Something greater than financial advice
Earlier this year plus shortly before I surrendered the Financial Services Authority permission to provide economic advice I met Bruce plus Theresa, my long standing customers of some thirty years. The meeting was arranged to say farewell and to close our professional (but not social) relationship, and to finalise their plans for their retirement.
The particular meeting lasted for most of the day, and whilst their finances were on the agenda and were dealt with, a lot of the meeting revolved around how they were going to live in retirement, what they could and should do, how they were going to maintain family ties, decisions about their house and nearly all facets of life in retirement. We also covered their relationship with money, dealing in particular with how to change their working life attitude of saving and prudence to finding the courage to spend their time and money on making the most of their lives in retirement. While I was able to demonstrate mathematically that their income and assets had been more than sufficient to allow them to live some sort of fulfilled life in retirement, we had to deal with some deep emotional blocks to spending, in particular the fear they would run out of money.
It was far more than financial advice. It amounted to ‘financial life coaching’, a relatively new professional field that treats money and life as intertwined and is truly holistic in its approach. It is an approach I started to adopt in 2006 after training with the Kinder Institute of Life Planning in the US. In fact, most of my client interventions since then have been holistic, coaching interventions. I’ve found that the coaching element is of far greater value to my clients than arranging financial products, which, within the context of most financial life plans, should be simple, inexpensive and commoditised.
Financial coaching is for everyone?
I have witnessed the impressive changes that financial life coaching can bring about in clients, and I might argue that everyone needs a life coach. In reality, the service is less suited to what Ross Honeywill and Christopher Norton call ‘Traditionals’ and more suited to what they call the ‘New Economic Order’ (NEO) (Honeywill, Ross and Norton, Christopher (2012). One hundred thirteen million markets of one. Fingerprint Strategies. ), and what James Alexander and the late Robert Duvall in their research for the launch of Zopa (the first peer-to-peer lending business) called ‘Freeformers’ (Digital Thought Management: Robert Duvall, published by the Digital Strategy Consulting).
Two types of purchaser
These distinctions are important in the situation of a key concept about cash, which I will cover shortly. First, let us consider the differences between the two teams. Honeywell and Norton describe ‘Traditionals’ as primarily interested in the deal, capabilities and status. A sub-group regarding ‘Traditionals’ is ‘High Status Traditionals’ for whom status is the greatest priority. They cite Donald Overcome as the epitome of a High Status Traditional.
Honeywill and Norton contrast ‘Traditionals’ with NEOs. According to the authors, NEOs buy for authenticity, provenance, uniqueness and discovery. They are more likely to start their unique business, are usually graduates, see the web as a powerful tool for streamline their lives, understand investing (money and personally), and are repulsed by simply conspicuous consumption. They are highly person and express their own individual principles through what they say, buy, carry out and who they do it using.
Honeywill and Norton discovered NEOs in the US and wrote about them this year but Robert Duvall and Adam Alexander arrived at a similar concept in great britain in the early 2000s. In their researching prior to launching Zopa, Duvall and even Alexander identified a group of people they called ‘Freeformers’, a new type of consumer ‘defined by their values and beliefs, the options they make, where they spend their cash. They refuse to be defined by way of anyone, they don’t trust corporations or the state. They value authenticity about what they buy and they want to direct “authentic” lives. ‘ Duvall together with Alexander saw these people as the core of an IT society based on self-expression, choice, freedom and individuality.
2 attitudes to money
In my personal career as a financial adviser, planning software and coach I have identified 2 prevailing attitudes to money. There are those who see money as an will itself, and those who see income as a means to an end.
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I cannot confess to having carried out detailed research with this, but I have seen enough to create a reasonable assumption, namely that it is this Traditionals who see money being an end in itself, and it is the Freeformers who see money as a means to an end. (At the risk of upsetting Messrs Honeywill and Norton and conscious that NEOs and Freeformers usually are not exactly the same, I am going to refer to both just as Freeformers in the rest of this particular paper as I feel the word can be a better and more evocative description in the species than NEOs. )
Within very general terms, Traditionals are intent on making their money go as far as possible by getting the best money saving deals and features. Psychologically, they equate money with ego and status. Conversely, Freeformers use their money to get their individuality and authenticity and also to express their values. Whilst they do not spend entirely irrespective of cost, their very own spending criteria are written with regard to authenticity, provenance, design, uniqueness together with discovery.
Mapping attitudes to life plus money
In my own experience Traditionals respond to financial advice, but not financial planning or coaching, whilst Freeformers only start to value financial assistance when it is supported by an individual and special life and financial plan delivered out of a deep coaching together with planning process.
Putting it one way, Freeformers understand that the link between life and money goes deep, therefore respond well to coaching of which addresses their life and dollars. Traditionals, on the other hand, do not harbour this type of powerful connection between life plus money, and are less likely to respond on the concept of ‘financial life coaching. ‘ Traditionals form the key market for financial services institutions and packaged products, especially those that provide deals (discounts and competitive fees), features (pension options with flexibility, for instance) together with status (high risk, high returns). Freeformers are more likely to select a platform (an online service to aggregate all their assets and tax wrappers) and give attention to selecting investments to suit their prices and goals.
The spectrum needed with personal finances
In the UK as well as other parts of the world you can now find various forms of help for your personal funds. Its a wide spectrum with economical advice at one end plus financial life coaching at the additional. In between, families and individuals can certainly access financial planning, guidance, teaching, mentoring and education. Of course none of these are mutually exclusive and some firms or perhaps organisations will provide a combination so it is important to understand what is available and the limits in addition to benefits of each.
Fiscal advice is product oriented. In england the Financial Conduct Authority (FCA), which regulates personal financial tips, defines financial advice as advice to buy, sell or switch monetary product. Whilst there is a regulatory qualification to ‘know your customer’ and ensure any advice is ‘suitable’, typically the thrust of financial advice is the sale of products.
A financial adviser must be sanctioned by the FCA and abide by their rule book.
Financial planning goes deeper than economic advice. It aims to ascertain some sort of client’s short, medium and long-term financial goals and develop a decide to meet them. The plan should be detailed and holistic. It should cover all areas of the client’s personal and friends and family finances and recommendations in any section of the plan should maintain the integrity from the plan as a whole.