An Introduction To Financial Wellbeing

 

Financial wellbeing is a term that describes all aspects of the relationship between money and happiness. It is more than managing money – I’d call that financial resilience. The question of what makes for a happy life is one that has been pondered over throughout the history of mankind. We have a huge amount of knowledge from various sources, including academia, philosophy, psychology, neuroscience and theology.

Over the past 150 years or so, the success of capitalism and the resultant increases in standards of living have made money a central point to our lives. Increasing life expectancy and changes in family demographics means that we now have a future that involves living independently, but without income.

This means that financial planning has become increasingly important to our wellbeing.

 

Introduction to financial wellbeing

Financial wellbeing is therefore the study of these sources of joy in our lives, and the part that money plays in helping, or hindering, our wellbeing. We can break down this topic of how money affects our wellbeing into four areas:

• The positive impact that is true of all of us.
• The positive impact that is unique to each of us.
• The negative impact that is true of all of us.
• The negative impact that is unique to each of us.

For example, having meaning and a purpose in our lives will bring anyone wellbeing. What that means for each of us, however, will be different.

We also know that there are behaviours we all exhibit which lead to poor financial outcomes. The knowledge from the relatively new world of behavioural finance should be applied to all aspects of financial decision-making, not just investment management.

Then we each have our own self-limiting beliefs about money which have developed through our experiences.

Understanding the research is therefore one step in applying financial wellbeing theory. Understanding ourselves and how this knowledge should be best applied to each client is the other step.

 

The general truths

There are five pillars of financial wellbeing that are true of all of us (note: all references on the sources of the research for anything mentioned in this article are in my books):

• Having a clear path to identifiable objectives.
• Control of our daily finances.
• Having financial options.
• Protection from financial shocks.
• Clarity and security for those that we leave behind.

Some of these – daily finances and financial shocks – constitute financial resilience. Some are more practical in nature. That clear path, for example, could easily translate into cash-flow forecasting.

Others are a little harder to pin down. Do we have more options as our finances grow? Yes, to a point. If you have very little, then a roof over your head and something regular to eat will clearly increase wellbeing. The extent to which this continues as wealth grows, however, is much more questionable. The answer to the question does more money make you happier is yes, if you need money to be happy.

If that extra money can buy you shelter and security, clearly it is going to make a difference. Once you reach the point where more money is just buying bigger things, or things bought just to show you have money, then the additional wellbeing is limited or even negative.

Which brings us to those identifiable objectives, something I feel is the key to the relationship between money and happiness.

 

Self-worth

If we gain our self-worth from external sources, such as approval or status, then our self-worth is dependent on others. If, on the other hand, self-worth comes from internal sources, such as living a life with meaning and purpose, then this is both more achievable and longer lasting.

Take that classic trope of wealth, the expensive car. A person whose self-worth comes from external sources will drive an expensive car down the street and enjoy the admiring glances. However, this will only give them a sense of self-worth if the glances continue. Once they have passed that admiring pedestrian, they need to find another to drive past for their self-worth to be nurtured.

A different person may buy that expensive car because they just love cars. Perhaps it is their hobby and love the car for how it drives and how the car itself makes them feel.

For a financial plan to help a person to be happier not just wealthier, therefore, those identifiable objectives should include things that will bring the client wellbeing. For me, this is the major shift in the role of the financial planner; to both educate clients, and to help them identify objectives that will bring them joy.

 

The why

When I wrote the original Financial Wellbeing Book back in 2015, I Googled the term to make sure that nobody had used it for the title for a book before. There were two results from that search. When I Googled the term nine years later, there were 320-million results.

There are several reasons why adopting a financial wellbeing-oriented approach to financial planning is becoming essential.

In 2021, Aegon UK undertook a survey of many thousands of its customers, both direct consumers and advisors. A total of 72% of consumers said that they wanted advisors to discuss their life objectives with them. However, only 32% of advisors thought that this is what customers wanted.

There are several reasons why adopting a financial wellbeing-oriented approach to financial planning is becoming essential. The first is that the two statistics above show us that financial wellbeing is the direction of travel for financial advice and planning.

 

An upgrade to V3

I think of financial advice as the provision of guidance in relation to the technical aspect of money, such as managing investments and tax planning. I think of this as version 1.

