We all like to pretend that we make logical decisions. What really happens is that most human beings make emotional decisions first and later justify them with logic after the fact. And your clients, well they are human beings—not calculators. While your advice must be logically sound, understanding the emotional side of your clients’ financial decision-making can go a long way to help ensure they understand the magnitude of the choices they make with you. When you’ve understood the filter through which they look at their personal finances, you can improve the perceived value of your advice, and help your clients to be more confident and clear about their choices.
During my 10 years as a financial professional, I came to recognize this and other patterns among my clients as I tried to figure out just what was driving their financial behavior. As I’m sure you’ve experienced, I was often left scratching my head while watching a client make a decision or repeat a behavior that was clearly not in line with what they told me their goals were.
I uncovered what we, at The Money Finder, refer to as Money Mindsets. I found seven unique profiles that brought myself and my clients clarity on why they did what they did with their money. These seven Money Mindsets gave me a way to help my clients understand their behavior, so they could change it for the better.
Your clients’ Money Mindset impacts everything. It impacts what they put in their grocery cart, the house they buy, and the annuity they choose. Let me be clear, none of these Money Mindsets are bad or good, they just are. We’ve had tens of thousands of people uncover their profiles and this is what we’ve found:
The Money Mindsets are arranged on a control scale. The Brick Wall being the most controlled, and controlling, when it comes to money, and The Polly Anna being the least.
The Brick Wall
The Brick Wall is often a very savvy investor but they tend to believe they DO NOT make emotional financial decisions, which according to DALBAR’s Quantitative Analysis of Investor Behavior (QAIB) causes a lot of financial mistakes. The Brick Wall tends to be well-educated and self-educated when it comes to their finances, but can sometimes use that knack for research as an excuse to procrastinate on making decisions. They tend to feel in control as spenders and be avid savers.
The Bunker is driven by the need to feel safe and secure. Often their fear can get in the way of what’s actually best for them. They love to buy the extra warranty on most everything just to avoid surprises. They like annuities, 30-year fixed mortgages, and anything that feels stable. This does not mean that The Bunker is actually better with money, it just means they seek perceived financial stability—and if they don’t have it —they become very stressed and can make panicked financial decisions.
The Justifier could play the six-degrees game pertaining to why you need just about any purchase and win every time. When they do put money away for the future, they are most comfortable with things where they don’t have to make constant decisions, like having to trade investments regularly. They can be quite the spenders and bring out spending in others. They are alive-for-the-moment type of people and they do really well when the behavior needed to achieve long-term goals is connected to a short-term win
The Dreamer is a risk taker. These are often your business owner type clients; you may be a Dreamer too (I am). They know it takes a nickel to make a dime and they’ve got no qualms with investing in themselves and/or their business. They tend to like to grab at every opportunity, financial or otherwise. These clients do well when their savings are automated and difficult to get at. The Dreamer needs a sounding board so they slow down their decision-making and is able to prioritize before pulling the trigger!
The Masquerader loves hard assets that others can see, especially things like their home, cars, and other big ticket items. They may have a healthy portfolio, but it could be outweighed by their debt. They have a great potential for financial success but they often take funds from their savings or investments far too early to support their lifestyle needs. Often this Money Mindset has worked hard to get a life where they don’t have to worry about money but have forgotten that no matter how much income or wealth you’ve got—you still have to pay attention to your money.
The Undercover Agent
The Undercover Agent tends to be very difficult to work with on their personal finances, because they aren’t forth coming, not even when they seek your help. They are at high risk of being given unsuitable recommendations based on the often-incomplete information they share. The Undercover Agent needs to know why they should actually tell you the whole truth about their financial picture—how are you different from the last guy or gal?
The Polly Anna
The Polly Anna is one of the most frustrating Money Mindsets for you to try to work with. While they believe they should prepare for their financial future, they just hate to participate. If someone was to eavesdrop on your conversations between you and this client they’d hear, “Well, I trust you!” “Whatever you think!” The whole process of dealing with money is overwhelming and unappealing for them, and they tend to agree to whatever is suggested to get away from having to think about their finances. The stress of exploring their many financial options nearly causes them to break out in hives. You can use knowledge of the Money Mindsets to ensure your clients understand their options, make wise choices, and don’t succumb to those less than ideal natural financial tendencies.
Harness the power of understanding emotional decisions with your financial skills and help your clients make more of the money they have today!