The American humourist H. L. Mencken famously observed, “When someone says ‘It’s not about the money’, it’s about the money”.
Under stress, we tend to project our emotions and there is nothing it is easier to project them on to than something that is entirely devoid of any emotional characteristics of its own. Divorce is the classic case, where issues to do with emotions prompted by betrayal, infidelity and so forth are projected on to disputes about money.
Often it seems that these disputes need to consume a certain amount of money in fees and costs before the antagonists are capable of dealing with the issues directly.
Most of us have gone with Mencken at some point in our lives. But as we become more mature financially and emotionally we can learn to avoid the deeper potholes in the road.
Does the job of a financial adviser include facilitating this learning process for clients? The financial planner George Kinder, life coach Maria Nemeth and others – including many members of the Institute of Financial Planning – would say that it should. By asking clients to dream their future without reference to money, they aim to liberate clients from the constraints, often artificial and unnecessary, that they think money imposes on them.
In this respect I agree with life planners: a proper financial plan cannot be based on financial objectives. It must be based on life goals and ambitions. Eliciting those goals in the first place requires the adviser to distance themselves from the money and encourage clients to treat money as a means and not an end.
The translation of goals in to financial terms is a key skill of the financial planner that requires exploring positive and negative implications of goals, timescales and circumstances both objectively and empathetically. If your head is full of the QCE4 syllabus, it is not so easy to do – although an awareness of behavioural finance can help put the technical stuff in perspective.
How much further should the adviser go? How far in to positioning the money journey as cognate with the learning journey of life? How far into relationships and their significance; in to risky career changes or frameworks like Kinder’s aloha that purport to give the journey meaning?
More people, especially aged under 40, are willing to engage in this way as clients and probably feel that the secretive uptightness about money typical of their parents’ generation is so last century. But are advisers ready to become counsellors? For that is what they may become if their guidance ceases to be merely financial but encompasses career, relationships and business, especially if they adopt a framework like those of Kinder and Nemeth.
I don’t question the right of advisers to take on these roles, provided they acquire the necessary skills. My reservations are about the money. Kinder, Nemeth and other authors of money journeybbooks cannot help concluding that more money is better. Like the makers of cult film The Secret, they end up ascribing a positive moral value to money, though they avoid the film’s distasteful you-deserve-to-be-rich message.
If you share my belief that a good financial adviser should not ascribe any value to money itself, either positive or negative, is this purely a moral judgment or is it also based on professional and practical considerations?
Chris Gilchrist is director of FiveWays Financial Planning, the author of the Taxbriefs adviser guide ‘The Process of Financial Planning’ and edits investment newsletter The IRS Report