A Financial Planner wears two hats; life coach and financial coach. In my early days as a Financial Planner, like many planners, rather than focus on the touchy feely part, I tended to focus on the numbers and the plan but invariably the job involves an element of life coaching, because you’re talking to people about what they want to achieve, what they value, the level of risk they are willing and able to take to get there and putting a plan in place to do that.
In many cases clients confide in you about issues they haven’t divulged to anyone but the people closest to them. Issues that have helped form the way they think about money. What they would do if money was no object? A bereavement or maybe a health scare that affected their thinking about money. How many children they would like to have? What is most important to them? What keeps them awake at night? As one marketing campaign says, when you talk to clients about money, you’re talking about life.
Where (as in most cases) income or resources are limited, drawing up a plan means the client may have to prioritise so it forces them to make life choices which are fundamental to their values. In addition, a critical factor in investment management is talking to the client in advance about how they will react if they hit turbulence along the way. Nobody loses money because of something that happened in the market. If you are appropriately diversified poor stock selection won’t be your ruination. Behavioural finance tells us that people lose money because they take actions during times of high market volatility which increase rather than reduce losses. Discussion of all of these issues invariably veers towards the touchy feely.
When someone decides to engage in financial planning, there is a gap between where they are financially and in life, and where they want to be. They may not have had good money management habits in their younger years. They might never have felt the need to take a structured approach. Sometimes it might simply be down to a lack of focus on managing their finances because they are busy doing what they do.
So, do people’s financial habits change as they age? This is a question I’ve asked myself since my early days working in finance, and the conclusion I’ve come to over the years is that for some people, as their priorities change, their behaviour does too. I know people who although profligate in their younger years, are now very financially responsible. Most people however, find it difficult to change their habits, and if they have got to adulthood and still haven’t changed, then they are less likely to do so now. Those that do, do so because they realise (or a Financial Planner shows them) the dividend that will result; not wanting to live a hand to mouth existence they put a plan in place to arrive at each event in their life with the resources available to fulfil their objectives. This doesn’t happen for everyone, so it’s just as well that there is another way that people can change.
Events can change people. You may know someone who went through a traumatic event and was immediately changed by it. Traumatic events can change people or give them the opportunity to change;
Because they can show the person what is wrong.
Because they provide space, cover, and a turning point.
Because people expect that the person will change so no explanation for the change is required.
The current pandemic represents such an opportunity for anyone who isn’t happy with their finances. The last nine months have acted like what is referred to in finance as a standstill arrangement. Our lives have been stripped back to basics and in many cases we’ve been left with only the most essential (and most important) parts. The pandemic has acted as a “reset” for a lot of people.
When this is over no one is going to wonder if you choose to pursue the career you always wanted instead of the safe bet you fell into after college. No one is going to wonder that you no longer drive a high end current year car or that you relocated from Rathmines to Rathdowney. If you were able to make do without that expensive habit during lockdown, you can leave it behind if you choose to.
If you aren’t feeling the motivation, maybe you need to visualise it. Write down your objectives. Write down what you would aim for if money was no object. Don’t temper your objectives in terms of what you think you can achieve; your planner has methods for dealing with this, and drafting a financial plan would be no fun if it didn’t require some financial engineering. Most real Financial Planners will give you the first meeting free of charge and will only take you on if they know they can help you. A real financial plan while not cheap, will cost you nothing.
If you want to change your financial trajectory, now is a great time. Don’t waste this.
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© Eoghan Gavigan 1 November 2020
