Ever since the financial crisis, clients have expected advisors to understand their psychological needs about money. Alas, eight years later, most FAs still fall short of embracing this vital aspect of wealth advising.
Such “money silence,” pervasive among clients and advisors alike and at all income levels, contributes to the shocking lack of financial literacy in the U.S., business bankruptcies, the high divorce rate and families failing to pass down wealth to succeeding generations. That’s what wealth psychology expert Kathleen Burns Kingsbury tells ThinkAdvisor in an interview.
Her new book, “Breaking Money Silence: How to Shatter Money Taboos, Talk More Openly about Finances and Live a Richer Life” (Praeger) makes a strong case for the damage inflicted by people’s reticence to talk about their feelings concerning money. Almost 50% of Americans say they’d rather discuss politics or death than personal finance, according to Burns Kingsbury, 51, a former psychotherapist and bank examiner who founded consultancy KBK Wealth Connection in 2009. Her clients include Morgan Stanley, Prudential Insurance and TD Ameritrade Institutional.
The U.S. is in crisis mode when it comes to financial literacy, she argues. That stems largely from money silence, which FAs perpetuate by not engaging with clients about the so-called “softer side” of finance.
Not only are clients hurt by FAs’ neglect of that aspect, advisors lose accounts because they fail to address clients’ fears and hopes for the future or how to communicate with their adult children about passing down family wealth. Upshot of the latter? Between 90% and 95% of next gens leave their parents’ advisors once they receive an inheritance, according to Burns Kingsbury, a popular keynote speaker at conferences held by firms and groups such as Barron’s and Financial Planning Association chapters and who teaches psychology in financial planning to Bentley University grad students.
Advisors deliver added value when engaging clients in meaningful money-and-feelings dialogue, which goes far in building emotional connections that make for stickier relationships, Burns Kingsbury stresses.
Her fifth book is a guide on how to begin such conversations and includes rules for couples on, for example, the way to “fight fair financially” (“Be curious … Pretend you are a scientist interviewing a subject for a research project.”)
ThinkAdvisor recently interviewed the consultant, who was on the phone from her office in Waitsfield, Vermont. She talked about how money silence impedes planning for a secure financial future and how FAs are in a unique positon to substantially boost the level of financial literacy in America. Here are excerpts from our conversation:
“There’s a financial crisis in this country that affects us all,” you write. What’s the crisis?
Lack of financial literacy is at a crisis level, but it seems to be a crisis nobody is paying attention to. That’s shocking. People aren’t talking about it, so it fuels itself. Almost two-thirds of Americans are unable to pass a basic financial literary test [the National Financial Capability Study by the FINRA Foundation].
Advisors play a role in perpetuating what you call “money silence” by not engaging clients in discussions about money and emotions.
In our society, talking about money is often taboo. Many advisors unknowingly collude with the idea that it’s okay not to talk about the emotional aspects of money. While a lot of advisors are comfortable discussing dollars and cents, I’ve found in my work that a large majority are uncomfortable, or not as skilled or trained, in talking about the emotional aspects of money.
You write that in the financial services industry, there’s an understanding that talking about feelings concerning money is “nice but not necessary.”
Yes, and what winds up happening is that advisors don’t develop the skills they need to coach and educate people about the human side of finance. So they don’t ask vital questions. The industry needs to do a better job of communicating, especially to the next generation of advisors, that their job isn’t just crunching numbers — it’s having relationships and being able to talk about feelings regarding money.
Are FAs starting to be more open to helping clients in that way?
In the past year or so, there seems to be a bit of a shift in the right direction — a little more talk about behavioral finance at conferences. But the industry is still incredibly focused on the technical aspects.
What’s the fallout from money silence?
One of the biggest reasons that wealth isn’t successfully passed down over several generations is poor family communication about finances and lack of preparation for heirs. That’s a fancy way of saying lack of financial literacy.
You write about families that don’t talk about money. What about families that discuss money too much — they’re constantly fighting about it?
