In times like these, there's more than enough fear to go around, both yours and your clients'.
When times get tough, third-party business advice can help us get a new perspective on our problems.
But sometimes the advice we really need isn't the concrete or factual kind; it's something just a bit more insightful--more inclusive of the emotions that make these problems seem worse. Which is why I consulted Deborah Price, founder of the Money Coaching Institute, to gain insight into how advisors and their clients can more effectively deal with the fear the present economy is causing.
Price is the author of three books: Money Magic, Unleashing Your Potential for Wealth and Prosperity; Money Therapy, Using the Eight Money Types to Create Wealth and Prosperity; and Start Investing On Line Today. Price has appeared on numerous radio and television shows throughout the United States and is considered a leading expert in her field. A former financial advisor for more than 20 years with firms such as Merrill Lynch, Mass Mutual, AIG, and London Pacific Advisors, Price is someone who shows financial advisors, other coaches, and therapists how to make a real difference in their clients' lives in the area of money psychology.
Here's an excerpt from our conversation.
Swift: Thank you for joining me today, Deborah. Perhaps you could explain briefly what money coaching is.
Price: The money coaching process is a step-by-step approach for understanding and changing one's relationship with money in order to live a more purposeful and prosperous life. Money coaching is a relatively new field and paradigm where we work with clients to help them identify their unconscious money patterns. We train advisors to be certified money coaches and, also, advisors who want to deepen their own understanding and awareness of some of these money patterns, but who don't really want to do the coaching. It's just a question of what serves the person and their individual practice. We also train advisors, coaches and therapists who want to expand their ability to coach and support their clients. One of the things we are starting to see is financial advisors, coaches and therapists working in partnership to bring a more deeply meaningful and integrated process to their clients. We currently consult with these professionals in developing our "financial triage" model as well. This is a team approach that includes a money coach, an advisor or planner, and a therapist.
Depending on the needs of the client, all three professionals work together to support the client in very different, but meaningful ways.
Swift: With the economy and investment markets so troubled right now, it would seem money psychology is a particularly relevant topic as advisors attempt to manage their clients' fears. What do you think are the most important things for advisors, therapists and coaches to keep in mind today?
Price: It's very important that they remember that what's going on with people today is based on the "physiology of fear." In other words, we tend to think that people can control their fears. But often, they can't because the fear is a physiological response to a perceived threat or danger to their safety. For example, the more people listen to the news and play over and over again in their minds the negative information, the more fearful they become. The barrage of bad news triggers the amygdala--that's the part of the brain that stimulates the fight, flight or freeze response. That response is greatly influenced by how we are individually hard-wired around money.
Swift: Is that hard-wiring around money affected by one's upbringing?
Price: Yes, exactly. People who grew up in a family where there were any kind of economic challenges would have a greater likelihood of responding more strongly than someone who had a really calm financial upbringing. That's why we hear a lot of people whose parents were of the depression era often describe their financial lives as being a bit more constricted. And that's because their parents were so greatly affected by this vast experience of negative economics and they passed it down from one generation to the next. So, if your client is the child of such parents, then a troubled economy will either cause your clients to react with heightened, persistent fear, or they could become angry over the circumstances, or they could go into retreat--a behavior where they avoid or internalize their anxiety and fear. The important thing to understand is that they're not doing this at a conscious level. It's happening at both an unconscious and a physiological level so, to some extent, unless we intervene to give them some support and strategies, which gives them something else to think about and do, the fear just gets more heightened.
Swift: You know, I've never heard it explained that way, and it makes so much sense. It goes to this whole idea of the "pit" we feel in our stomachs sometimes. That's physiological, not just in the brain.
Price: You're right but, in fact, it's really a little bit of both.
Swift: So how do we deal with it?
Price: We have two ways of processing fear. One: we call on the direct, or sub-cortal, pathway, which carries information unconsciously. This is the shorter of the two pathways and explains the "knee-jerk," immediate reactions people sometimes have. Now, the advantage to that is that when we are in great danger, we can react quickly. The disadvantage, which relates to the way people are responding to this market, is that they may react too hastily to this perceived danger, and that kind of reaction may not serve them well at all, as evidenced by the current market meltdown. Those who have sold, have lost greatly and largely due to their inability to manage their fear, not the actual validity or value of their investments.
Swift: So is there an indirect pathway, as well?
Price: Yes, the indirect pathway that passes through the cortex is slower. It's the pathway that allows us to really assess the situation after the knee-jerk response subsides and, by doing that, we can slow down our process of dealing with our fear long enough to consciously consider how we should respond, and whether or not the danger that we're feeling physiologically is real or just perceived.
Swift: How about the fear, itself? In other words, are there different kinds of fears, just as there are different ways of processing them?
Price: That's a good question, and the answer is "yes." One type of fear is authentic--something that is really happening in the moment that's a real and present threat. And then we have unreal fear, or something simply stimulated by our imagination. Unreal fear is about what might happen rather than what's really happening. And it's important for advisors to realize that regardless of what type of fear a client is experiencing--and most won't be consciously aware of which type of fear they have -- that all the fear is real to the person who is feeling it. So we have to acknowledge these fears in our clients and listen to them and address them proactively. That process of being proactive and listening will allow clients to slow down the fear response--literally calming down both the fear and the physiology, and allowing the person to begin to feel safe through expressing their feelings and concerns.
