Some thing greater than financial advice
Earlier this year and shortly before I surrendered the Financial Services Authority permission to provide monetary advice I met Bruce plus Theresa, my long standing customers of some thirty years. The 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 for the agenda and were dealt with, much 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, choices about their house and nearly all aspects of life in retirement. We furthermore 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. Whilst I was able to demonstrate mathematically that their income and assets had been more than sufficient to allow them to live a new fulfilled life in retirement, we’d to deal with some deep emotional blocks to spending, in particular the fear which 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 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 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 A digital Strategy Consulting).
Two types of purchaser
These distinctions are important in the situation of a key concept about money, which I will cover shortly. First, enables consider the differences between the two teams. Honeywell and Norton describe ‘Traditionals’ as primarily interested in the deal, capabilities and status. A sub-group involving ‘Traditionals’ is ‘High Status Traditionals’ for whom status is the top 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 together with discovery. They are more likely to start their particular business, are usually graduates, see the web as a powerful tool for streamlining their lives, understand investing (money and personally), and are repulsed simply by conspicuous consumption. They are highly person and express their own individual beliefs through what they say, buy, perform and who they do it along with.
Honeywill and Norton discovered NEOs in the US and wrote about them this year but Robert Duvall and James Alexander arrived at a similar concept in britain in the early 2000s. In their analysis prior to launching Zopa, Duvall plus Alexander identified a group of people they called ‘Freeformers’, a new type of consumer ‘defined by their values and beliefs, the alternatives they make, where they spend their cash. They refuse to be defined by means of anyone, they don’t trust corporations or perhaps the state. They value authenticity in what they buy and they want to guide “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 very own career as a financial adviser, coordinator and coach I have identified a couple of prevailing attitudes to money. There are those who see money as an result in itself, and those who see dollars as a means to an end. I cannot admit to having carried out detailed research within this, but I have seen enough to generate 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 the end. (At the risk of upsetting Messrs Honeywill and Norton and informed that NEOs and Freeformers aren’t 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 is often a better and more evocative description of the species than NEOs. )
Throughout very general terms, Traditionals are usually intent on making their money get as far as possible by getting the very best deals and features. Psychologically, they associate money with ego and condition. Conversely, Freeformers use their money to achieve their individuality and authenticity and also to express their values. Whilst they cannot spend entirely irrespective of cost, his or her spending criteria are written regarding authenticity, provenance, design, uniqueness and discovery.
Mapping attitudes to life together with money
In my own experience Traditionals respond to financial advice, but not economic planning or coaching, whilst Freeformers only start to value financial suggestions when it is supported by an individual and unique life and financial plan given birth to out of a deep coaching together with planning process.
Putting it another way, Freeformers understand that the link between lifestyle and money goes deep, consequently respond well to coaching that addresses their life and income. Traditionals, on the other hand, do not harbour a real powerful connection between life and money, and are less likely to respond towards the concept of ‘financial life coaching. ‘ Traditionals form the key market to get financial services institutions and packaged goods, especially those that provide deals (discounts and competitive fees), features (pension plans with flexibility, for instance) in addition to 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 concentrate on selecting investments to suit their prices and goals.
The spectrum of help with personal finances
In the UK and other parts of the world you can now find a variety of forms of help for your personal finances. Its a wide spectrum with economic advice at one end and even financial life coaching at the other. In between, families and individuals can certainly access financial planning, guidance, instruction, mentoring and education. Of course none of these are mutually exclusive and some firms or maybe organisations will provide a combination so it is essential to understand what is available and the limits in addition to benefits of each.
Monetary advice is product oriented.
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In great britain the Financial Conduct Authority (FCA), which regulates personal financial advice, defines financial advice as guidance to buy, sell or switch a financial product. Whilst there is a regulatory necessity to ‘know your customer’ and ensure any advice is ‘suitable’, this thrust of financial advice is the sale for products.
A financial adviser must be authorised by the FCA and abide by it is rule book.
Financial planning goes deeper than fiscal advice. It aims to ascertain a new client’s short, medium and lasting financial goals and develop a want to meet them. The plan should be thorough and holistic. It should cover every area of the client’s personal and family finances and recommendations in any section of the plan should maintain the integrity from the plan as a whole.