The Impact of Money on Your Family

What has been the impact of money on your family? This is a big question and one often addressed in a family meeting. Also, it is often asked by your financial advisor in the financial planning discussion.

There will be both positive and negative impacts of money on a family. In many ways these impacts will shape who the family is, determine the family relationships, define the family legacy and how the family is remembered by others. So, the impact of money is very significant.

Importantly, the impacts of money on the family will also shape each family member’s relationship to money. Your relationship to money will then have a large bearing on your relationship with the family.

Another question for a family meeting is what beliefs about money did your family give you? To understand this for yourself is very powerful for your development and building a healthy relationship to money. Then, having the family members share this together will be very revealing about their attitudes to the family and its purpose. Because every one in the family is different, there will be no surprise to find very different attitudes.

Remember, money and the belief systems built around it can do a lot of good in families and also it can do a lot of harm. The key point is to understand both perspectives for your own quality of life, financial planning and also building healthy family relationships and communication.

If you want a really good book to read on this topic, then get the Golden Ghetto by Jessie O’Neill.

Review Your Relationship with Money

Recently, I have had a great experience in reading a book called The Energy of Money by Maria Nemeth. I would thoroughly recommend this book to any person who is interested in better understanding their relationship to money. After all, this is what I have been advocating very strongly in my past few blogs. To become financially educated and realize your potential, you need to understand who you are and why you make the life and financial decisions that you do.

Maria’s book is very consistent with the philosophy that we have at Financial DNA that life and money decisions are totally integrated and interdependent. Related to this point Maria explains very well how ultimately, your success comes down to how you handle energy. The only difference is that Financial DNA goes one step further and provides a robust and University validated system to measure your energy based on profiling who you are.

In the book, Maria says that: “Our relationship with money is a metaphor for our relationship with all forms of energy: time, physical, vitality, enjoyment, creativity and support of friends”. She then goes on to explain that these energies are what empower our lives. Without any one of them our life becomes difficult. Each is interdependent. Your success and comfort with money will be echoed through all of these areas. Maria says that when you learn to use money energy, you can learn to use any form of energy with ease. Our process starts with a Quality Life Review so that we can see which of these areas you are currently strong in and those which are a struggle and need further development. This process is key to successful financial planning because it is sending a message of where potentially your energy is and where it needs to be.

Also, related to all of this we need to be clear about what is meant by “successful” people. This is not just about financial success. Maria defines successful people as those who have succeeded in using money to realize their hearts’ desires as well as people who have used money to become comfortable or wealthy personally and professionally.

Think about your own definition of success and your energy. How does that relate to money?

Financial Education in Turbulent Times

My last couple of blogs have really hit on the issue of financial education to develop greater financial capability for the consumer. Why am I harping on it more? Yes, it is my passion and the core of why Financial DNA was developed. However, the need is now “red hot” with the financial markets in turbulence and many people very concerned about how they will unwind. Are we at the lows yet? It would not seem likely. So, there is potential for a lot more concern and emotion yet.

The question becomes how will you behave in these turbulent times? What decisions will you make? How will you make them?

Every one has emotions. Further, nothing more than money can trigger your emotions and cause you to make irrational decisions. The key is to have greater self understanding of your emotions and propensities to making financial decisions. Also, it is important that you stay focused on your life purpose. This may sound lofty and big picture. However, your life purpose is the foundation of your goals and your wealth creation strategies. I have always seen that those who stay focused on their life purpose are the ones who make it through turbulent times and manage their emotions.

Remember that 5% of your wealth will come from investments and 95% from your behavior. So, understanding your behavior will get the results in the end.

So, what is the next step? Get more of the right financial education and become financially literate. The focus of this education should clearly be to become more educated about who you are and your life purpose. The Financial DNA purpose and that of our Wealth Mentors is to provide you with this education. Ultimately if you are interested in preserving your wealth in turbulent times then this is the best strategy out there.

The Role of Advisors in Consumer Education

In my last blog I discussed how regulators are pushing for greater consumer “financial capability” and how the Irish regulator had recently issued a report on this. In the Netherlands, consumer financial capability is also a huge issue. Yesterday, I met with the Netherlands Authority for Financial Markets (AFM) along with our Country Operator, Symon Jagersma to discuss this topic. We also demonstrated how the Financial DNA Discovery Process is practically used to enhance consumer financial capability.

In demonstrating our Financial DNA process the key point that we made was that financial capability is very tied to understanding your own behavior. Your behavior is totally intertwined with financial decision making. The point being that how you make financial decisions and handle money is related to who you are, your life and your relationship with self and others. This is what the Financial DNA system provides for the consumer, and also the advisor. Financial DNA was originally built based on our passion to see the consumer receive education to become more financially empowered and in our view this starts with greater self-understanding. Consumer financial education does not start with understanding the technical aspects of alpha and beta and what a stock or bond is, or hedge funds.

So, we believe that financial advisors must play a greater role in consumer financial education starting with client behavior. This is not just about discovery of the client’s risk tolerance to build a portfolio. The process must also be educational on an on-going basis. Hence why we have promoted the role of the advisor as a “Wealth Mentor”.

Ultimately, I believe that the consumer should expect financial education from an advisor (or arranged by the advisor) which addresses self understanding about their financial motivations, attitudes and beliefs, how to set goals based on life purpose, and communication about money. Advisors are not being asked to be psychologists rather just have a greater awareness of what drives financial behaviors. So why not encourage the consumer to ask for this type of education when engaging the advisor? Most checklists out there, including from the CFP Board, only address issues like the qualifications and experience of the advisor and how fees will be charged. These points are important. However, there needs to be more depth in the advisor selection checklist with issues of what financial education the consumer will receive, the discovery process followed, and other important advisory processes that will be used to build the financial plan.

My advice to the consumer is to ask more questions up-front about the delivery of these types of financial education programs. By doing so, they will more likely choose a “top shelf” advisor who will look after their interests. If the advisor is delivering this type of education then it is likely that they will have personally participated, and hence be a more client centric advisor.