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.