Financial wellbeing for me is where the behavioural meets financial planning.
It spans some of the areas we may not necessarily get involved with as an adviser, such as budgeting, the emotional aspects of money and the financial educational aspect as well.
As a firm, we’re looking to incorporate financial wellbeing into our services as part of broadening what we offer to clients. Within that emotional side of things, there’s also that idea of coping with financial stress, which of course is hugely relevant right now.
In terms of defining what financial wellbeing is all about, I like Chris Budd’s book on the topic – he puts its really well.
He describes the five elements of financial wellbeing as a clear path to identifiable objectives; control over daily finances; being able to cope with a financial shock; having financial options and clarity and security for those we leave behind.
At Smith & Pinching, the elements we’re choosing to develop and work on are around education, helping clients understand where their financial behaviours come from, and the concept of emotional decision-making.
Alongside that, practical budgeting comes into play, and building things like financial resilience.
The question for us is, how do we as advisers and planners make sure we’re covering this important aspect of financial planning, particularly at a time like this?
The other side of our service we’re looking to develop is around clients’ life stages and life events, such as divorce, grief and the transition to retirement. I don’t think you can separate money from clients’ real-life situations.
The plan is for us to build out a new approach to soft skills training for advisers. This will be delivered in various formats and will see the creation of resources advisers can share with clients, alongside the usual advice process.
It’s still a work in progress, but it’s about bringing in more of the life planning elements to what we do already.
The road to an integrated service
We have two ways of incorporating financial wellbeing into what we do. One of the ways is through our corporate team, and our work engaging with employees, and the other way is with our individual retail clients.
So far, I would say financial wellbeing and money coaching has probably been incorporated more for the corporate market than it has been for individual clients.
From a practical perspective, one of the challenges is trying to incorporate things like money coaching when we as advisers are trying to do all the usual day-to-day activity at the same time.
Several people in the business have done the money coaching training, but would I say it's completely embedded yet? No, I don't think it is.
But it is something that's in development, and I can certainly see it starting to be an integrated part of the service by 2021.
One of the things we're doing is a lot of soft skills development within the team around the unconscious biases we have by virtue of our own experiences with money and investing, and our own attitudes to risk.
This also looks at advisers’ own financial wellbeing, and how has this has been informing their relationship to money.
We’ve got 35 advisers, so of course they’ll be some who are happy to give this a go and some who’d rather not. Again, it’ll all come down to how we integrate this as part of our client offering.
From a personal perspective, I've done my money stuff to death, and have done a lot of in-depth work on understanding my own relationship to money. I wouldn't say I've got it all sorted and I'm now like the best adviser ever.
But what I do know is how to leave my own financial wellbeing at the door, and to be aware of what's 'my stuff' and what's 'their stuff'.
It also helps me be aware of certain things. For example, if there’s a situation that I’m feeling uncertain about financially, I know how best to not bring that into my meeting.
A change is on the cards
We have a training scheme at Smith & Pinching for newer advisers, and financial wellbeing is definitely something we’re very aware of building in as part of their soft skills training.
Personally, I don’t think you can do enough of that kind of exploration. Whether it’s working on coaching skills or exploring relationships to money and financial behaviours, I think both of these are really valid in terms of self-inquiry and understanding where you are.
Looking at things from a business development perspective, we’re aware that a change is on the cards.
I believe financial planning will be defined differently in future, as a service much more tuned into life planning and life stages.
I would definitely say there’s an awareness across the profession that what people need from financial advice is already changing, and is set to change dramatically over the next 10 years.
Not everybody's going to want money coaching, and certainly we're not going down that route of saying everybody has to be separately money coached.
But it seems like a clear advantage to have advisers that have those skills, not just for our current client bank but for future generations as well.
I think the days are going where the adviser/client relationship is one of someone in authority telling their client the best course of action.
Previously I would have put myself in the category of almost a parent/child style of advice, or perhaps a doctor/patient relationship, as in: ‘I’m the expert, and in the nicest way possible, I’m telling you what to do.’
People are much more informed today, so it’s better to aim for more of a relationship of equals.
Even if people aren’t that well informed, I think it’s part of our role as advisers and planners to empower people, so that they are part of a financial plan.
What’s more, I find the advice sticks so much better when it’s supported by more of a coaching method.
Clients really want to be a part of it, particularly if you’re bringing life planning into that as well. Whether you're doing it formally or just having really good conversations, the longevity of the client relationship is going to be that much greater.
What I’d do differently
Having gone into money coaching before financial wellbeing was even a concept, I’d probably say the mistake I made initially was assuming that everybody would be up for talking about their relationship to money.
Financial wellbeing often involves talking about our emotions around money, and things like budgeting can also be quite personal for some people. Questions around whether clients have financial resilience for example - some people might be quite offended by that.
There is a sense that maybe you're crossing a different line.
So I would say, perhaps go for an approach that's maybe a little bit more light touch – providing information on the idea of financial wellbeing, and then if someone wants to delve in a bit deeper, they can.
Bringing in these aspects more gently might be a better approach than perhaps I did at first!
One of the strategies that's worked pretty well for me is the concept of 'we're all in it together' when it comes to our financial behaviours.
For example, you might come across a client who is very status-driven, and who is always keen to maximise what they have in the bank in a way that perhaps seems unhealthy.
In a situation like that I'll often bring myself into it and say something like: 'As humans, we often tend to overestimate the impact a sum of money can have and that it will make us happy'.
Bringing in this idea of we're all human and we're all doing this has probably been one of my best strategies.
It definitely stops it feeling from the client’s perspective that you've got a teacher trying to tell you what to. The trouble with these kinds of conversations is that sometimes it can feel to the client like they’re being judged in some way.
Talking from experience, there is a danger you can completely close a client off to the subject.
Asking permission before broaching topics around financial behaviour is definitely a good idea, and again, taking a 'gently, gently' approach and reminding clients that we're all in it together, and that we all have these kinds of things going on.
There's loads of people doing really great work on financial wellbeing at the moment. It's interesting to see how it's all developing. It's an exciting time – it feels like a whole new paradigm is coming in.
A version of this article was first published on the PFS Power website, the Personal Finance Society's initiative to promote financial planning and share best practice among financial advisers.