The New Generation of Financial Advice

Bullets fly as my kid sister and I shake under a blanket on the floor of the car speeding through the streets of Manila, Philippines. My parents are trying to figure out a way to get us out of the country during the devastating coup of December 1989.

What does this have to do with money? Everything.

As a CERTIFIED FINANCIAL PLANNER™ and Registered Life Planner® I spend a lot of my time explaining value. Like the value of working with experts to organize and design their lives for today and tomorrow. Many think a financial planner offers an easy solution - perhaps it’s a hot stock tip or an obscure tax strategy. I’ll come back to this in a moment, but suffice it to say, good financial planning involves a lot of cognitively complex decisions coupled with deep empathy. Decisions like - “how can I simultaneously save for retirement, my kid’s education, and my dream to sail around the world?”

Many of us have similar dreams. But how good are dreams if you're not actively and strategically working towards them? CFP® Professionals like myself are trained to help structure clients’ lives with intelligent designs, expert strategies, and most importantly, results. In fact, 67% of Americans who use a financial advisor believe they have clarity on how much to spend now and save for later compared to 44% of those Americans without an advisor. But many people think of finance and think it’s a cold, lifeless spreadsheet painted in only two realities: red or black.

But to us, the new generation of financial advisors, money lies at the heart of some of your greatest hopes and fears, with complex shades of grey that must be listened to and understood. This means bringing your money out of the abstract and into life.

Doors slam. My dad and his two suitcases disappear. Off to Venezuela, forever. I'm eight years old.

What does this have to do with money? Everything.

We all want to use money better and grow our wealth. But sometimes our brains have their own agenda; which, sometimes, need to be re-written to make progress. In my career I’ve worked with thousands of financial advisors and hundreds of individuals and families. One thing has become clear: your beliefs about money affect how you save, spend and generally behave around it. And no amount of knowledge or planning will help until you face these beliefs.

Moments in your past, like the two I’ve mentioned, were moments my mind held onto. These moments formed unconscious beliefs about money that I carried into my adult years and influenced many of the decisions I made in my 20s. Many of those decisions - like racking up $30,000 in credit card debt at the age of 24 - stemmed from my belief that money, like my father, could disappear at any moment - so better to enjoy the present and pay for it later.

I worked in finance. I understood the markets. But it wasn’t until much later that I realized that it wasn’t about the numbers. If I didn’t unpack these moments and examine them without judgement, they could have a very real, negative effects on my day-to-day life.

Everyone has these moments and everyone’s story is uniquely their own. These moments don’t have to be traumatizing. They can even be pleasant, “Every time I came home with straight A’s on my report card my dad would buy me anything I asked for.” Although generally positive, this memory might have impressed upon you that good, hard work always deserves a monetary reward. Perhaps in adulthood, “good, hard work” is how you define the work you do day-in and day-out. This belief may have resulted in you feeling like you deserve a spending spree as a reward...every time you get paid. By the end of the month, you ask yourself where all the money goes.

So many people think that their issues around money can be solved by simply making more when, in fact, numerous studies have shown that happiness in humans begins to decrease at a certain level of income. In a large study published in Nature Human Behavior, the income range for emotional well-being was between $65,000 - $95,000 for North Americans. Simply making more won’t lead to happiness and overall satisfaction.

What increases happiness? Purpose.

Financial wellness happens when you spend your money in ways that give meaning to your life. And this meaning is tied to your life’s biggest goals and dreams. “Is this purchase supporting my life goals?” Is the kind of thinking that begins to reap the biggest rewards. Because the irony is that when you start spending more meaningfully, you begin increasing not just your happiness, but also your wealth.

I nearly joined one of the leading advisory firms in the U.S. (predominantly owned and operated by men) when I drafted a proposal: I’d spend my time specifically advising and serving women. One week later I received their response: they weren’t interested.

What does this have to do with money? Everything.

Focusing on women is seen by many in this industry to be wasted effort. A generation ago, we weren’t the breadwinners or decision-makers, so the industry built itself around one demographic: wealthy men. A demographic historically not prone to discussing emotion.

I am a multi-racial female in an industry desperately needing an update. I've worked with countless financial advisors and individual clients -- many of them older, white men -- some of whom I consider dear friends. But after examining the unique memories that have shaped my view of money, I decided to carve out a space in an industry that includes everyone. Don’t worry old white men, you too :) But this space isn’t just about race or sex, this space is one where we recognize that you have to face money courageously -- and all the baggage you might unknowingly have around it -- in order to create actual change.

So what can you do today to ignite meaning in your financial life?

Not surprisingly, working with a professional helps. Studies show Americans who work with financial advisors demonstrate higher levels of retirement readiness, disciplined planning, and financial confidence. If you take nothing else from this message, please understand three critical questions you should be asking any financial advisor you’re considering.

The first: Are you a fiduciary?

Just about anyone can call themselves a “Financial Advisor” or an “Investment Consultant”. But only a small handful of these are actually fiduciaries. A fiduciary has a legal duty to act only in the client's best interests. This means they aren’t incentivized by commissions or getting you to buy some expensive insurance policy you might not need. Most advisors who work for big brokerage firms or banks are held to a suitability standard, not a fiduciary standard. In simple terms, it means that these advisors are only required to recommend products that are suitable for a client. These advisors are not necessarily required to put the interest of the client first. After seeing the rather lenient definitions of “suitable” benefit advisors more than their clients, we purposefully founded Mana as a Registered Investment Advisor and joined the ranks of fee-only financial advisors to draw a line in the sand between us and the others.

If you know you’re working with a fiduciary, then you’re off to a great start. But there’s another question to ask a prospective financial advisor: Are you a CFP®?

In our industry, the CFP® marks are considered the gold standard. Certified Financial Planners® must acquire several years of experience related to delivering financial planning services to clients and pass the comprehensive CFP® Certification Exam before they can call themselves a CFP® professional. Of the 270,000 financial advisors in the United States, only 30% are CFP® professionals. All “financial advice” isn’t created equal.  Think about it: would you visit someone who calls themselves a “doctor” who never went to school and earned a MD?

The third piece of advice is harder to measure: Does your financial advisor listen to you?

The emotions that affect our money behavior aren’t always obvious. Unraveling the stories you’ve come to associate your money life with takes great care. The best financial advice has to be catered to the individual -- which requires an empathic understanding of your past. This also means that the path to financial health is, as personal finance guru Dave Ramsey wisely puts it, “a crock pot not a microwave”. There aren’t a lot of magic bullet solutions to immediately “fix” your financial situation. Just like a personal trainer helps instill disciplined methods and expert regimens to help clients achieve physical fitness goals, a financial advisor is someone who’s your partner for the long-haul.

At Mana, we know that re-examining the root causes of behavior, free of judgement, is critical to our client’s financial future. The stories we tell ourselves throughout life are deeply connected to the way we interact with the world. Our relationship with money, not money itself, can empower us and enrich our lives.