Two hundred years ago, 85% of the world’s population was living in poverty. Today, that number has drastically dropped to about 8–9%. We’ve also doubled our longevity over that time period, and seen a great reduction in violence. However, despite the fact that we are living longer, and technically richer than ever, studies show that as a society we are lonelier than we’ve ever been across every generation. Stated simply, our riches don't seem to be making us happy.
As we have largely secured our needs at the bottom tiers of Maslow’s hierarchy—our basic physiological necessities, safety and security—our concerns have gone upstream to the pursuits of love, belonging and a sense of self-esteem. This has left us with more complex problems that, generally speaking, have less straightforward solves. For example, it’s much simpler to solve the problem of putting a roof over one’s head versus finding a satisfactory answer to the question of self-worth. In the words of my greatest role model Viktor Frankl, “Ever more people today have the means to live, but no meaning to live for.”
What does this mean for the role of the financial advisor?
In this sea of struggle that humankind is swimming in, the role of the financial advisor becomes increasingly important in supporting an individual’s quest for their personal definition of a fulfilling life; and clients are looking to them as more than mere financial guides. Though managing a client’s investment portfolio will always fall in the advisor’s purview, advisors today are increasingly called to act as stewards of their clients’ overall well-being and happiness. This shift is underscored by McKinsey research, which predicts that over the next decade, advisors will transition from being primarily investment managers and “become more like integrated life/wealth coaches who advise clients on investments, banking, healthcare, protection, taxes, estate, and financial wellness needs more broadly.”
Though we may still be a number of years away from advisors becoming fully integrated life coaches, the movement toward this paradigm is already somewhat visible. Many advisors are embracing a behavioral finance-informed approach, as highlighted by Orion's 2024 WealthTech Survey. According to the survey, 33% of advisors have already integrated behavioral finance into their practices, and an additional 43% plan on doing so over the next three years. This focus on understanding clients’ behaviors and motivations is proving impactful, too—according to the 2023 Schwab RIA Benchmarking Study, firms leveraging behavioral finance have significantly enhanced client satisfaction. Nearly 50% of these firms applied behavioral finance in more than half of their client interactions, leading to a median increase of 3.3 times in new assets from existing clients in 2022.
Getting Your Finger On The Pulse Of Clients’ True Needs
If advisors are to become these more holistic champions of clients’ lives, then they need tools that enable them to monitor a client’s personal well-being right alongside their financial wellness. To support advisors in this pursuit, we created PulseCheck, a tool designed to incorporate information about clients’ overall health and happiness into the financial planning process. The tool offers assessments that help advisors understand key aspects of well-being alongside the financial situation of their clients, guiding the selection of next steps to improve overall satisfaction. It supports investors in identifying their priorities, measuring contentment in six important wellness areas, and setting goals based on those priorities. This assessment draws from positive psychology, focusing on six key areas: happiness, engagement, advancement, relationships, truth and strength (HEARTS). Let’s dive in further to each of these facets.
Happiness: Joyful Being—This aspect highlights the importance of experiencing positive emotions such as joy, gratitude, serenity, interest, hope, pride, amusement, inspiration and love. Activities like going on date nights with your partner, indulging in a favorite food, visiting Disneyland, and taking leisurely vacations may contribute to this facet of well-being–and are clinically proven to reduce stress.
Engagement: Immersive Focus—To be fulfilled, we need to be engaged in our work. Whether it’s finding flow in your corporate job or your creative pursuits, engagement involves being fully immersed in activities that are enjoyable, yet challenging. This could be learning to play guitar, writing a novel, or simply excelling at a difficult task related to your day job.
Advancement: Growth and Accomplishment—As a growth-oriented species, we want to be better today than we were yesterday. Setting and achieving goals that are personally meaningful and challenging correlates to higher self-esteem, autonomy and confidence. This facet entails feeling skilled, proficient and successful in diverse aspects of life, including work, interests, learning or personal growth.
Relationships: Meaningful Bonds—Perhaps the most important factor in defining a person’s well-being, relationships encompass building and maintaining meaningful connections with friends, family, colleagues and community members. Referring back to the studies on loneliness, 79% of Gen Z, 71% of millennials and 50% of boomers report feeling alone. By supporting clients in developing strategies to maintain close relationships, advisors may be able to significantly increase the client’s happiness and satisfaction with life.
Truth: Searching for Meaning—As human beings, we need to feel that our actions and efforts contribute to something greater than ourselves. This could be achieved through work, our relationships, spiritual and faith-based pursuits, philanthropy, or other means that allow us to live out our most cherished personal values. For example, if a client feels disconnected from a cause they care deeply about, an advisor could guide them toward opportunities to contribute and engage more meaningfully.
Strength: Health and Wellness—The old adage “health is wealth” holds profound truth. A couple of years ago, I was experiencing a myriad of symptoms that no one seemed to be able to solve. I thought I was dying, and no amount of money could relieve the pain I felt. In the end, the source of my troubles turned out to be a toothache that was missed by my dentist. With the issue resolved, my health troubles subsided, and I was able to focus on other drivers of happiness. But during that time, my only thought about money was how I could use it to improve my physical well-being. This experience underscored the critical role that health plays in fully appreciating life’s riches, encompassing physical, mental and emotional wellness.
Bridging The Gap Between Wealth And Well-Being
Advisors are increasingly seeking elegant planning solutions that allow for deeper values-based discovery, personalization of the financial planning process, and an opportunity to add value beyond the financial markets. This need stems from a critical industry challenge: bridging the gap between the value advisors perceive they are adding and the value clients actually experience. By adopting a BeFi-informed approach, advisors can address this disparity, leading to decreased investor attrition and improved financial outcomes. The statistics are clear—the 2018 article “The Secret Financial Lives of Americans” reveals that 64% of clients feel they have nobody to talk to about their money, highlighting a significant opportunity for advisors to step in as trusted, holistic guides.
By leading clients through a reflective and actionable journey focused on the aforementioned six wellness categories, advisors can help them reconcile their financial and life needs for a richer, more fulfilling existence. This approach can aid clients in identifying the goals that will have the greatest impact on their overall fulfillment. In the coming decade, advisors are going to need different skills to meet clients’ rising expectations. Whether through this tool or other means, it’s crucial those delivering advice are attuned to these near-universal facets of the human experience.
As advisors adopt these tools and methodologies, they're not just meeting the changing needs of their clients; they're setting themselves up for success in a competitive field. Our 2024 Orion WealthTech survey shows that advisors believe implementing behavioral finance tools like PulseCheck strengthens client relationships (83%), deepens client trust (79%), and enhances client confidence during periods of market volatility (74%). For advisors who have yet to integrate behavioral finance into their offerings, now is the time to act decisively. If you're uncertain where to start, begin by reflecting on these six aspects in your personal life and establish a small tangible goal aimed at enhancing an area in need of attention. Understanding the applications of behavioral finance is a practice in empathy, and one well worth pursuing. Remember, we can only take our clients as far as we are willing to go ourselves.
Dr. Daniel Crosby, chief behavioral officer, Orion Advisor Solutions. Readers can learn more about the synergy between the six key elements of personal well-being as they intersect with the often-overlooked dimension of financial wellness by attending a webinar on April 12, 2024.