Start with which of four “money scripts” they follow.
By Rory Henry
The Holistic Guide to Wealth Management
Joy Lere Psy.D., licensed clinical psychologist and co-founder of Shaping Wealth, a learning platform transforming the human experience of money, told me on my podcast that she was amazed by how often money was the cause of her clients’ anxiety and unhappiness. Research confirms this phenomenon.
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According to the American Psychological Association (APA), money has consistently topped Americans’ list of stressors ever since the first Stress in America survey was conducted in 2007. According to the APA:
- 72 percent of adults report feeling stressed about money at least some of the time
- 22 percent reported feeling “extreme stress” about money at some point during the past month
- 26 percent of adults report feeling stressed about money most or all of the time
It shouldn’t be this way and this is where financial advisors can be a huge help.
“Patients often didn’t realize it, but it shouldn’t have been surprising,” Lere said. “Money is a taboo topic in our society. People have very few places to talk about it openly and honestly and especially in our society, money is inextricably linked to so many aspects of our lives.”
Lere said she starts by asking clients questions like these:
- “What is your money story?”
- “What type of money script is causing you to make certain decisions in your finances and life?”
- “How do you even go about rewriting your money story?”
She’s found this type of exploration useful in helping patients better understand how they view their finances – and important life decisions. By the way, I have found Lere’s questions helpful for advisors to understand why they were drawn to the financial advisory profession, and what led them to pick up my book. Diving into our past and uncovering our relationship with money becomes a transformative step. By understanding the origins of our financial behaviors and attitudes, we can leverage this knowledge to assist our clients in doing the same. Adopting a human-first approach, we use our past experiences to help clients craft a new, empowering money story for themselves.
DataPoints, a developer of financial behavioral assessment tests, believes people follow one of four “money scripts” – general beliefs about money that are often unconscious and learned during childhood or early adolescence and that tend to be passed down through generations.
- Money Avoidance. People who fall into the money avoidance category tend to believe money is evil. They believe having too much money is terrible, and that the accumulation or desire for wealth is negative. While money avoidance may have started as a coping mechanism for people in lower socioeconomic environments to feel better about their situation, it can lead to self-destructive financial behaviors. After all, you need money to survive, whether you like it or not.
- Money Worship or Money Focus. People who adhere to the money worship script put money on a pedestal. They believe money and the things it can buy can solve all their problems. They’re heavily swayed by people on social media, leaning on sports cars and showing off their mansionside pools. People who fall into the money-worship script want to show their peers that they have money, too (whether they really do or not), which is a slippery slope to overspending and poor wealth management.
- Money Status. People who succumb to the money-status script believe their self-worth is tied to their net worth. Even if they don’t necessarily have money, they want to flaunt their “wealth” to make themselves seem more important. Money status is related to “keeping up with the Joneses” and can lead to higher credit card debt and overspending.
- Money Vigilance. People experiencing the money vigilance script tend to be very anxious about spending money, even when they have plenty. They’re generally future-oriented and have a strong desire to maintain a financial safety net for emergencies. This tends to be a positive money script because it leads to healthy saving and investing behaviors that often lead to long-term financial success.
According to DataPoint, knowing which money script your client falls into is the first step toward helping them make healthier financial choices in the future.
“When people talk to me about money, they aren’t just talking about dollars and cents. They’re talking about trust, safety, status, significance, empowerment, control and identity,” Lere noted. “When I had an invitation to step into the finance world, I was pleased to learn that more wealth management professionals were recognizing the need to get some training in psychology so they can help clients make better decisions with tools beyond math and spreadsheets,” she told me.
Lere said she’s often asked what’s preventing numbers-oriented financial advisors, including CPAs, from becoming more empathetic with their clients and from being better attuned to emotional clues clients are giving them.
“Quite simply it comes down to training,” she said. “Most advisors are trained on the left-brain economic side of things – the numbers. That’s where they feel most comfortable, confident and competent. But when you stay entirely in the ‘numbers’ lane, you’re actually helping clients avoid the murky underbelly of the psychology of money,” she said. “What’s going on in their heads can be scarier to explore than numbers on a financial statement. Advisors need to get the right side of the brain involved, too.”
Self-awareness: Advisors Must Understand Their Own Relationship with Money in Order to Provide Holistic Advice to Clients
Some of the work Lere does with financial advisors is helping them tell their own money stories. Advisors talk about money all day long with clients. But if they haven’t taken the “emotional side of money” journey themselves, they shouldn’t be asking clients to take it, she noted. “When we start having emotional conversations with someone, we are entering a space in which you might not always know what to say. We create so many ceilings for ourselves because we cannot tolerate discomfort. So, we play it safe. This is something we see play out again and again in the financial advisory industry,” Lere asserted.
When people look at financial behavior, she said it’s easy to see what everyone else is doing and make blanket assumptions such as, “Oh, they’re just being irrational and biased.” But if we step back, we realize they’re not being irrational, she said. As humans, we are wired for survival.
“When you take the time to gather enough context so you can understand someone’s story, you will see that at one point along the way, the behavior they’re exhibiting was on some level adaptive,” Lere added. “The behavior may not fit certain circumstances, but people, by and large, aren’t trying to blow up their lives or hurt the people around them. That’s one of the ways we misinterpret why someone is doing what they’re doing.”
Impact of Money Messages Received in Childhood
As mentioned earlier, CPAs and other advisors will be much more successful if they go through the self-awareness journey themselves. Research shows that both financial advisors and their clients are greatly influenced by the money messages they received growing up.
