Some thing greater than financial advice
Earlier this year and shortly before I surrendered my Financial Services Authority permission to provide monetary advice I met Bruce and Theresa, my long standing customers of some thirty years. The particular meeting was arranged to say goodbye and to close our professional (but not social) relationship, and to finalise their plans for their retirement.
The meeting lasted for most of the day, plus whilst their finances were around the agenda and were dealt with, a lot of the meeting revolved around the way 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 aspects of life in retirement. We also covered their relationship with cash, dealing in particular with how to alter their working life attitude of saving and prudence to finding the courage to spend their time and money upon making the most of their lives in retirement. Whilst 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’d to deal with some deep emotional blocks to spending, in particular the fear that they would run out of money.
This 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 truth, 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, low priced and commoditised.
Financial coaching is for everyone?
I have witnessed the impressive changes that financial life coaching can bring about in clients, and I’d 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 Commanders: Robert Duvall, published by the A digital Strategy Consulting).
Two types of client
These distinctions are important in the framework of a key concept about money, which I will cover shortly. First, enables consider the differences between the two organizations. Honeywell and Norton describe ‘Traditionals’ as primarily interested in the deal, features and status. A sub-group of ‘Traditionals’ is ‘High Status Traditionals’ for whom status is the best priority. They cite Donald Trump as the epitome of a High Status Conventional.
Honeywill and Norton contrast ‘Traditionals’ with NEOs. According to the authors, NEOs buy for authenticity, provenance, uniqueness and even discovery. They are more likely to start their particular business, are usually graduates, see the net as a powerful tool for simplifying their lives, understand investing (money and personally), and are repulsed by way of conspicuous consumption. They are highly specific and express their own individual values through what they say, buy, carry out and who they do it along with.
Honeywill and Norton discovered NEOs in the US and wrote about them for all men but Robert Duvall and John Alexander arrived at a similar concept in britain in the early 2000s. In their research 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, your options they make, where they spend their funds. They refuse to be defined simply by anyone, they don’t trust corporations or perhaps the state. They value authenticity concerning how they buy and they want to guide “authentic” lives. ‘ Duvall plus Alexander saw these people as the key of an IT society based on self-expression, choice, freedom and individuality.
A couple of attitudes to money
In my own career as a financial adviser, advisor and coach I have identified a pair of prevailing attitudes to money. You can find those who see money as an stop with itself, and those who see income as a means to an end. 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 the Traditionals who see money being an end in itself, and it is the Freeformers who see money as a means to the end. (At the risk of upsetting Messrs Honeywill and Norton and aware that NEOs and Freeformers are certainly not exactly the same, I am going to refer to both simply as Freeformers in the rest of that paper as I feel the word is really a better and more evocative description in the species than NEOs. )
Within very general terms, Traditionals will be intent on making their money go as far as possible by getting the greatest deals and features. Psychologically, they associate money with ego and status. Conversely, Freeformers use their money to obtain their individuality and authenticity in order to express their values. Whilst they just do not spend entirely irrespective of cost, their very own spending criteria are written with regards to authenticity, provenance, design, uniqueness and even discovery.
Mapping attitudes to life and money
In my own experience Traditionals respond to financial advice, but not economical planning or coaching, whilst Freeformers only start to value financial guidance when it is supported by an individual and special life and financial plan born out of a deep coaching and planning process.
Putting it one other way, Freeformers understand that the link between lifetime and money goes deep, and so respond well to coaching that will addresses their life and funds. Traditionals, on the other hand, do not harbour this kind of powerful connection between life and even money, and are less likely to respond on the concept of ‘financial life coaching. ‘ Traditionals form the key market with regard to financial services institutions and packaged solutions, especially those that provide deals (discounts as well as competitive fees), features (pension plans 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 investments and tax wrappers) and give full attention to selecting investments to suit their principles and goals.
The spectrum of help with personal finances
In the UK along with other parts of the world you can now find numerous forms of help for your personal financial situation. Its a wide spectrum with economic advice at one end and financial life coaching at the other.
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In between, families and individuals can easily access financial planning, guidance, teaching, mentoring and education. Of course nothing of these are mutually exclusive and some firms or perhaps organisations will provide a combination so it is crucial that you understand what is available and the limits plus benefits of each.
Economical advice is product oriented. In the united kingdom the Financial Conduct Authority (FCA), which regulates personal financial assistance, defines financial advice as advice to buy, sell or switch a monetary product. Whilst there is a regulatory necessity to ‘know your customer’ and be sure any advice is ‘suitable’, the thrust of financial advice is the sale of products.
A financial adviser must be sanctioned by the FCA and abide by the rule book.
Fiscal planning goes deeper than fiscal advice. It aims to ascertain some sort of client’s short, medium and long lasting financial goals and develop an intend to meet them. The plan should be comprehensive and holistic. It should cover all areas of the client’s personal and friends and family finances and recommendations in any portion of the plan should maintain the integrity on the plan as a whole.