|By PAUL SULLIVAN|
Break your financial life into chapters. Assign a high point, a low point and a turning point to each chapter. What’s the story and what stands out?
It sounds like a party game. But it was a survey created by
“We wanted to isolate the most meaningful moments in a person’s life,” he said.
One of the striking findings was that people rarely mentioned investment decisions among the most important events in their lives. What did stand out, even decades later, were moments when they made tough choices, often around spending and working, he said.
Adviser firms, large and small, independent and connected to large brokerages, are trying to harness research like Mr. Riedel’s to find better ways to service — and let’s be honest, attract and retain — affluent clients. Some are focused on clients in their 40s and 50s who can still make changes to their financial lives; others are trying to talk directly to some of the 10,000 baby boomers turning 65 each day.
Driving it all is a desire to be the firm that can address in some meaningful way the anxiety investors face around money. A recent
(The top three concerns, the study found, were an illness that would use up their savings, outliving their money or seeing inflation erode the value of their savings.)
The subjects in Mr. Riedel’s survey had investable assets greater than
“People seek financial guidance when they have someone else to worry about,” he said. “Everyone had to meet certain demographic criteria, but also more subjective criteria. We wanted people who were not just do-it-yourselfers. We wanted people who were pretty high on the help-seeker scale.”
At the start of the project, he said, he discarded the traditional life cycle financial planning model, with its three phases: accumulation of wealth, followed by the protection of it in the middle years and then the distribution of it later in life. “That method says life is composed of fairly predictable stages, and you just have to match guidance to that phase,” he said.
In an effort to uncover a more realistic pattern, he used techniques of narrative psychology, asking the participants about the highs, lows and turning points in their financial lives.
By assigning certain codes to their answers, he was able to come up with four categories that better captured the stages of a person’s financial existence — working, spending, saving and investing.
“The traditional model says a financial life is about saving and investing, but when people talk about their financial lives they talk about working and spending,” he said. “It accounted for 90 percent of what we heard. Working and spending provide the drama of our lives.”
Crucial, though, were what people labeled the turning points. They were almost all about trade-offs in life. Do you go to graduate school, and if so do you go to the top program or the one closer to home? Do you start your own business later in life or stay with the security of the job you’ve held for decades?
“The big ‘aha!’ moment for us was that a financial life really isn’t about money,”
“Every single financial decision is either moving you toward or away from your ideal life,” he said. “To me, that’s a fascinating idea. People said, am I going to do the things that I want to make me happy, or am I going to go after money? Your ideal self and your financial self are often at war.”
The trade-offs are time, money and energy. As
“Money lets you get more time — you can get more babysitting, you can get a driver to be more efficient, you can at least expand your uses of time,” he said. “But when you make those trade-offs, one way or another you’ll never forget it.”
To develop the program,
As part of its “advice beyond investing” campaign, UBS Wealth Management is beginning a financial education program next month that will work with clients and their children from elementary school to the early professional years.
“When we ask our clients about what they’re thinking, the financial stuff is at the bottom,” said
At the most basic level, the push to change the adviser-client relationship by these very different firms makes sense. There are robo-advisers and low-cost brokerages that can strip away most of the costs from investing money.
But the question is how do firms implement this new way, and can clients trust it? This advice, after all, is going to make the difference in someone’s financial life. Yet it is being delivered by an adviser who may not be able to go beyond investment analysis.
“Candidly, a lot of advisers are more engineering-, math-focused and they get uncomfortable with these discussions,”
And to help both sides of the discussion, the firm has divided the process into steps: understanding priorities, setting up goals and then tracking both to make sure they’re in alignment.
Knowing this is how firms are approaching them, clients need to find advisers with whom they can communicate. Otherwise, they’re not only wasting the money they pay in fees; they’re missing the opportunities to improve their financial lives.
“The marketplace has realized that people are not better off if they do slightly better than the S.&P. 500 and make stupid life choices,”
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|Source:||New York Times Digital|