‘The Happy Valley’ case study

When members of the Institute of Advanced Financial Planners (IAFP) met in late 2009 in London, Ont., they were presented with a case study entitled “How do you Solve a Problem Like Happy Valley?” and asked to explore the relationship between financial planning and sustainability.

In simplest terms, sustainability means resources must be used at a rate at which they can be replenished. Financial planners must ask themselves what role they play in advising clients and in applying the concept of sustainability to modern lifestyles. When they registered, delegates were asked to choose one of the following case-study challenges:

• How to invest a $10 million endowment;
• How much to spend from the endowment;
• What kind of projects to support; or
• How to advise estate beneficiaries on options advanced by other delegates who chose one of the challenges above.

The case study was purposely crafted to juxtapose quality-of-life needs in the global community (as represented by an endowment) against business-as-usual in the developed world (as represented by those who controlled much of the wealth in Happy Valley). During the symposium, delegates listened to some of the top minds in Canada expound on various aspects of endowments, social investing and other relevant topics, and prepared themselves to vote on the options that were proposed to make Happy Valley a better place for its citizens. The case examined the long-term effects of wealth on both family and community stakeholders, and also raised questions about the importance of a client’s non-financial aspirations.

The Happy Valley case study was premised upon the ideas used in a “Village of 100/1,000” microcosm of our current world put forward by Dartmouth professor Donella Meadows of The Sustainability Institute (Spring Valley, California-based Family Care Foundation). The microcosm lays out some stark realities about worldwide economic disparity (in this village of 100 people, 5 people control 32% of all wealth). The crux of the problem really was in how to address the economic disparity that exists in today’s world.

The symposium looked for potential solutions from the highly qualified skill set presented by the IAFP’s Registered Financial Planners (R.F.P.s). That was the purpose of the vote held on the Friday of the symposium; however, the results tabulated do not represent the purpose of the symposium nor was this vote intended to be the culmination of our investigation into the concept of sustainability. It was merely the beginning. Canadian anthropologist Wade Davis presented a very unsettling view of our world in his 2009 Massey Lectures entitled “The Wayfinders.” He makes the point that biologists today suggest 20% of mammals, 11% of birds, and 5% of fish are threatened. Botanists anticipate the loss of 10% of plant diversity, and linguists and anthropologists are facing the imminent disappearance of more than half the world’s extant languages. None of these findings suggest we are on the right track toward a sustainable world.

The Village-of-1,000 concept illustrates this disparity in a manner that allows each of us to witness its impact in a very meaningful way. The thought process behind the case study was simply that if this disparity could be brought before some of the finest financial planning minds in Canada, surely we could find solutions. Most important, however, was to shine a light brightly on the disparity that exists in the world so we can all set to work solving it now!

Economist and philosopher E.F. Schumacher illustrated this purpose wonderfully in his book: A Guide For the Perplexed. Schumacher introduces four progressive levels of being: matter, plant (with the addition of life), animal (with the addition of consciousness) and human (with the power of self-awareness). His thesis states it’s only humans that exhibit the characteristic of self-awareness. Sadly, all humans do not exhibit this skill set equally. Which leads us to Adaequatio, a principle that states the understanding of the knower must be adequate to the thing to be known.

This brings us back full circle to the case study and the objective of bringing knowledge of the disparity of the human condition to our R.F.P.s—clearly among the best and the brightest in Canada—to address the problem. It’s in this context that we examine the results of the symposium as illustrated by Friday’s vote and the discussion held on Saturday morning. Following Schumacher’s principles, we asked a group of the most capable people available to examine deep-rooted systemic problems. In so doing, we gained an awareness that much needs to be done, and that it needs to be done by each and every one of us—starting now.

The intransigent problems demonstrated by Happy Valley allowed us to examine the many varied issues and competing interests that abound in financial planning on a number of levels.

In dealing with the five issues of pollution, health and welfare, economic disparity, housing standards with access to basic essentials and a more equitable standard of living, the delegates could have chosen to do nothing while letting market forces resolve the disparity. They did not. Rather, they voted to intervene and set in motion specific strategies aimed at addressing the disparity in our “Village of 1,000”—Happy Valley. It should be noted the solutions voted for by the majority did not work out perfectly in a numerical sense. For example, harmonizing the spending policy with the investment policy turned out to be a larger challenge than anticipated. The point to be stressed here is that R.F.P.s attempted to address disparities normally not even acknowledged, generating tremendous discussion and provoking very serious thoughts on the topic.

The delegates voted to invest the endowment and spend its income moderately. In light of the market conditions in the fall of 2009 this is not surprising.

A significant schism occurred among the delegates when it came time to consider how to eradicate poverty in Happy Valley. When delegates voted from the perspective of how the endowment should solve this problem, the majority wanted to overhaul the tax base (from land ownership to income) and governance.

However, when the delegates voted from the narrower perspective of those who currently controlled much of the economy in the Valley, the preferred methodology was to allow market forces to solve the poverty issue (based upon strategies having been put in place to intervene with the economy in dealing with the other four issues).

It is arguable that both of these potential solutions are rooted in the developed world, and a colonial mindset that has been inflicted on the developing world throughout the ages. Is the overhaul of the tax base and political system really the magic elixir to solve all developing world problems? Experience tells us that inflicting democracy on societies that do not have a healthy respect and strong institutional support for the rule of law simply does not work.

As well, the idea of letting market forces work “naturally” to solve the problem is to stick with the capitalist model that created these significant discrepancies in the first place. Certainly capitalism does and will protect the economic and political power of the elite, but history has shown this economic engine, left unchecked, is not the best solution. In the end, the real purpose of the symposium was to bring the problem of economic disparity that exists in the world today to the attention of the R.F.P.s attending. The world, as a microcosm, was chosen for the case study to help delegates understand both the complexity of the problems we face and the importance of applying the advanced skills that R.F.P.s bring to finding solutions to complex problems, even if it is only at the level of one planner and one client at a time.

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John Hope, B.A, LL.B., R.F.P., CFP is a financial planner with Manulife Securities Investment Services Inc., London, Ont. This article articulates the thoughts of the author and is in no way representative of Manulife Investment Services Inc. or any of its related companies.

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John Hope