Why only now?
As a major driver of economic activity across the world, in any industry, culture, race or nation, money as an incentive for work done or any other transaction has only been seen as a trading tool replacing the ancient batter trade. Many studies available on personal finance have neglected what is now being revealed as the most critical character of money. That is, its ability to influence people’s emotions. It is true that money is used for trading, but that is a very narrow and limited definition. It’s like defining what a car can do, without paying any attention that for the car to do what it does there should be a well trained driver, who is very sober, knows, understands and complies with the rules of the road. A car in wrong hands can kill and destroy. The same can be said that money in wrong hands can both kill dreams and destroy families. You need only look at the global household debt levels, and gigantic companies and governments that are being destroyed by greedy individuals, whose emotional needs for money has overtaken their conscious and sometimes moral compasses.
Is there a need?
The recent 2008 – 2009 global economic crisis has become our perfect reference, that when emotions kick in, the entire rationality flies off the window. It is seen by economic experts as the worst economic downfall since the Great Depression of the 1930′s and was triggered by three major emotional factors, and that is Greed, Fear and Irresponsibility or lack of discipline. According to his June 2008 speech, President and CEO of the New York Federal Reserve William C Dudley blamed the US shadow banking system and the trading of toxic assets backed by ghost money for the crisis. It wouldn’t have been possible without the superficial lifestyle and instant gratification culture of the average American consumer.
A close analysis of the situation above can be downscaled in simple terms to our daily personal lives. The US is known for its Super Power, and “Greed is good” culture. And to many, this economic bubble burst was no surprise at all. If a country has an unconscious, and unspoken egoistic believe system that becomes a frame of reference for most citizens, it goes to prove that there are indeed money personalities that are mostly influenced by our environments, whether internal or external. Like any other believes that affect many adults, they are inherited from parents or the societal influence during the person’s upbringing.
Financial wellness is therefore a holistic approach into personal financial management. It is a combination of behavioral finance, a highly specialized study discipline that has existed for decades and is based on an understanding that people are emotional beings and trying to predict or justify their actions with financial scientific models is futile without taking their emotional influences into consideration, and financial planning which only looks at the financial needs of the individual, and recommends strategies and products to best fulfill these needs. This study was only limited on studying investment behavior trends in financial markets, and only until recently was never brought to the professional personal financial planning level.
What is the difference?
The difference between traditional financial planning, and financial wellness, is that in financial wellness the individual becomes the centre of the exercise, not the product, or the financial advisors anxiety or ambitions to meet sales target. It’s not about determining whether the product fits your needs, but about first understanding your needs holistically, drawing a path, and then devising a strategy (Unique portfolio) made out of one or different products that can best achieve those goals. Financial advisors were not trained to provide financial counseling that is why the onus of ensuring that the core financial needs are met lies with the individual. Financial wellness must remain independent, equipping the client, with the knowledge and tools to make objective plans and decisions, to understand both their emotional and intellectual states in relation to their financial needs and goals.
In simple terms, what does it mean for me?
The holistic financial wellness approach seeks to answer age old unanswered questions into wealth and happiness. Like how much is enough? Now people will be able to truthfully put money where it belongs on their hierarchy of priorities, without any fear or guilt that they might not be doing enough to secure a better future. Financial wellness has opened a window of hope for anyone willing, to have a balanced family, social, and career life.