When we initially meet potential clients, we spend time getting them to think about what having money means for them. It can take some time and some good questioning to get to the bottom of what money really means to someone and what potential changes to their lives having money would bring.
In doing this we are shifting the thought process away from the money itself to “what can this money do for me” or more encompassing “What does this money mean for me and my family”
Why do we do this?
- Having these conversations with clients is far more empowering, as it begins to give meaning to money
- Clients have a deeper sense of understanding and control of their wellbeing and investments
- Clients begin to feel more relaxed and calmer about their financial affairs
- It leads to better investor behaviour, which leads to better investor outcomes
- It provides clarity when faced with life altering decisions
Becoming a more effective investor
Often prospective clients arrive at our offices for the first time with what they perceive as a money challenge. Normally they have received money and need to know how to invest it wisely. This can come from inheritance, a sale of a business or shares, the sale of a big property or just from accumulation over time.
The natural inclination is to want to protect and ultimately make it grow. We often find that potential clients jump straight into what rate of return can they get and what are the costs involved. We usually get asked about performance and structures like endowments or offshore investments.
We can answer all those questions, but it is much easier to do so once we have a far more transformative conversation around the following issues first
- What does this money mean to you?
- What could it practically do for you in your day-to-day life and when could this potentially take place?
- We start having conversations about possibilities, aspirations, hopes, goals and even dreams. These are important to share as it makes the money and investments far more meaningful.
When you have this kind of conversation, you begin to have clients and critically couples, engaging completely differently about money.
International research is showing us as planners that when different pots of money are given meaning, clients become more engaged and focused on the financial plan. It also helps clients to stay focused on the plan.
Benefits of understanding and creating calm
Many of us carry fears around specific life issues. More challenging too is that couples often have different issues that they are concerned about. Some have a fear around future medical costs, while others worry about education for their children or grandchildren.
In some cases, one partner feels holidays are important and money must be spent bringing the family together, whilst the other partner feels concerned that the debt levels are too high and spending on holidays is not a sensible money decision.
By earmarking pots of money for different goals, or needs, we can circumvent the angst that this can create between couples. Whether that be a unit trust investment labelled ‘Children’s education’ or ‘Holidays’ or money held in a money market account, by earmarking it, the money is given meaning and is specific to an agreed goal.
Research is showing that this allows more clarity and makes the investments come alive for couples who get confused when all the money is sitting in a few investment accounts, for example – typical retirement funds, local unit trusts or offshore investments. Clients lose their feel for ‘if they have enough’ and specifically what the goal was for that money.
It reminds us of what many of our grandmothers did with “jam jars”, where they kept money for school uniforms and groceries etc.
Life changing
Conversations like these in our meetings together, can often end up being really life changing. As an example, a client has recently inherited a large lump sum. The initial conversation was about how best to invest it. The conversation then focused on him as an individual and understating his life and aspirations. It emerged that he was very unhappy in a demanding job, working very long hours. Discussions were held around what alternatives were available. What could this inheritance do for him and his family?
As financial planners we strive to ask the right questions skillfully and then act as a sounding board to see if a proposed solution is plausible or not. The inheritance is looked at in a completely different manner than before. It has been given meaning and it may even lead to a few life changes.
Talk to your financial planner
If the points raised in this article resonate with you and you would like to investigate a bit further, please feel free to reach out to your financial planner. Do not be afraid to use them as a sounding board and to discuss openly any hopes and fears you have as an individual or differences you may have as a couple. In the end, giving meaning to your money, will result in a better investment outcome and financial wellbeing.
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