Financial planning is version 2. In addition to technical advice, it adds cash-flow forecasting. As well as looking at “now”, we are also looking to the future.

Financial wellbeing is version 3. It is an upgrade. In addition to technical knowledge and future planning, it brings two things: understanding and applying knowledge on the relationship between money and happiness. And interpersonal skills (more on this later).

 

A case study

Let us take a client of a financial advisor. They have received tax planning and investment advice, started savings and set up protection plans. They are a happy client. Suppose that advisor then retired, and the client moves to someone who, in addition to advice, also does financial planning. The client now gets a cash-flow forecast and a path to their future. I would suggest that this client is very unlikely to go back to just financial advice.

This financial planner also then retires. The client moves to a new planner, one who adopts a financial wellbeing approach. Now, they get an advisor who is also knowledgeable and skilled in helping them understand what is likely to bring them wellbeing in the future.

They may review their objectives, widen those objectives from just a bucket list, increase their connectivity with loved ones and enable an increase in meaning and purpose. Now the financial plan creates a path to a future that the client didn’t know was possible before they went to see the planner.

I would suggest that someone who goes to a financial wellbeing-oriented planner is unlikely to go back to just a planner or advisor.

 

The how

There are two areas of development that a financial planner needs to upgrade to a financial wellbeing approach.

The first is education. This should be for themselves, to understand the research about the sources of wellbeing in our lives, and how money both helps and hinders this. It is also important to educate clients. Clients need to be prepared for a conversation with their planner which is about their wellbeing, not just their wealth. Helping clients to change behaviours and understand their self-limiting beliefs. This starts with understanding why they act in ways that may be creating poor financial outcomes.

The second is for advisors to develop their listening and questioning skills. Clients very often do not understand themselves and being better at these coaching skills will help advisors to help clients recognise those identifiable objectives.

 

Conclusion

Being happy is not easy. Wellbeing takes effort, both to achieve and maintain. Money has a crucial part to play in this process. This is why I believe that financial wellbeing, in its broadest sense, is the direction of travel for financial planning.

 

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Chris Budd, former financial planner and founder of Ovation Finance Ltd, author and founder of the Institute for Financial Wellbeing.

Chris has written two books on money and happiness, the original Financial Wellbeing Book and The Four Cornerstones of Financial Wellbeing. He also founded the Institute for Financial Wellbeing and has developed training courses for advisors on the subject.

Chris Budd will be speaking at the Money Maestros Conference in South Africa in October.

A Coaching Way of Being

Blue Chip explores the role of coaching in unlocking financial potential. Behavioural coaching expert, Rob Macdonald, unpacks what it is and why it is important to the work of a financial planner.- by Rob Macdonald

 

What is coaching?

Most people are probably familiar with the idea of a coach. Our experience is usually from the sports field, where we may have had a coach at school or observed coaching in the professional sports era. Yet more recently interpersonal coaching has grown globally as a way of supporting individuals in their life or work. Various labels are given to this, the most common probably being “Life” or “Executive” coaching. The essence of this form of interpersonal coaching, I believe, is for a coach to help an individual find answers for themselves to questions that they themselves have, about any aspect of their life or work. It may help someone who is dealing with a challenge, wanting to make a change or trying to achieve a goal.

 

How is that distinct from mentoring?

Mentoring usually involves someone with greater experience or expertise, passing on guidance and knowledge to someone less experienced. Coaching is about helping someone find their own answers to questions, rather than providing the answers. An example would be, in response to the question, “How should I do this?” a mentor may say, “I suggest you do it this way… in my experience, that worked best.” Whereas a coach is likely to respond with a question like: “What ways have you thought of doing this?” So, a mentor plays a role in offering solutions or advice; in coaching the responsibility for finding solutions and a way forward falls onto the client, rather than the coach. Coaching is about helping someone find their own answers to questions

How then does coaching apply to financial planning, given that clients go to a financial planner to get advice?

Yes, on the face of it, financial planners play more the role of mentor rather than coach. They have the financial technical expertise and experience which a client usually lacks. But there are two key challenges that financial planners face when giving advice to clients. The first is that sometimes they will give the wrong advice because the client hasn’t given them all the information needed to give the right advice. Second, the financial planner gives the right advice, but the client doesn’t take it.

 

Isn’t that a problem that just comes with the territory of being in a professional advisory occupation?

