Full English transcript
During the interview, we discussed financial education, financial advice, investment costs, financial planning, pensions and intertemporal poverty.
Debora Rosciani
I would like to start with a passage from your book Il tempo e il denaro. Come fare scelte finanziarie che funzionano nel tempo:
“Every time we earn or spend money, we are making choices. When we save, we decide to give up something today in order to have more choices tomorrow. When we spend, we transform our time and our work into experiences, security or pleasure. Money does not simply measure the value of things: it also reflects what truly matters to us. Sometimes we spend to feel free, at other times for a sense of belonging or reassurance. Economic psychology teaches us that our emotions influence how much money we use and how we use it. Learning to manage money also means learning to understand ourselves better.”
Professor Beltratti, money often triggers strong emotions. And yet, when making financial decisions, we should be able to remain disciplined and rational. At the very beginning of your book, you write that “financial difficulties rarely arise from a lack of information; more often, they arise from the way we make decisions over time.”
Andrea Beltratti
We often think that finance is primarily about having a great deal of real-time information. Perhaps we have in mind the images of trading floors we have seen in films.
In reality, information is important, but our choices also depend on our objectives and our investment approach. To develop an investment approach that is not driven by anxiety, it is very important to adopt a medium- to long-term perspective.
From this perspective, information certainly matters, but not only day-to-day information. It needs to be combined with a basic understanding of how markets work and of the investment opportunities available.
As I write in the dedication of the book to my daughters, freedom begins first and foremost with awareness. Awareness and knowledge are necessary conditions for making sound, structural medium- and long-term choices, which need to be made in stages. In the book, I try to accompany the reader along precisely this journey.
Debora Rosciani
One of our listeners observed that when approaching a financial intermediary or advisor, the first thing to establish is whether they genuinely understand the person’s needs, objectives and time horizon. If, instead, they immediately insist on a specific product—as has sometimes happened with products that include costly protection against short-term market declines—perhaps it is better to stop and think. You also discuss this in your book.
Andrea Beltratti
The role of the financial advisor, and more generally of financial intermediation, is a very delicate one. The task is to guide, not to impose. Advisors should help clients understand which choices are best suited to their circumstances.
As far as specific products are concerned, we should remember that at certain times it may indeed be appropriate to favour more prudent instruments. Think, for example, of 2008–2009 or 2022: in circumstances like these, greater protection can provide peace of mind to many investors who are not prepared to pursue long-term opportunities fully.
The point I try to emphasise in the book, however, is a different one. When we think about finance, we almost always associate it with the concept of risk. I chose to call the book Il tempo e il denaro—Time and Money—rather than Risk and Money, because we too often forget that time is our greatest ally.
For this reason, I fully agree with what you said earlier: the advisor’s role is to understand a person’s objectives, help them plan for the future and build a coherent path towards those objectives. Advisors cannot make decisions in place of savers, but they can accompany them along the way.
In some circumstances, it is perfectly reasonable to favour instruments offering greater protection, particularly when there are liquidity needs or the investment horizon is short. This, however, should never be a substitute for sound financial planning or for a clear and transparent relationship between advisor and client.
Debora Rosciani
Then there is the issue of costs. Many listeners wonder why they should pay high fees and point out that the growth of ETFs is partly due to their ability to reduce investment management costs substantially.
Andrea Beltratti
First of all, we should remember that any professional service needs to be remunerated. The issue, therefore, is not whether a bank, an asset management company or an advisor should be paid. The real issue is transparency in the relationship with the client.
If costs are very high—entry fees, performance fees or other charges—it naturally becomes more difficult for active management to generate sufficient additional returns to compensate for them.
Fortunately, there is now a highly developed ETF industry, and it is important to understand it. ETFs, however, also require financial education. They have become increasingly sophisticated and, in addition to management fees, investors need to consider aspects such as the liquidity of the instrument and implicit trading costs.
Once again, the key is to understand how products work before choosing them.
Debora Rosciani
In the final chapter of the book, you discuss some of the most important moments in life: buying a home, family, children, the future and retirement. Ultimately, all of these also involve financial decisions.
Andrea Beltratti
If we do not know why we are saving and where we want to go—taking into account our family, our children and even what we may one day want to leave behind through inheritance—it becomes very difficult to build a coherent path.
This is why I greatly appreciated what one of your listeners said earlier about the effort he makes to inform and educate himself so that he can make better decisions. It is a reminder of individual responsibility, of the willingness to become actively involved and to devote time to learning.
That, too, is an investment. And it is an essential part of sound financial education.
Debora Rosciani
You self-published this book, but you have also created the website Il Tempo e il Denaro, where you collect additional materials and analysis. What can readers find there?
Andrea Beltratti
First of all, the website provides information about the book and a link to purchase it.
The main part of the website, however, is devoted to reflections and analysis that I publish periodically on financial education.
For example, starting from the issue of pensions, I developed a concept that I call intertemporal poverty. Traditional poverty indicators consider the cost of consumption, but they do not take into account the savings required to maintain an adequate standard of living during retirement.
If we envisage a future in which public pensions will be less generous, it becomes inevitable to set aside part of one’s income during working life. This observation led me to explore whether the concept of poverty itself could be redefined from a long-term perspective.
The website also includes other contributions on financial education: comments on current topics such as SpaceX, podcasts, and a series of pieces connecting music and finance.
Debora Rosciani
Then you are the ideal guest for Due di Denari. When Mauro Meazza returns and we talk about music, we will invite you back.
Thank you, Andrea Beltratti, especially for the clear language you use to explain complex financial topics. It demonstrates that even the most difficult subjects can be explained simply.
Have a wonderful summer, and we hope to speak with you again soon.
Andrea Beltratti
Thank you. It was a pleasure.
Further reading