Laura du Preez | 09 October 2024
Laura du Preez has been writing about personal finance topics for more than 20 years, including eight years as personal finance editor for two leading media houses.
If you want to succeed and flourish when it comes to managing your finances, you should acknowledge that you are not your brain – but you can manage the thoughts, feelings and fears about money in your brain.
Roddy Carter, a US-based doctor who is now a personal coach, says using neuroscience to understand the brain can help you to personal mastery. Carter spoke at the recent Humans Under Management conference for financial advisers in Cape Town.
He said financial advisers can play a key role in helping us acknowledge and reflect on our thoughts, feelings and fears about money. Advisers can also feed thinking that results in positive emotions and help us to make decisions like the chief executive officer (CEO) of our lives.
Carter says the human brain has four parts:
Carter says he teaches people to make decisions from the prefrontal cortex, which calls the office of the CEO.
Otherwise, it is like you are operating from the factory floor – subject to whichever thought or feeling arises and overwhelmed by them. This keeps you enslaved to a brain designed to ensure you survive but not to necessarily thrive, Carter says.
From the office of the CEO, you can answer three questions: what do I fear, what am I thinking and what am I feeling.
But if you want to thrive, you need to choose your response to your thoughts, feelings and fears with clarity and intention, he says.
It sounds easy, but often you just hear a barrage of conflicting noise and arguments in your head, he says.
This is because parts of your brain are thinking, feeling and fearing different things and if you don’t act like the CEO, this crazy committee will make your decisions, he says.
If you see a financial adviser, for example, part of you may think that advisers just want to make money from you, Carter says. Part of you will think about the investment risk and find it terrifying. Part of you may think: I can't wait to get out of here - how many pages of this do you have to read before you can leave?
A good financial adviser should be able to help you identify that “a part of you” feels one thing and “another part of you” thinks another thing, Carter says.
And to help you to the right decision, a good adviser should help you feed certain thoughts and feelings.
When you are informed and understand your financial decisions, you will be able to use your awareness and position in the office of the CEO to harness your brain. Then you can make financial decisions in line with what you truly want to achieve – those that make you happy and fulfilled, Carter says.
A good financial adviser does deeply people and behaviour-centred work, helping you achieve a level of consciousness or self-awareness and bring about behaviour change to add value to your life, he says.
You can only get help with your thoughts, feelings and fears when you trust a financial adviser enough to share with them, Lara Warburton, an independent financial adviser from Integral Wealth Management and the Financial Planning Institute’s Financial Planner of the Year for 2023, told the conference.
Warburton says she often takes on new clients who are disappointed with their previous financial adviser and are mistrustful of a new adviser.
Among the reasons they are disappointed with the adviser are:
Poor returns: Warburton says this is the most common reason for disappointment with advisers and often the reason is a result of advice to invest in very low risk funds. This typically results in the client not achieving the investment growth they need.
Warburton says some advisers base their investment recommendations solely on how a client responds to a risk profile questionnaire. These questionnaires often identify them as risk averse because their tolerance for risk is low, she says.
But often these clients have long investment horizons and need to take more investment risk in order to, for example, have enough to retire, Warburton says.
An adviser should take the time to educate the investor on the need to move out of their comfort zone and tolerate a higher level of risk, she says.
Limited products: Warburton says clients of tied advisers are sometimes unhappy because they did not realise the adviser can only recommend investments from one financial institution and only some of that institution’s range of funds are good ones.
Inappropriate products: Warburton says another reason people are unhappy with their advisers is because a financial product recommended to them is inappropriate or they did not understand the features of the product – for example, that did not understand that the investment was tied up for a period.
Lack of ongoing advice: Another reason why consumers leave financial advisers and mistrust financial advice is because some advisers make an initial recommendation but fail to give ongoing advice, Warburton says.
If you have had this kind of poor service, a good professional adviser who values their role can help you trust the advice process again.
Look for someone who doesn’t just sell into your fears or give you what you want, but who gives you advice – even when it is an unpleasant conversation about your savings being insufficient and what you need to do to correct that, Warburton said.
Warburton said a good adviser will make time to talk to you to find out things you may fail to mention but which are important for your financial plans. To do an effective needs analysis, your adviser needs to understand you and your family and your environment. Your first meeting is an important place to start building a trust relationship, she says.
Warren Shute, a UK-based financial adviser and founder of the Lexington Way, told the conference that when he first meets a new client, he asks seven questions:
These questions should help you build a trusted relationship with your advisor and provide them with enough information for them to help you make decisions about your money and your life like a CEO.