Yes. Doctors, laywers and other advisory professions face the same challenge. Unfortunately, there is another problem with giving advice! Ironically, giving advice can be disempowering. If you tell me what to do, then I can blame (or praise) you for the outcome of the advice.

A financial planner I worked with had a client who had a spending problem. The financial planner advised the client that they needed a budget and offered to draw up the budget for the client. Six months later, the financial planner was fired by the client because they still had a spending problem. The client had taken no responsibility for sticking to the budget because it was all the financial planner’s idea. In a way, it was the financial planner’s budget not the client’s budget!

 

So how do financial planners address these problems?

The key is to find a way for clients to take greater responsibility for their own financial outcomes. Research by Morningstar shows that clients are more likely to achieve financial health if they feel in control of their financial future. In other words, getting clients to feel more empowered with the decisions they make is key to effective financial planning. Helping clients take responsibility for their own decisions is what a coaching approach enables.

 

Does this mean that financial planners should be coaches?

No. You might be surprised by my answer. Clients are still coming to financial planners for financial advice, so I don’t believe financial planners can be just a coach. They still must draw on their expertise and experience to help clients, just like mentors.

In some ways I think we are doing the financial planning profession a disservice with the many new services we see emerging, and financial planners taking on labels such as a financial counsellor, therapist or coach to differentiate themselves. Often, there are people who operate with these labels who are not even licensed to give financial advice. But in the same way that I want to see a doctor about my physical health, I want to see a financial planner about my financial health.

 

Yet, you are advocating for a coaching approach to financial advice.

I definitely am. Much research shows that the greatest value that a financial planner adds is through behavioural coaching. But I’m suggesting that this approach doesn’t change the fundamental nature of the work of a financial planner, which I believe is to help clients make and implement life and money decisions. And this is the crux: a financial planner’s work is not just about the money. After all, money is simply a means to an end. I don’t believe you can help clients make sound money decisions without helping them make decisions about their life as well. And I believe that you can do that best by adopting a Coaching Way of Being.

 

What do you mean by a Coaching Way of Being?

A “Way of Being” describes how you turn up with your clients. If you turn up as the technical expert who sees your technical advice as your real value-add, you can provide great advice, but as I mentioned earlier, it could be wrong, or it just doesn’t land with the client. By adopting a “Coaching” Way of Being, you turn up in a way that recognises that the client is the expert in their life and that taking responsibility for their own decisions is key to their financial health. Most importantly, the financial planner turns up mindful of the fact that the person in front of them is their client, not the client’s money.

 

 

 

How do you develop a Coaching Way of Being?

Just like when you learn to ride a bicycle, you can only learn it by doing. So, it’s a way of being that I believe can only be learned by doing. You can’t learn it by reading a book or watching a video. The key is in the doing and the practicing.

I have run several behavioural coaching programmes designed to help financial planners develop a Coaching Way of Being. In these programmes, we develop key interpersonal skills such as being present, curious, showing empathy, asking good questions and listening deeply. Adopting a Coaching Way of Being also demands high levels of self-awareness, self-insight and self-management skills, which in fact are the foundation of this way of being. An encouraging aspect of learning to work in this way is that it not only impacts how you relate to clients, but feedback from the programme participants suggests that they have found it useful in their personal lives and in how they relate to colleagues, family and friends.

If you are interested in learning more about how to develop a Coaching Way of Being, you can contact Rob at:
rob@coachingwayofbeing.com

• BC article link: https://bluechipdigital.co.za/featured/a-coaching-way-of-being/
• Ebook link: https://www.yumpu.com/en/document/read/70390590/blue-chip-95/24

Practical conversations for financial health and wellbeing.

How to help your clients prioritise purpose, connectedness and relationships.- by Kim Potgieter CFP®, Director, Chartered Wealth Solutions, ICF Professional Certified Coach, New Money Story® Mentor Coach, Certified Dare to Lead™ Facilitator

A client recently shared with me that his 80-year-old parents have decided to separate. They moved to a new country away from their children 10 years ago and have not built meaningful relationships or integrated into social circles. While this decision will strain their finances, the emotional trauma and lack of support are exceptionally challenging. Being deprived of meaningful relationships, along with the possibility of losing your home, can significantly impact your wellbeing and longevity.