“Our core beliefs about money are often set into motion very early on in our lives,” said Lere. “We develop those beliefs based on what we learn experientially from what is taught to us,” by influential figures in our lives. “There are many messages that become the internal scripts we use to articulate what we believe about money. These scripts can be related to financial behaviors – what we believe is acceptable and normal about spending and saving for instance,” she added. Like Lere, I’ve seen how many of our firm’s clients transfer negative associations with money from childhood into adulthood. In fact, many advisors also allow the money messages they received while growing up to influence the advice they give to their clients.
“If our parents or extended family had a lot of stress and anxiety about money, that often colors our beliefs about money,” said Lere. “If a client has convinced themselves that finding a job is really stressful, or that they’ll never have enough money, or that money is something families don’t talk about – they only fight about it – that’s going to influence their perception, feelings, comfort and confidence with money as they go through life.”
How Advisors Can Improve Their Self-awareness
As many of the experts in my book have discussed, self-awareness is a key component of emotional intelligence, but it takes practice to achieve and most people need outside help and coaching to improve their self-awareness because we have so many blind spots. The great news is that self-awareness is a set of skills we can learn and develop by working with a therapist, leadership trainer or coach. You need a guide and mentor on the journey with you to help you understand how you may be getting in your own way without realizing it.
“We live in an uncertain world and we must tolerate a lot of volatility in the stock market, economy and geopolitical arena,” noted Lere. “These factors can be highly destabilizing and anxiety-provoking for many people. When it comes to financial stress, the question keeping so many people up at night is: ‘Am I going to be okay?’” Lere said.
Goalposts That Never Get Closer
Many people don’t necessarily believe that they are going to be okay. Further, they worry they’ll never have enough money and could eventually run out of it. “The issue of not having enough money is huge and is highly charged,” said Lere. “One of the main drivers of financial stress is being on a hedonic treadmill and telling themselves, ‘Whatever I have, I need more; whatever I have, I need more.’ And that’s why having more money is often not the solution to someone’s financial stress or anxiety,” she explained. “But if you ask most people what would make them happier or more financially secure, they’ll tell you, ‘If I just had a little bit more money, I would feel okay.’ But that’s an illusion and it creates a world of pain for people because the goalpost they’re striving for just keeps moving further away.”
In their provocative book, “The Gap and the Gain,” Benjamin Hardy and Dan Sullivan spend a lot of time exploring why people tend to resort to “gap-thinking” – focusing on where you are now and where you want to be instead of on “gain-thinking,” which focuses on how far you’ve come, or the “gains” you’ve made. According to the authors, gap-thinking is detrimental to your happiness, self-esteem and physical health, whereas gain-thinking improves these aspects of life. Gain-thinking helps you overcome the feeling that your financial goalposts are constantly in the distance.
Let’s talk about the importance of values and how they really help our clients (and us) drive toward their goals and make the necessary behavior changes to get there.
Quite simply, our values help us get clarity about our “why” – the driving force that fuels your passion and gives meaning to your life. In other words, it’s about having clarity about what gets you out of bed in the morning and it’s really important to have someone really step back and be honest with themselves about their values. Often there’s a disconnect between professed priorities and what someone is living out. You know what really tells the truth about what’s most important to a person?
Their Calendar and Their Bank Account
There’s a real opportunity to promote positive behavior change, when you can help a client see a discrepancy between what they’re telling you is most important to them and what they’re actually doing. So, get curious with your client and ask them, “Is this the way you want to keep going?” If not, then ask them what they’re willing to do differently. Because if they don’t change their behavior, they won’t make any progress toward their goals or happiness.
As accounting professionals, you are often the financial “first responder” for your clients. You may not be accustomed to behavioral finance principles. But when you’re reviewing a client’s QuickBooks and see all those debits and credits, it becomes readily apparent they’re not often making the right financial decisions, especially if they are business owners. How can you help clients start making the right behavior changes and perhaps tie the business back to their values?
Scaling Questions: Your Next Superpower
As financial professionals, we are always dying to know is there a single magic bullet question we can ask during a discovery meeting or client check-in meeting that could penetrate to the heart of a person’s concerns and provide insight into how to offer them advice.
I’m here to tell you the answer is no. There isn’t a magic bullet question. Instead, I’m here to give you a methodology you can use to uncover a client’s feelings and perceptions, and a way to measure progress toward goals. Enter scaling questions.
Scaling questions ask clients to rate their feelings about important issues they face or goals to which they’re striving, typically on a scale of 0 to 10. For example, “On a scale from 0 to 10, how confident are you about your finances?”
The reason I like scaling questions is because they help advisors assess the degree to which a client is concerned about something (instead of just “I’m unhappy” or “I’m worried”) and this makes their feelings and concerns more tangible and easier to discuss.
Once established, scaling questions can help clients evaluate where they are in relation to their financial and life goals. From there we can ask them what they think it would take to improve their score and/or get to a 10, which represents the ideal state. Scaling questions can be used to understand a client’s satisfaction with their financial and life situation, their feelings about their future, or their readiness to make changes. For instance, you might ask, “On a scale of 0 to 10, how prepared do you feel for retirement?” or “What changes would you need to make to your business so you could take six weeks of vacation every year, without lying awake all night?” This kind of thinking can be incredibly eye-opening for clients.
In summary, scaling questions can:
- Provide a quick assessment of a client’s current state
- Help clients articulate their goals and identify specific steps for improvement. “You are a 6 when it comes to your savings goal; what would make that a 10?”
- Encourage clients to reflect on their progress and what has been working well for them
- Facilitate a more human-first approach to a conversation that empowers advisors to have more meaningful conversations
- Give advisors a tool to understand the psychological and emotional makeup of their client