That’s the flip side of money silence. When the subject of money is always contentious, there’s something underneath that’s being avoided, something that money symbolizes that’s causing it to be conflictual.
The industry labels financial communication “the softer side” of finance and as such, isn’t necessary for FAs to address. Yet these “soft skills” are what people actually want from advisors, you write.
They do. Investors want help to feel better about their relationship with money and how they’re passing on their wealth and planning for retirement.
But most advisors are older males; and for the most part, that generation of men didn’t talk about their feelings.
Yes, with the older boomers and the traditionalists [born 1922-1945], you weren’t supposed to share your feelings. The millennials are much more open. There are next-generation advisors saying, “I don’t want it all to be about transactions. I want it to be about relationships and helping people who aren’t already affluent but who are accumulating wealth.”
You write that the money mindset of the millennials is fiscally conservative. That’s surprising.
In some ways, they mirror the traditionalists, many of whom lived through the Great Depression and so, have been frugal savers. Millennials saw their parents go through the financial crisis and the Great Recession and lose some of their retirement savings. Millennials look frivolous — with all the electronic [gear] they buy, for example — but their mindset is much more fiscally conservative: I don’t want to do what my parents did.
What else contributes to the problem of money silence?
Many advisors think that anything touchy-feely is something a [psychological] counselor should deal with. The dilemma is that many people in the mental health field are money-avoidant. Research has shown that. So between advisors who are feeling-avoidant and counselors who are money-avoidant, clients aren’t talking about what they think and feel about money.
As with money, talking about death is a societal taboo. Silence about that is part of why clients’ children don’t stay with their parents’ advisors when their parents die.
Right. During times of transition, advisors lose about 90% of assets. It’s about making a connection, fostering trust and helping families understand that you’re there for them, not just for their parents. That’s an emotional connection and creates the likelihood of the advisor’s keeping those assets.
Why is it important for FAs to have a high level of emotional intelligence: the ability to manage one’s own emotions and to understand and empathize with the emotions of other people?
Advisors that do are better positioned to have long-term relationships with clients, to really get to know them and to be able to foster trust. It means the difference between being a really good advisor and a great, incredibly successful advisor. They’re more likely to make more money and better financial decisions. An advisor with less emotional intelligence may be a very good mathematician and good at investing but isn’t great at connecting with a family and the next generation.
You discuss the myth that men are supposed to know all about money only because they’re men.
Men are much less likely to walk into an advisor’s office and say, “Boy, I’m a mess. I don’t know what I’m doing.” Whereas, women often will do that. But they probably actually know more than they think [about finances].
On the other hand, many women don’t ask advisors financial questions because they’re worried about sounding naïve or stupid.
Yes, and that’s an added pressure on women to be quiet about money. There’s also the perception that “it’s not ladylike” to want a really good return on investment because you might be seen as “too aggressive.” So it’s a kind of double-edged sword for women. The message out there is that women should be more financially fit and know more about investments; but there’s a backlash that it’s not ladylike to be profit-motivated.
Money silence is a reason that women are paid 79 cents to every dollar that men get paid, you argue.
Yes, because if nobody is talking to each other about salaries and what the reasonable wage is, it’s very easy for a company to pay you less and get away with that gender inequality — and maybe not even realize that it’s an unconscious bias.
What can women do about the situation?
Women need to get much better at negotiating and advocating for equal pay. Often that’s seen as “too pushy.” But if we support each other as women, eventually that will go away. Women need to speak up. I see the millennial women starting to do that a little more.
Where do robo-advisors come in concerning money silence?
They make human advisors’ value go up because [humans] can have family conversations and coach people on breaking money silence. A robo-advisor can crunch numbers. But can it talk to you about how you feel about your parents getting older and what your financial concerns are, or the things you worry most about in raising kids or saving for a house? Robo-advisors are a great differentiator for the human advisor, who’s able to say: “I can have those meaningful conversations, and I can use technology. I can do both.”
— Check out How to Connect With (and Keep) Female Clients: Kathleen Kingsbury on ThinkAdvisor.