Swift: Sounds like clients just need to know how much danger they're really in.
Price: Precisely. People can tolerate fear when they can consciously assess their immediate danger. Another really important factor is that they can also tolerate fear when they know the situation is going to end within a specific time frame. There have actually been some great studies done around people's ability to tolerate fear in relation to riding roller coasters. We ride them because, on some level, we have a sense of trust and we know the ride is going to end. So roller coasters can become a metaphor for the stock market when we communicate to our clients that, in the same way they would be willing to ride a roller coaster at Disneyland, they can also ride these stock market fluctuations. We're in the driver's seat and, as advisors and coaches, that's the important thing to remember.
Swift: I think this is fascinating. You know in my work with advisors, they always tell me that one of their jobs is to manage their client's expectations. They say things like "this too shall pass," "trees don't grow to the sky," and "anything that goes up must come down." So are they in essence kind of helping their clients see that there might be an endpoint, that it's not an eternal situation?
Price: To an extent. Obviously, we don't really know where the end point is to the current market situation, but we do know that--historically--U.S. recessions have averaged somewhere between eight and 16 months. When we begin to give our clients information about what has typically been the case, they can compartmentalize that and begin to say, "OK, I think I can handle that." That information begins to give them a time certain. And the advisor isn't responsible if the recession lasts longer than 16 months because he or she can't predict it.
Swift: So advisors should be careful about the messages they give to clients.
Price: Of course. We don't serve our clients well by saying, "This could go on for 10 years." Clients won't be able to tolerate that and, in fact, no one knows that for certain. But we may be missing the point here ... I think there's an inclination on the part of advisors to first say these kinds of platitudes to clients, when it's more important initially to let them speak about what they're feeling--to give them a chance to air out their anxieties and fears and not take them personally. If we ignore their emotions and the client doesn't get to express them, then it becomes more likely they're going to take some form of [possibly undesirable] action. But if they are heard, people will be more likely to manage well. And, they need some real strategies and options of what they can do, both personally and financially.
Swift: How does an advisor learn to get better about "intentional listening?" Do they need to create a safe space for the client? Can you give us some tips or insights about how advisors can be better listeners and counselors for their clients during these challenging financial times?
Price: We teach many techniques in the area but one simple strategy I would recommend advisors do is realize that decision making is really driven by either the probable or the possible. So they need to engage their clients in discussions about what they think is going to happen. Ask clients, "What is your fear? What do you think might happen?" And get them to just speak to it. And then ask them to look at the more probable outcome: "Beyond that, what do you think is likely to happen?" That moves them from the possible to the much bigger probable, and the follow-up question--"What positive outcomes do you hope will happen?"--helps keep them from making negative projections. Then they can become hopeful about better possibilities. So let clients go full circle with their fears, what might happen, what's likely to happen, to more positive, hopeful outcomes. By the time they're done with that, they'll have expressed a lot. Then the advisor can give them their advice and say, "this is what my professional experience and best information is," and the client can hear it because they've been heard.
Swift: I know you've been doing some work in the community where you live, such as conducting town hall meetings, and I'll bet you've had some pretty interesting conversations.
Price: It's interesting because there are more people in just this sort of frozen state of uncertainty about what's going to happen. The fear of the unknown often causes people to become somewhat paralyzed. We do have clients losing their homes, losing their jobs ... but we have more people who are just kind of waiting, becoming paralyzed, and not knowing what to do. I think that's an incredible opportunity for financial advisors and planners. If we can give people something to do and engage them in some form of action in the areas they can control, they'll feel better and less stuck. Instead of paralysis, we can help them take action and control those parts of their financial lives that are possible to control.
Swift: Do you have any plans to bring these lessons to a larger, national forum?
Price: Yes, we've tested a framework for this in the local market and now we're sharing that with our coaches around the country and in South Africa. We're also hosting virtual, Web-based tele-classes that people who can't get to a money coaching forum can participate in. We hope that advisors will bring their clients to these calls--or simply come themselves--so that they can get a better understanding of emotions like fear and find ways to mitigate the unhealthy kind.
Swift: I was talking with one of your certified money coaches, Steven Shagrin, the other day. He's been a financial advisor and life planner for more than 20 years but has recently embraced your methodologies. He told me that adding money coaching can create a new source of income for planners who may be feeling financial constriction due to the market drop, particularly if they are working under an AUM business model.
Price: That's true. advisors can indeed diversify their service line and bring in new revenue as a money coach. And, as I said at the beginning of this interview, advisors who prefer to stick with more of the traditional financial planning and investment advisory services can bring in a money coach to partner with them and do joint work with their clients. But whether someone opts to become a money coach or to bring in a money coaching partner, the benefit to the client is the same--greater self-control, enhanced awareness as it relates to money and the ability to discern what's real and what's not when it comes to fear. For the planner or advisor, the benefits are enhanced understanding, increased awareness and deeper relationships with their clients. And there's never an issue of competition because money coaches do no manage money or provide any product whatsoever, it is strictly a coaching profession. All good things in today's environment.
Swift: Well, this has been great, Deborah. Is there anything you've left unsaid that you would like to add?
Price: I'd like to leave you with a little quote that I love by Michael Pritchard. The quote is: "Fear is that little dark room where negatives are developed." So, in closing, I would like to say ... don't leave your clients in the dark; they really need you right now.