What is the “It”? The “it” is a Fourth Marriage—the marriage between Self and Money. (Click HERE for my Sept. 17, 2013 post referencing the other three marriages per David Whyte).One of the greatest teachers on relationships said,
“No one can serve two masters. Either you will hate the one and love the other, or you will be devoted to the one and despise the other. You cannot serve both God and money.“ (Matthew 6:24).
Those of us who manage others’ assets and advise them how to align their financial planning with their life goals have our own issues with money. We all, in fact, have a lifetime of our own often unconscious “money scripts” that can create potential conflicts of interest. Deborah Price of the Money Coaching Institute offers a simple survey tool to shed some light on our money behaviors. Price’s Money Type Quiz will illuminate specific language about your own and others’ attitudes and behaviors related to money.
Regardless of which side of the business table you sit at, being aware of your money type can help shape your attitudes and actions about the following:
- when giving or receiving advice
- when making good decisions about whether you view money from your business or your personal finances as “expenses” or “investments”
- present or future consumption
- something dreadful or awesome.
Drawing on the latest research in neuroscience, neuroeconomics and behavioral finance, Price refers to “three levels of management” in the brain that govern our financial decision-making: lower management, middle management and executive management/CFO.
This has been with us for millions of years and is the most primitive part of the brain. It is the part of our brain that is mostly instinctive and reactive; it can trigger our fight/flight/freeze responses. We literally feel this when we erupt in anger (fight), feel our blood pressure rise (flight), or have our stomach churn or brain slow to a near standstill (freeze) at the thought of meeting with a financial planner.
This kicks in when the brain accesses conscious or unconscious memories and feelings from our childhood. This part of our financial decision-making can cause patterns of avoidance or resistance relative to money or other adverse behaviors due to uncomfortable feelings or associated money memories and experiences from childhood and beyond. They can also lead to behaviors like procrastination or rash, instinctive responses to a hot piece of market information. We “know” just enough to be dangerous!
Executive Management/The CFO
This part of our brain is the trained, rational decision-maker that takes a slower, more disciplined approach to money matters (rather than emotional, or reactionary like the lower and middle management brains!). This part makes the final decisions based on the best holistic information and strategic planning we give or receive on opposite sides of the financial planning table.
Other behavioral finance experts have noted that the key to good financial advising is to help the client keep all three levels of management talking with each other. The temptation is to appeal to the CFO—where most CFPs excel–and view the other two levels of management as not worth the time. However, the backlash comes when the other levels are not taken seriously and rebel causing our clients (and us) to make unwise decisions.
Understanding our own “scripts” is the first step to understanding the financial lexicon of our clients!
Next time: Tools for your toolkit gleaned from the Sept. 12, 2013 Colorado Financial Planning Association Symposium.
Be sure to take the free assessment to increase your awareness of your own relationship with money.