Here’s a blinding flash of the obvious: Americans are highly stressed about their finances.
Even before the economy went to Hell, people were experiencing all kinds of really negative feelings because we’re all under so much pressure to keep up, and because much of what personal finance encompasses is unfamiliar to most. The pressure to keep up with our work loads and our neighbors is intense and growing.
I’ve said it here before, and I’ll keep right on saying it: money is emotional. And that’s not just some touchy-feely, theoretical statement. It’s science.
The Panic Instinct Is Real
The part of our brains where financial decisions occur is the part that houses our fight-or-flight instinct. That’s right: the defense mechanism that told us to run when we saw a saber tooth tiger is the same mechanism that tells us to panic when we’re presented with financial decisions we don’t know how to navigate. We have not evolved to handle these matters well. Maybe we will at some point, but it’s a long way off, and we’re going to have to experience a lot of discomfort before full adaptation can occur.
To make matters worse, the financial institutions have spent vast sums to understand how our brains function in this regard, including the emotions we experience, and they have mastered the methods to exploit this for their financial gain. Most of the representatives that affiliate with these institutions typically fall into two camps: either they don’t truly understand this aspect of the industry, or they rationalize this agenda because they have their own pressures to attend to.
We’re not the only advisors who put the emotional aspects of personal finance at the forefront, but it certainly isn’t commonplace. The industry prefers to play to our emotional needs with their imagery and subtle messaging, but then use numbers and made-up words to create the appearance of “ROI”. Emotional guidance is given at most advisory firms only when the client’s account has gone down in value and it is typically comprised of two words: “sit tight.” The truth is, humans are short-term, linear thinkers and we move in the direction of our emotional wants, not what logic dictates. If consideration is not given to this fact in every strategy you implement, the strategy is just not going to work.
The Financial Doctors Are In
We are not therapists, but a lot of therapeutic conversations happen in our office. Financial planning is an ongoing, lifelong process, so ours is very much a relationship-based business. And the key to any sustainable relationship is clear, consistent communication.
We meet with clients frequently and ask for a lot of information because the scope of our service is broad, but also because our experience tells us that if we don’t, clients make decisions that would have benefitted from hearing our perspective. In many cases, it would have saved them money. Simply put, the more we talk to our clients, the more money we save them.
I left the world of being a Registered Representative at a broker dealer, and in doing so took a big, fat pay cut, because I finally acknowledged that much of what the company had been training me to do and say was intended to manipulate the emotions of my clients. I wanted to change. I wanted to feel good about the work I do. And now I do.
The strategies and advice we support our clients with really work. They’re not always sexy, or fun and exciting, but they work. Every time. Because they focus on the aspects of finance that we have control over, like managing cash flow properly, and developing a legitimate, forward thinking tax planning strategy.
Want to improve the sense of control and confidence you have in your financial life? Start by creating options for where you draw money from with regard to tax treatment, degree of volatility, contractual obligations, etc. This is what we’re referring to when we suggest increased financial flexibility. This kind of flexibility is the key to feeling more confident in your financial life AND optimizing long-term returns. Together, we can develop a strategy for your personal circumstances. Let’s talk.