Financial Planning > Behavioral Finance

Financial Planning: The Antidote for the More Matrix

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Maybe it was my recent writing about the late Dick Wagner (the driving force behind the notion that financial planners need to understand their clients’ relationship with money) that renewed my interest in the more philosophical aspects of financial advice. Or perhaps it was citing Jim Schwartz’s seminal 1992 financial planning book “Enough” in my May 3 blog, “Strike Three: Is Index Investing Really a Swing and a Miss?

But regardless of my motivation, I read with great interest Schwartz’s latest email blast based on a December 1999 piece he wrote about the dark side of “Enough,” titled “The More Matrix: Controlling More-Ons.” As the title suggests, this missive is about the human craving for “more” and why financial advisors need both to understand it and to help their clients overcome it.

(Related: The Human Side of Financial Planning: George Kinder Talks About Dick Wagner)

“The fear of extinction feeds the overriding cultural matrix of the ‘More Messiah’ — regardless of communist, capitalist or socialist orientations,” Schwartz wrote. “As Dennis Prager once stated: ‘The first word out of a baby’s mouth is ‘mama’ (love), the second word is ‘dada’ (security), and every other word thereafter [is about] more.”

As the title implies, Schwartz’s first book is about the need for financial planners to help their clients determine how much “enough” money in their lives would be so that together, they can create a financial plan to get there. It was Schwartz’s book that led me to realize that those still popular “risk tolerance” questionnaires are asking exactly the wrong questions. The key question is not how much risk clients can bear, but rather, how much risk they need to take to reach their goals — to get enough.

It is the force of the delusion of “more” that drives us to ask the first question — and to take as much risk as possible. Therefore, it follows that clients need financial advisors not only to help them determine how much “enough” will be, but also to overcome their instinctive drive for “more.”

“The More Matrix [feeds] off the envy, desire, acquisition and the idolization of ‘more’ as the Savior currency,” he wrote, as well as the negativity of comparison: “‘I’m No. 1, you’re not.’”

Schwartz wrote, “Be it money, knowledge, connections, learnedness, there is always an external ‘if only’ underlying [the] drive for more, which ironically exposes the Matrix’s prey and reinforcing lack.”

The antidote for this seemingly universal drive for “more” is “enough”; that is, for advisors to help their clients discover just how much “enough” would be, and to meet their needs and key wants, as well as those of their spouse, children and, possibly, grandchildren. Those needs and wants typically include education, housing, health care, and favorite avocations and hobbies.

Although its original purpose was to sell “more,” ironically, it turns out that financial planning is the perfect tool for helping clients overcome Schwartz’s More Matrix because it provides a method for visualizing and quantifying “enough.” As Schwartz wrote: “The trick, it seems, is how to escape the prison of the More Matrix” without just trading one open-ended set of goals for another. That would be just “rearranging the seats on the Titanic.”

— Read Want Stronger Client Relationships? Get Personal on ThinkAdvisor.