Getting started with financial wellbeing
For intermediaries only
Coaching, planning, advice – learn the three practical steps of how to get your clients started with their financial wellbeing journey and how you can help them become future-focused.
Getting started with financial wellbeing – video transcript
Chris Budd, founder and Chair of the Initiative for Financial Wellbeing:
So how do you get started? This is one of the big questions that a lot of people will ask. How do I start having this conversation?
Well, the first thing I would suggest is there's a few things to stop doing. And your first thing to stop doing is to stop just talking to clients about their money. Now I've just added the word ‘just’ into that first line.
I do accept that some people will still want to talk about investment performance, but I bet it's a lot less than you think. I spent 20 years as a financial adviser and in the early days, I can remember all those annual review meetings. Even calling it an annual review - it's the past, it's an annual planning meeting for the future - there's one tip you can take away.
But the annual review meeting - where I would get out the client's investment portfolio, and I would go through each fund line by line and highlighting whether it had beaten this benchmark or not. Can you imagine how bored all those clients would have been for all those years? I'm sorry if that's what you're doing, but if it is you will be boring your clients.
So I would suggest that when a client comes to find a financial adviser, what they are doing is they are saying, “look, I've got this money and it scares me. I don't really understand it. I don't really want to understand it. But I feel a lot of pressure because I’ve got to look after it, because I know it's all about my future. Can you look after it please?”
And then what we financial advisers do with our clever CII exams, that's taken us years to get, is we bring the client back into the meeting, we tell them all about their money. We talk about investments and we talk about tax and pension rules because we've spent all this time learning it. So we better be telling somebody as we better be using it. And yet that's the one thing that clients don't want to be talking about.
I'm generalising. Of course there will be some.
I still think those only want to talk investments aren't really the sort of client’s financial planners should be going for. But if you talk to clients about not their money, then they will start to feel far more engaged.
Imagine if somebody actually looking forward to a meeting with a financial adviser.
I've put a controversial statement here as well - stop asking about their life goals. Now I realise that the word life goals can cover a lot of different things. What I'm getting out here is the bucket list stuff.
If you're talking about life goals, you're really only talking about the joy side of things that we want to be talking to clients about the purpose side of things. Now that's where we've got to start talking about intrinsic motivations.
What does that mean?
Well, there are two types of motivations in life. There's the reasons why we do something for other people and why we do something for ourselves, extrinsic and intrinsic.
Extrinsic motivations - examples would be for money or for a reward or to beat a target. So targets and businesses actually aren't particularly good because targets and business are a very extrinsic motivation. Extrinsic motivations are all things that we do for other people.
Intrinsic motivations - something that we just do because we want to, and it's quite hard to actually explain what we get from it. It's just something that we do. It probably aligns with our values, for example, or it could just be something that gives us joy.
Learning to play an instrument might be an intrinsic motivation. If you learn to play the piano to get a job at your local piano bar, that's an extrinsic motivation. If you learned to play the piano, just because you want to play the piano, that's an intrinsic motivation. Now the research shows us that if you achieve an extrinsic motivation, that does not increase your wellbeing, which is why comparison is the thief of joy.
Whereas if you achieve an intrinsic motivation that does increase your wellbeing but, there’s a kicker. If you fail to achieve something loss aversion kicks in and you fail you feel that loss by three or four times more than you feel the equivalent gain.
So what we don't want to do is set a clear path to identifiable objectives. And the identifiable objective is we find a good intrinsic motivation, but it's not achievable because that will actually reduce wellbeing again. Hence what we want to identify is achievable intrinsic motivations.
So how do you start talking to clients about these things?
Advice, I mean the technical stuff, the CII exams, it is important but it's just, I would suggest, not for the meeting room.
Now, if you give somebody advice, you'll have hopefully a happy client. If you give them planning before the advice, then you will have a loyal client. So let's take an example of somebody 50 years old, they come to you and they say, I want to retire at 60 and I've got five pensions. Great. You say that's a set consolidation and do some tax planning, investment portfolio. Fantastic. That's advice. If you say, let's see if you could actually afford to retire at 60, that's do some cashflow forecasting that's planning, and now you've got a loyal client.
Because they're coming back each year to see how much closer they are getting to being able to retire at 60.
If you're talking about coaching first, then you're talking about how did you arrive at 60? What is relevant about the age 60, 60 and a day? What are you going to be doing? What does your day look like? And you start to uncover these intrinsic motivations and then create the plans or the cash flow to get there. And then you use a technical advice to help achieve it. That's the coaching then planning then advice model, all three are important, but must be followed in that order. And if you do that, you will start to really help clients to understand themselves better. And in doing so, you'll have a happier client.
First video in this playlist
What is financial wellbeing?
Money can have a positive or negative impact on your life. And we think that's not just because of how much or how little someone has but also because of beliefs, emotions, practices around money. Aegon’s Dr Tom Mathar and Chris Budd, founder and Chair of the Initiative for Financial Wellbeing explain what financial wellbeing is, and the five pillars that helps provide its structure.