Financial wellbeing refers to anything pertaining to the relationship between money and happiness.
I summarise it by using four cornerstones of financial wellbeing:
- That which will make anyone more happy
- That which makes the individual more happy
- That which will make anyone less happy
- That which makes the individual less happy
This is such a broad topic – and can feel that a wholesale change to a firm’s service proposition is needed – but it doesn’t have to be this way.
Those who have been successful in changing the focus of their advice from just the money to their clients' wellbeing have done so by making small changes, one at a time, that build to create lasting improvements.
Here, then, are five suggestions for small changes in order to focus your advice on the wellbeing of your clients.
Use of silence
Money decisions are fearful decisions, and, as a result, they are typically made using an instinctive (known as ‘System 1’) type decision-making process.
The second of the four cornerstones above refers to helping a client understand what will make them happy (a process I called ‘Know thyself’). When it comes to their relationship with money, however, the fact that we use System 1 can make this difficult. We simply don’t always know what we want out of life!
When you ask the client a question about their future plans, their first answer, usually quickly given, will typically not be carefully considered. What they tell you may be what they think you want to hear, or what they think they should say to a financial adviser.
In order to encourage the client to think more deeply about your question, there is one simple tactic you might try: don’t speak. Because the moment you speak, you stop the client from thinking.
If you keep quiet, the client may well look at you, thinking they have answered your question. Give it 10 seconds, however, and they will typically realise that more is wanted. Now they will move to more considered thought.
Prepare the client
The most common question I get from advisers interested in financial wellbeing is how they raise the topic with somebody that they’ve only ever talked money to. The secret here is to not surprise the client. Don’t wait until the meeting to spring on them a question about their personal plans which they weren’t expecting.
For example, when sending an email confirming the meeting, as well as saying “I look forward to seeing you on Tuesday at 11”, why not add “This year, I’m really interested to hear about your future plans.”?
The topic of financial wellbeing is, I find, truly fascinating. It incorporates academic research, psychology, theology, neuroscience, behavioural finance, and much more. For example, once I understood how difficult we find it to picture future selves, I understood why I kept making such bad decisions. This led to me being able to make changes and therefore better decisions.
There is a huge amount of literature available. I would suggest starting with either The Financial Wellbeing Book for an easy intro, or The Four Cornerstones for a deeper dive. The bibliography of The Four Cornerstones is then intended to provide a guide if you want to explore certain topics further.
Educate your clients
Two of the four cornerstones are barriers to our happiness. Why do we keep buying stuff that we don’t need, for example? (There is an explanation, contained in set point theory). I often see adviser websites which use terms such as ‘financial freedom’ and ‘creating the future you want’, yet under the ‘What we do’ section lists ‘pensions, tax, investments’, or describes the investment proposition.
Why not share your new knowledge from step three above with your clients. Write articles for your newsletters about financial wellbeing, brackets (or ask me to!).
In this way, when the client comes for your next meeting, they will be prepared for that different type of conversation.
Measure their wellbeing
You are what you measure. I'm about to launch a tool, developed with academics, that will measure the financial wellbeing of your clients. All you have to do is send an email, and the client will go through a process which will not only assess their wellbeing, but suggest areas they may like to look at to improve their score.
If you’d like to know more about this tool, do get in touch: email@example.com