In It’s Good To Talk (Part 1) I explored what I learned in therapy (on the counselling courses I did at college last year).
It’s good to talk but I’ve noticed that people often steer clear of talking about money…even though it has such an important role in our lives.
Why the historic taboo around money?
Well, personal finance is…personal. You can’t have a proper conversation about money without touching on values: people’s deeply held beliefs and priorities.
Everyone is different and we all have different upbringings, experiences and backgrounds. These shape our money blueprint.
It’s good to talk. And, during the last couple of months, I’ve been spending a lot of time talking with new subscribers to The Escape Manual. Here’s a section from an email that one sent me:
Many thanks for the Zoom call today.
I remember Jordan Peterson made a particular point about how one could only make a certain amount of progress sorting ones thoughts and ideas alone in one’s own head, real progress only being made in ones thinking when having to put it into words and up for discussion.
Thanks for helping me (re)order my thoughts!
MikeTEM subscriber email (name changed to protect confidentiality)
This is a common theme and I often hear people saying that in their normal life, there is no one else that they can talk to about money, career and financial freedom.
The parallels between coaching and counselling
Everyone is different so there is no One True Church. As someone smart once said: “It is better to follow your own path, however imperfectly, than to follow someone else’s perfectly”.
Doing coaching is a bit like therapy: you respect the uniqueness of the person in front of you, their values and beliefs and their right to make their own choices. It would be a mistake to assume that everyone brings the same financial beliefs, blind spots and background to the party that we do.
You also have to be able to listen more than you speak. So when talking about money with someone, I try to be courteous, helpful and respectful…without sacrificing honesty. When you want to help people, you tell them the truth. Like many things in life, it’s a balancing act.
It’s good to talk. We clarify our thoughts by airing them and getting feedback / new ideas / new angles in conversation with someone else. People learn best with a mixture of reading, discussion and encouragement. There are some things that you only figure out in conversation with others. Without this, we can get stuck in a rut.
There is something magical about talking to another person
Did hiding a problem out of shame or guilt ever make things better? I doubt it.
By airing a problem, you break its hold over you. Sunlight is not only the best disinfectant, it often sparks solutions. Getting it out doesn’t just feel good, it can be a source of lightbulb moments and breakthroughs.
There have been questions / problems / challenges that have bounced around in my head for ages like a pinball bouncing round inside an arcade game. I then verbalise the problem and BING! sometimes it’s solved mentally before I’ve even finished explaining it.
It’s a cliche that therapists don’t give advice, don’t offer solutions and offer nothing concrete to clients. Like all cliches, there is some truth in this. Counsellors are not like doctors who ask some questions, make a diagnosis and then hand down a prescription to go take some pills which will magically fix everything without any effort on the part of the patient.
A counsellor acts as a sounding board and helps the client see new ways of looking at their problems. The client is guided but they own their own problems and come up with their own solutions. Therapy is about doing the work. Often the progress happens between the sessions with the therapist. The therapy or coaching is a catalyst and a learning accelerator but the lightbulb moments can happen at any point.
Self-sabotage is a thing
I learned in therapy that everyone has problems. Even the most polished, outwardly self-assured person is dealing with problems in some area of their life. And even if they aren’t right now, they have in the past and will again in the future.
Achieving and maintaining good mental health is no small achievement in today’s world. To reach financial independence you need to avoid blow-ups and breakdowns. Staying on The Path is not easy…partly because we humans have a remarkable talent for self-sabotage. What makes this even trickier is that we have blind spots.
How to you find your own blind spots?
By getting feedback. People often instinctively avoid asking for feedback because of their defences.
Defences are the way that you protect yourself (your emotions and your belief system) from attack (both perceived attacks and actual attacks). Defences are part of how our unconscious operates. To develop defences you put on emotional armour to shield yourself from being hurt. People tend to:
– be unaware of their defences;
– overlook when their defences are not helping them;
– find it difficult to change when their defences interfere with their capacity to engage with peopleGail Evans, Counselling for Dummies
Wouldn’t it be a tragedy if our defences stopped us from getting useful feedback?
I’m a great believer in learning from trial and error and from my own mistakes. But I don’t let that stop me from getting feedback or from learning from someone else’s hard-won expertise. Working with an expert means you can skip a lot of frustration and confusion – not to mention wasted time and money. Having a teacher / coach / counsellor for a few months can be worth years of trial and error.
Yes you can do it by yourself. I taught myself personal finance (as well as learning from books) but the cost was making some big mistakes along the way that I could have avoided.
Financial advisors are often focussed on selling product
So its good to talk. It’s good to have a sounding board.
Can a financial adviser or financial planner play that role? Yes, a good financial planner understands the importance of behavioural finance and the coaching aspect of their role. Pete Mathew and Andy Hart do great work spreading this message and many other regulated financial planners understand the value of behavioural coaching and incorporate it into their advisory practice.
Unfortunately conflicts of interest are inevitable when paying for advice. Here’s Carl Richards on the subject:
Potential conflicts of interest are inherent in almost any situation when you’re paying for advice. Lawyers, accountants, financial advisors, auto mechanics…we all have to cope with situations when our interests may not fully align with the interests of our clients, at least in the short run.
Your job is to identify those conflicts of interest, and then keep them in mind as you make your decisions. Think of it this way: when you walk into a Toyota dealership, you don’t expect the guys there to tell you that Hondas are the greatest car around. You hope they’re honest, but you know they’re going to try to sell you a Toyota – and you make your decisions accordingly.Carl Richards, The Behavior Gap
The problem is that commissions encourage financial advisers to sell product. And fees levied as a % of your portfolio encourage financial advisers to gather assets under management. That means it’s not financially in their interest to teach you how to manage your own portfolio. And some wealth management firms are really just marketing organisations where all the investment stuff is outsourced and the fees are ridiculously high.
The difference between financial advice and financial coaching
In an ideal world, everyone would have a money mentor; perhaps a rich uncle who was an experienced business owner, entrepreneur, investor and teacher. They would have lots of free time and patience to hear your financial challenges and discuss solutions. But in reality, how many of us have that person in their lives? Not many!
Going to a regulated financial adviser has two advantages. One they can tell you exactly what products (e.g. which fund / insurance policy) to buy. Two, if you sign the right legal docs, they can handle the admin and do the paperwork for you. You can hand over your money and give them the discretion to run your portfolio and this suits some people.
But these advantages can also be disadvantages. If the client doesn’t know how much they’re being charged (and often they don’t) this can be a very bad (not to mention expensive) idea. The other disadvantage of handing everything over to a financial adviser is that the client does not learn, they don’t take ownership and they don’t take responsibility. The client bears the fees and losses so you can see the potential problem here.
You get to choose
Financial coaching is very different from regulated financial advice.
A financial coach is a mixture of teacher, therapist and sounding board. A coach doesn’t tell people what to do, doesn’t sell them stuff and doesn’t give product recommendations. Financial coaching is for grown-ups, people that want to learn and make their own decisions.
Which is best? As ever, it’s contextual. It depends on who and where you are and what you want. The good news is that you get to choose.
Want more help? The Escape Manual is explained * here *