In the past when I have been doing client work, there have been instances where I would make a recommendation and the client’s behaviour would almost be the opposite of the advice I gave.
You could tell some clients weren’t making decisions from a logical place. That might be an individual spending more than they should, or perhaps the opposite – a cashflow model might show they are going to be fine for the rest of their life, yet they still can’t allow themselves to spend or give money away.
It always felt like there was something I couldn’t quite get to through the traditional financial planning methods.
A couple of years ago I was online and someone from one of the Personal Finance Society groups asked whether anyone had heard of the certified money coach training. I thought that was interesting, and found it was all about behaviours and patterns with money, and how some of the things we’ve learnt about money when we’re younger can really influence how we are as an adult with money.
The certified money coach training is a 16-week course, which is done via an online classroom due to the fact the Money Coaching Institute is based out in the US. The course is based around case studies, and you effectively coach two people as practice while you’re training. This allows you to apply the principles you’re learning about immediately.
As I’ve put money coaching into practice, I’ve adapted it to draw out the principles that work with planning clients and use it on a more light touch basis. It might only form 10 minutes of a meeting, but it allows you to get to those aspects around money that clients are unlikely to be aware of.
I apply it to my case work by introducing myself as a money coach as well as a financial planner. Not everybody wants to talk about their behaviour, so as long as the client gives me permission I’ll integrate it into my financial planning work.
I’ve had some people who respond with: “Gosh, that sounds like counselling or therapy.” Those people may not be the best clients to try money coaching with. But it is coaching, not therapy. It’s certainly not lying back on a coach and saying: “Tell me about your childhood”!
Yet if a parent was someone who scrimped and saved for example, that behaviour may be being repeated, or as an adult they might react against this and do the opposite.
Even if someone isn’t up for talking about that kind of stuff, I’ve gained more of an awareness about what might be going on with clients in terms of money. If anything, it’s like having another aspect of knowledge to draw upon.
During client conversations I can see what’s going on, and perhaps adjust how I speak to them or gain a greater awareness of how to best present a cashflow model.
Money coaching in practice
The trigger for me for using money coaching with clients is when things aren’t flowing as well, or if communication closes off a bit.
Coming across resistance during a client conversation or an inability to make a decision, particularly when the advice has been fully explained, are often signs that there’s an underlying behaviour which is stopping clients in some way.
For us advisers, when we have client meetings like this there’s a tendency to think “what am I doing wrong?” But it might not necessarily be the case that you are doing anything wrong.
There’s a few examples I’ve seen recently where money coaching has had an impact with clients.
In one case, the client had received an inheritance and she wasn’t even able to bank the cheque. She phoned me up and told me she couldn’t accept the money, and that it felt really wrong. I held a half hour coaching session with her to understand what it could be that was making her feel this way.
It turned out that the person who had bequeathed the money was someone she never saw, so she felt like she hadn’t earned it. She had a strong sense of wanting to earn every penny.
It ended up being resolved quite easily – I simply said to her: “You do know it is ok to receive money that isn’t earned?” It was as if I’d said some magic words, and all it came down to was giving her permission to accept the inheritance.
In another case, we had someone who was spending to create a particular impression among his peers. For him it was about ensuring he had the right house and the right car, that he was sending his kids to the right school, and so on.
A cashflow model showed that he was in danger of running out of money by the time he was in his mid-70s. The cashflow model provided support as for him the embarrassment of having to downsize his house was enough of a deterrent and a prompt to change his spending habits.
Without sounding manipulative, if you’ve identified a pattern like the above, you can use that to help clients see what they need to see. These are hard-wired patterns so sometimes it’s not about changing behaviour, but about working with the pattern in the best way you can.
For advisers that are interested in learning more, the Money Coaching Institute has details about when the online courses are running.
There’s a big adviser community on Twitter who are into behavioural finance - I listen to Andy Hart’s podcast and that’s very good for understanding more about behaviour and money.
There’s also a lot of good books about finance and behaviour, such Mind over Money by Claudia Hammond.
For me, being trained in money coaching is almost like occupying a different headspace with a client. It allows you to better understand them, which in turn better facilitates the financial planning process.
Equally, if I come up against a block or barrier with an existing client, or a new issue, I’m able to understand the behavioural stuff that’s going on in order to know how deal with it. Essentially, it’s another useful tool in a financial planner’s toolkit.