In the 14 years I have helped clients approaching or in retirement, I have seen many people retiring from who they were instead of to a life filled with connection, engagement and purpose. Retirement should be a time of fulfilment and joy, yet many people struggle through this transition. Partly because retirement marks a major life adjustment, but also because people often fail to prioritise the relationships and connections that contribute to happiness.

In Rob Macdonald’s article in the previous edition of Blue Chip, he explains why helping our clients invest in time, relationships and control can impact their financial health and overall wellbeing. The reference to the Harvard Study of Adult Development, one of the most comprehensive longitudinal studies in history on happiness, is noteworthy. The message is clear: good relationships keep us happier and healthier. People more socially connected to family, friends and their communities are happier, physically healthier and live longer than less well-connected people. Close and fulfilling relationships protect our bodies and minds and positively impact our health and happiness.

The message is clear: good relationships keep us happier and healthier.

The study also notes that doing work that brings meaning and purpose (doing something you love) drives wellbeing and joy. Often, the most rewarding part is the connections and friendships people find at work. It’s about feeling in control and doing something you care about with people you feel connected to.

Circumstances change as people get older. Our clients may lose some of their connections and people they love; children may leave home to pursue their dreams; clients may downscale and move home, cities or countries; and what-ifs and unexpected events may create curveballs in their planning. The key is to help clients focus on things they can control and prioritise their happiness index.

Conversations to guide your clients

Building on Rob Macdonald’s suggestions to help clients gain clarity on their future lives and invest in social connections and relationships, these practical conversation topics may facilitate these discussions and guide clients to live connected, purposeful and fulfilling lives with relationships at the core.

The Midlife Couples Check-in Questionnaire

Encourage clients in partnerships to think and talk about the health status of their relationship. These questions can easily be adapted for singles:

• Do you still want to be together?
• Do you still have anything in common?
• How can you ensure that you have a healthy and fulfilling relationship in your next chapter?
• Do you have the same goals?
• Do you both want to stop working at the same time?
• What are your priorities for the next 50 years?
• Where will you live?
• Do you both have the same view on looking after your elderly parents?
• How important is it to each of you to leave money in your will for your children? Would you rather spend it while you’re still alive?
• Are there any items on your wish list? How will you navigate if your dreams are different?
• Write down your ideal day. Compare yours with your partner’s.

One of my clients was blindsided by her husband asking for a divorce after 30 years of marriage. She suddenly found herself single in her late 50s and facing an uncertain future. Fortunately, her finances were sound, but throughout her married life she spent all her time nurturing others and forgot what brought her joy. Her priority now is resetting and restarting to build new friendships and social connections and find a renewed purpose.

What are you retiring to?

Encourage clients to find significance in how they will spend their time in retirement. Having a sense of purpose and being equipped emotionally is one step closer to wellbeing and happiness. The concept of retiring “to” and not “from” is fundamental to how I approach retirement conversations with my clients. Often, if people operate from a push-factor position rather than a pull-factor, their actions are generally reactive and they don’t find happiness easily.

Just recently, I worked with a client who hastily took early retirement when the opportunity arose. After the initial excitement wore off, she experienced overwhelming regret and loss. She never considered or planned what she would do with her time now.

Challenge clients to reflect and visualise what would motivate them and bring them joy before retiring. Then guide them to plan purposefully towards a significant life.

Staying connected and engaged

One exercise we use to prepare clients for the emotional impact of ageing is the Wheel of Balance®. This exercise asks clients to evaluate their satisfaction in different areas of life, including health, family, work, personal growth, relationships, giving back, purpose and money. By identifying areas that may need attention, clients can take proactive steps to maintain balance and fulfilment in retirement.

Where will you live?

Many clients are tempted to move from their current cities, often to smaller towns or coastal destinations. Unless they know the area extremely well, they could be setting themselves up to spend their second chapter in a
place without social connectivity.

Caution your clients when it comes to abandoning their social networks for a view of the sea or moving countries to be with their children. Guide them on the advantages of staying connected to people they love and the pitfalls of choosing social isolation and loneliness.
Retirement can be a time of fulfilment and joy, but it requires careful planning.

Guiding your clients through these conversations can assist them transition with a sense of contribution, meaning, significance and connectedness.

• BC Article Link : https://bluechipdigital.co.za/financial-planning-retirement/practical-conversations-for-financial-health-and-wellbeing/