Financial Wellbeing: A Holistic Approach for Advisers and Coaches

Financial advisers, business coaches and accountants frequently encounter the challenge of clients not following through on sound financial guidance. This can prevent growth and cause frustration...

Making sense of why we make the financial decisions we do isn’t just about numbers on a page; it’s deeply intertwined with a complex web of psychological factors and the diverse backgrounds of our clients, including neurodivergence and cultural influences.

?? ???? This newsletter is information for both financial service and support professionals AND the clients they support.

<<<<< If you like what you read here, feel free to get in touch with me (Krystle McGilvery) for business support, finance coaching, and workshop or programme curation and delivery. I specialise in providing behavioural-psychology-informed personal and business financial training. >>>>

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?? I recently confessed to not having empathy before diving into behavioral economics and learning about the psychology behind our decisions.

As a coach, financial adviser or accountant, understanding these layers can profoundly transform the advice you offer, significantly impacting your clients’ financial wellbeing. I recently confessed to not having empathy before diving into behavioral economics, and learning about the psychology behind our decisions. Diving into the psychology and diversity behind financial decisions can transform your approach, enabling you to offer more impactful, empathetic and tailored guidance.

?? The Role of Emotions

As a professional guiding others, it's crucial to recognise these emotional states and address them.

We had a client who was riddled with financial worries and anxiety. They were ignoring their debt letters and barely taking home a decent wage from their business, albeit generating more than ￡10,000 every month. Their financial stress stopped them from assessing their financial position and strategically designing their route out of debt.

Emotions play a pivotal role in financial decision-making. Fear, excitement and stress can skew choices away from long-term goals. As a professional guiding others, it's crucial to recognise these emotional states and address them. Offer reassurance in moments of fear, temper excitement with realism and provide strategies to manage stress, ensuring decisions are made with a clear head.

?? Cognitive Biases and Their Impact

Our brains are wired to take shortcuts, known as cognitive biases, which can lead us astray financially. These can explain why people say they want to save but never set up the standing order, or splurge on a Friday night when out with friends, leaving their bank account in the minus.

People may follow financial trends among peers or family without considering if it’s the right choice for them.

Two common cognitive biases are:

• Loss Aversion: The fear of losing money can often be more powerful than the potential joy of gaining it. This can lead clients to avoid beneficial financial risks. Encourage them to weigh decisions carefully, balancing the potential for loss against the opportunity for gain.
• The Herd Effect: People may follow financial trends among peers or family without considering if it’s the right choice for them. Encourage clients to focus on their personal financial goals and circumstances rather than moving with the crowd.

?? Goal Setting and Accountability

Setting clear, achievable financial goals is a powerful motivator and can help overcome psychological barriers. Work with your clients to define these goals and break them down into actionable steps. This approach not only provides a roadmap but also a series of attainable victories along the way, reinforcing positive decision-making.

?? Overcoming Psychological Barriers

As a coach, accountant or adviser, here are some strategies to help your clients navigate their psychological predispositions:

? Education

Empower clients with knowledge about common psychological traps. This includes those mentioned above, along with many others - the empathy gap, overconfidence and familiarity bias, for example. Understanding is the first step to overcoming them.

? Mindfulness

Encourage clients to practise mindfulness in their financial decisions. This may sound a little woo-woo but clarity of mind, control and focus will support sound financial decision-making. Taking a moment to reflect can prevent impulsive decisions driven by emotions or biases.

? Behavioural Change Techniques

Implement techniques such as setting up automatic savings or investment plans to help clients make positive financial habits automatic, reducing the impact of biases and emotions. Consider including trusted behavioural change frameworks in your service to compliment the guidance and advice you provide.

?????? Embracing Diversity in Financial Decision-Making

Cultural backgrounds influence financial beliefs and practices, requiring culturally sensitive dialogue.

Understanding the influence of neurodivergence and cultural backgrounds adds depth to financial guidance. Neurodivergent individuals may approach financial decisions differently, necessitating tailored strategies that leverage their strengths and accommodate their challenges. This also impacts business, a topic I recently raised in Parliament on a visit to No. 10 Downing Street.

Below are some of the findings of recent research carried out by Monzo Bank .

Similarly, cultural backgrounds influence financial beliefs and practices, requiring culturally sensitive dialogues to develop tailored advice that respects the client's values and goals.

Developing cultural competency, employing inclusive communication, customising financial strategies and engaging in collaborative decision-making is key to accommodating the full spectrum of human diversity in financial planning.

Conclusion

The journey to financial wellbeing is multifaceted, involving an understanding of the mind, emotions, cognitive biases and the rich diversity of human backgrounds. By acknowledging these elements and adopting inclusive, empathetic strategies, financial professionals can offer nuanced, effective advice.

This approach not only aids in making informed financial choices but also fosters deeper, more trusting relationships with clients, supporting their financial wellbeing in a truly holistic manner. Embracing this comprehensive view of financial decision-making is essential for guiding clients towards achieving their financial goals.

If you feel you would benefit from speaking with me about better supporting your clients, get in touch at [email protected] or send me a DM.

I'm Krystle McGilvery, a Business Partner and Money Coach for Professionals and Service-Based entrepreneurs, Chartered Accountant, and CBT Coach. My work helps individuals transform their money mindset, enhancing both their financial situation and confidence. Visit Mind Over Money to find out more. Or learn more about me here.