Your Money and Your Mind

How to help your clients develop a healthier money mindset

According to the ancient Greek philosopher Aristotle, the purpose and ultimate goal in life is to achieve happiness. For centuries, humans have chased money to pursue happiness, bringing up the age-old question “Does money buy happiness?”

The research is in

In his book, Happiness: Lessons from a New Science, Professor Richard Layard stated that people are no happier today than 50 years ago, despite incomes more than doubling in that timeframe. Other studies have shown that money can buy happiness, but only up to a point. While research suggests money may not buy more happiness, it also shows that having an unhealthy relationship with money can lead to less happiness. 

How we develop our relationship with money

According to Dr. David Krueger, CEO of MentorPath, our relationship with money is the longest-standing relationship we will ever have. Money starts impacting our life when we are still inside the womb (e.g., the nutrition we receive from our mothers). The journey continues to our death, where money will determine the type of burial we receive. In childhood, we begin to pick up the money behaviours of our parents subconsciously as early as age three. By age seven, our primary money behaviour is already formed. As we grow into adults, other factors influence our money or spending habits, including what we pick up through formal education, the media and life experiences. These factors all contribute to our money relationship, which is how we think, feel and treat our hard-earned money. A healthy money mindset means not having an emotional attachment to money—leading to better choices, more happiness and overall well-being.

The role of the financial advisor

Why should you, the advisor, be concerned about whether your clients are achieving more happiness in life, so long as you are helping them build their wealth? One advisor put it this way, "I am fully invested in the relationships I have with my clients, and I don't just want to make money for them—I want them to enjoy their wealth."

While caring deeply for your clients is admirable, there is a practical reason behind it. Let's say a client exhibits signs of a scarcity mentality and is always expressing concerns that they will never have enough money, even though they have plenty. These types of clients will be more challenging to manage and fully satisfy. Your clients may have an unhealthy relationship with money if they:

• Associate their self worth with their net worth
• Feel guilty spending money
• Spend money carelessly
• Have a lot of credit card debt
• Constantly overspend and make excuses that it's not their fault
• Feel like they have to spend money to enjoy themselves
• Refuse to talk about money
• Talk negatively about money
• View money as anything other than a tool.

So, what can you do to help your clients develop a healthier money mindset?

Developing a healthy money mindset

1. Add financial coaching to your repertoire

Position your coaching role as part of the advice process. Develop your knowledge of psychological, social, cognitive and emotional factors, and how they can impact the way people think about money and the financial decisions they make. Consider reading Layard’s book: Happiness: Lessons from a New Science.

2. Evaluate your client's money attitudes and behaviour

Analyze your clients’ money habits and how they think about money to determine if it’s healthy or dysfunctional. Pay close attention to the language your clients use. Ask specific questions to gain deeper insights into their money behaviour and its origins. For example, “What is your first memory of money?” or “What does money mean to you?”

3. Address unhealthy thinking through your advice

Your role as a financial advisor is to not only help your clients tangibly achieve financial security, but also feel financially secure. These are two different needs, with the latter often being ignored. Talk to clients about their unhealthy money behaviour and explain how it can impact their health, well-being and overall satisfaction with life. Engage your clients in the planning process and educate them on how it can foster positive behavioural changes. For clients who tend to overspend, put more emphasis on savings strategies. If a client tends to underspend, encourage them to spend some money on entertainment and build it into their plan.

4. Improve your clients’ financial literacy

Assess your clients' level of financial literacy and build some education into your advice process and meeting agendas. Consider providing basic knowledge for less financially literate clients, such as “always maintaining income to be greater than expenses” or “saving relative to your income for retirement.” Check in with clients regularly to ensure your financial education is working and that their financial literacy is improving.

You can also consider delivering a financial literacy webinar for all your clients. CI Advisor Consulting has a new presentation called Your mind your money – Train your brain to achieve optimal financial well-being. Ask your CI Global Asset Management sales representative about how you can book CI Advisor Consulting to deliver this presentation to your clients.

Putting it all together

Put your financial coaching hat on to help your clients develop a healthier money mindset. Talk to them about the impact of negative money behaviour on their ability to live their best life. Work to educate them about sound money principles and implement strategies that will encourage good behaviour. In the end, if you can help your clients develop a healthier relationship with money, they will enjoy greater financial well-being, and you will create more client advocates who will go out of their way to tell their friends and family about you.

Important Disclaimers

FOR ADVISOR USE ONLY. No portion of this communication may be reproduced or distributed to clients as it may not comply with Sales Communications requirements.

This document is provided as a general source of information and should not be considered personal, legal, accounting, tax or investment advice, or construed as an endorsement or recommendation of any entity or security discussed. Every effort has been made to ensure that the material contained in this document is accurate at the time of publication.  Market conditions may change which may impact the information contained in this document. All charts and illustrations in this document are for illustrative purposes only. They are not intended to predict or project investment results. Individuals should seek the advice of professionals, as appropriate, regarding any particular investment. Investors should consult their professional advisors prior to implementing any changes to their investment strategies. 

CI Global Asset Management is a registered business name of CI Investments Inc.

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Published October 8, 2021