, and if we do this, we take the first step in a downward spiral of good to bad to ugly to kaput. Sure we won’t have the burden of expectations on us, but that’s only because we’ve lost their trust.

http://davidbonifacio.blogspot.com/
From http://davidbonifacio.com/

The preneed issue has been a big concern for thousands of Filipinos. Many are in anguish because they have lost their hard-earned money or they will be losing their investment. I have granted many TV interviews and have given dozens of advice on the issue in the past few weeks.

What is a preneed plan to begin with? The broad definition of preneed is that it is a “security” being sold by a preneed company. It looks and feels like it is an insurance product, but it is not. It looks like a trust product, too, but it is not, either.

In fact, you’ll find the preneed to just “exist” in the Philippines. Proponents of preneed have boasted it to be a genuinely “Pinoy” invention. The closest earlier preneed I know of are those you find in mortuaries in the US, where you can prepay your memorial expenses at a discount.

When you look at the design of a preneed product, it is very similar to an endowment policy being carried by life-insurance companies. With life-insurance companies also setting up preneed companies, the public gets more confused and the general public can’t distinguish the differences. Through the years, preneed products became mainstream investment instruments and have become part of the psyche of Filipinos. With very good branding and marketing endeavors by preneed companies, most Pinoys would dream of having a preneed educational plan for their children.

What happened? Why did preneed companies start to fold up? There are many theories to explain their current predicament. But the current financial crisis should not be used as an excuse by the preneed companies. We all know that many of them were already beleaguered for some years now.

Why are they in trouble?

One reason is that many of the plans that many preneed companies were selling were not “actuarially” sound. According to Wikepedia.com, “actuarial science is the discipline that applies mathematical and statistical methods to assess risk in the insurance and finance industries.” Simply put, we can surmise that some preneed plans were lacking in actuarial studies, a big reason they sold products that may be flawed by design.

Another probable reason is wrong investments by preneed companies. Yields will always be a function of risks. I noticed that many preneed companies are heavily invested in real estate and other riskier and nonliquid investments. We all know what happened to the real-estate industry. Imagine a company that you invested in putting a bulk of its investments in real estate. When maturities fall and you find your investments with minimal growth or, worse, illiquid, how will you meet your obligations?

How do preneed companies really invest their funds? We only hear about their trust funds, but what are in those trust funds? It is great if these companies are wholly transparent with what they do with their plan holders’ monies. By contrast, life-insurance companies are heavily invested in bonds, mostly treasuries.

Flawed design and poor investment decisions are a reflection of management competence. Not all preneed companies are in trouble, although there are just very few of them that are “strong and stable.” When you look at these “strong and stable” preneed companies, you will see that they employ prudent investment strategies, are actuarially sound and probably employ competent management teams. Sadly put, the majority of the players in this industry are in catatonic state, leaving their plan holders shaking their heads in disbelief and grief.

I would like to raise two questions. First, why is it that there are no preneed companies/products in other countries? Could it be that they know things that we don’t? Second, I would want to ask the regulators—why, why, why?

If you have invested in a preneed plan, what can you do now? Further, how should you invest for your pension and education now that preneed companies are in a flux?

Catch part two …

I wish to leave you with these words: Then he said, “Beware! Guard against every kind of greed. Life is not measured by how much you own.” (Luke 12:15 [NLT]).

In a few hours, I’ll be making my first overseas speaking engagement. The OWWA and the Ople Center have asked me to do financial literacy talks for the OFW’s today and Sunday at Hong Kong.

Financial literacy for the OFW’s have been in my heart for many years. Our “bagong bayani”, just like the rest of the Filipino population will really benefit from a better grasp on money education. Studies will show that the OFW’s are our new middle class — financial literacy is critical if they are to maintain their middle class status, otherwise all their sacrifices will be in vain.

I first started to get involved in with the OFW’s through my on-line friend, the late Tonette Binsol (a.k.a. Ka Tonyang). She asked me if I can help her organize a forum where we can teach OFW’s about personal finance. Today, I have forged a partnership with the Ople Center to make this advocacy alive.

I would like to thank our corporate sponsors for making this trip possible — Insular Life and V Cargo.

Hong Kong, here I come! Thank you Lord for all these!

p.s. – I’ll be speaking at the Bayanihan Center (Oct. 1) and the Philippine Consulate Office (Oct. 4).