The pandemic has helped lots of younger investors get started, but they should look beyond DIY options to see the really transformative changes early – and proper - wealth management can make.
Dennis Harhalakis, Founder of Cambridge Money Coaching, explains why the emotions behind money issues can cause such trouble between couples, and what wealth managers are doing to help.
Money is an emotive subject. Money issues are the biggest cause of divorce and suicide in the world. What is it about money that causes this problem? Money has been around for thousands of years, so is money the problem, or is it the way we live our lives that causes such conflict and anxiety?
In order to understand this issue, we need to look at how the brain handles money. In evolutionary terms money is really new. Humans split from the rest of the ape family about 7 million years ago and for 99.9% of the time since then money has not existed. Even the way we handle money now has only been in place since the industrial revolution. Before then, less than 10% of commonly used goods and services were bought in the market. We lived in villages and most human needs were taken care of by the family and the community. Traditional agricultural economies had few surpluses and those people who had real money, kings and the aristocracy, were a tiny proportion of the population.
300 years later, everything we do now involves money, and most of the time money is not even physically present at the transaction. But we don’t think of money as simply an artifice for facilitating the transactions of goods and services.
Instead, because of what it can do, money becomes intimately tied to our basic needs: food, sex, shelter, and security. Money becomes imbedded in our brains as a core survival issue. Core survival issues, and our behaviour around them, are driven by the instinctive parts of our brains. Losing your wallet produces the same fear reaction in your mind as a loud bang or nearly being hit by a bus. For those people who have money anxiety, thinking about credit card debt, or mortgage arrears also triggers a fear response. If money represents security, bills become an attack on our security, and any attack on our security triggers an emotional response.
Core survival issues, and our behaviour around them, are driven by the instinctive parts of our brains. Losing your wallet produces the same fear reaction in your mind as a loud bang or nearly being hit by a bus
How does our relationship with money develop? How does money become a core survival issue?
Our money patterns develop in childhood as we absorb the money messages given out by the people closest to us and the broader cultural environment. Children are sponges. The infant brain is designed to learn from anything and everything that is going on around it, and much of that starts by being alert to the social world. Children pick up on social cues long before they learn to speak. They notice the comments we make about money and each other, and when we argue and fight, we send negative messages to our children about money. Because of the way the brain works in childhood, these messages and memories are stored and money becomes associated with emotional states like conflict, guilt, anger, betrayal and fear.
Couples very often have a more “silent partner” on money matters, but by meeting potential wealth managers together you can ensure the right fit for you both and establish a joint relationship right from the start.
In addition, our relationship with money – how we feel about it, how it makes us feel – isn’t generally discussed. So, we enter adulthood with our unique money “stories” often unexplored. Each one of us is different and even in the same family, siblings will have different relationships with money. We end up with this strange situation where we have no training or real understanding about one of the things that our society collectively values the most. We can’t live without money, but often nobody has shown us how to live with it.
We end up with this strange situation where we have no training or real understanding about one of the things that our society collectively values the most. We can’t live without money, but often nobody has shown us how to live with it
What could possibly go wrong?
Well, when it comes to couples and money, quite a lot!
Each partner will have their unique money story, and we don’t usually take time to discuss and understand each other’s’ stories and feelings about money. It’s not what you talk about at the beginning of a relationship and, because it’s not something we generally do anyway, then it never takes place. As a couple, you will generally be fine for a while but when circumstances change, the underlying tensions can really manifest themselves. Money decisions are made from an emotional perspective and this means they are subconscious, instinctive and often driven by fear.
So, how do wealth managers negotiate this minefield?
The wealth management sector is making great strides towards a more nuanced understanding of these issues that recognises the huge importance of the emotional component in money matters – and particularly for couples. In my work training advisers, I encourage them to reflect on their own attitudes and emotions to recognise that their clients may often relate to money in a completely different way. In turn, even the most harmonious of couples might have wildly different attitudes to how their wealth should be managed.
Even the most harmonious of couples might have wildly different attitudes to how their wealth should be managed
The challenge is to help couples develop joint goals for their wealth that meet the financial and psychological needs of both parties. This means defining their values and building saving and investment strategies that align with them. Underlying this will be plenty of weighty questions, like how much to save for retirement or how much investment risk to assume, that are as emotionally charged as they are financially complex.
Good advisers are adept at drawing out individuals’ true attitudes and helping clients see the bigger picture, but the best ones recognise that navigating the money minefield with couples is not necessarily simple or intuitive. My work with advisers focuses on how they can create a framework for open discussion and healthy dialogue. As part of this process, advisers ask each partner why they have made certain choices, and explore using different communication preferences and ways to present information to each partner.
Lastly, couples – and their advisers – need to be aware that money tensions are highest when there are sudden changes in wealth or other circumstances. When couples cannot agree, then breaking them out of the cycle of emotional reactivity is paramount. Couples money coaching can be a very wise investment in gaining understanding and making sure that both partners are pulling in the same direction.
If you are seeking advice as a couple, ensure that you are meeting potential wealth managers together to ensure the right fit for you both
If you are seeking advice as a couple, ensure that you are meeting potential wealth managers together to ensure the right fit for you both. A good wealth management adviser can make all the difference to your financial wellbeing and, in their role as a coach and sounding board for your hopes and fears, they can make all the difference to your emotional wellbeing too – individually and as a couple.