Par Christopher Tan, Conjoncture,
an electronic journal published by PluriConseil Ltd
“This time it’s different”. Doesn’t this sentence ring a bell? 18 months ago, when the markets fell heavily in the last quarter of 2008, detractors of buy and hold strategy scoffed at investors who adopted this approach of investing saying that buy and hold is dead and suggested moving into cash. 18 months later, this same sentence is heard again, in a totally opposite scenario.Actually, everything is still the same, be it the tulip bulbs in Holland during the 1630s, the real estate bubble in Japan in the 1980s, the Internet stocks in the 1990s, Singapore’s property bubble in the mid 1990s, or the recent financial crisis in 2008/09. Just as contagious euphoria leads investors to take greater and greater risks, the same self-destructive behaviour leads many investors to throw in the towel and sell out near the market’s bottom when pessimism is rampant and seems most convincing.
One of the many lessons we have learnt in the recent meltdown is that while we can put in place a suitable plan for clients, the key to helping clients achieve their financial goals is to really ensure that they stick to the plan and not yield to greed or succumb to fear. The answer to this is money coaching.
Eight money archetypes
In the world of money coaching, we believe that individuals have unconscious patterns, beliefs and behaviours around money that may prevent them from making correct life decisions, especially financial decisions. As such, in order to help clients stick with their investment or financial plan, besides understanding their latest financial situation, it is important to understand these unconscious beliefs and patterns that made them who they are today. In money coaching, we categorise individuals into 8 money archetypes.
THE INNOCENT: The Innocent tends to take the ostrich approach to money matters. Innocents often live in denial, burying their heads in the sand so that they won’t have to see what is going on around them. Innocents are easily overwhelmed by financial information and rely heavily on the advice and opinions of others. Innocents are perhaps the most trusting of all the money types.
THE VICTIM: The Victim money type is prone to living in the past and may blame their financial woes on external factors. Victims generally have a litany of excuses for why they are not more successful and are often very attached to their “story.” That is not to say that bad things haven’t actually happened to the Victim. More often than not, Victim money types have been abused, betrayed, or have suffered some great loss.
THE CREATOR/ARTIST: Creator/Artists are generally those who are on a spiritual or artistic path. They often find living in the material world difficult and frequently have a conflicted love/hate relationship with money. They love money for the freedom it buys them, yet they have little or no desire to participate in the material world.
THE MARTYR: Martyrs are so busy taking care of others’ needs that they often neglect their own. Financially speaking, Martyrs generally do more for others than they do for themselves. They often rescue others (a child, spouse, friend, partner) from some circumstance or other. However, Martyrs do not always let go of what they give and are repeatedly let down when others fail to measure up to their expectations.
THE FOOL: The Fool plays by a different set of rules altogether. A gambler by nature, the Fool is always looking for a windfall of money by taking financial shortcuts. The Fool lives very much in the moment and is quite unattached to future outcome.
THE TYRANT: Tyrants use money to control people, events, and circumstances. The Tyrant hoards money, using it to manipulate and control others. Although Tyrants may have everything they need or desire, they never feel complete, comfortable, or at peace. The Tyrant’s greatest fear is loss of control.
THE WARRIOR: The Warrior sets out to conquer the money world and is generally seen as successful in the business and financial worlds. Warriors are adept investors — focused, decisive, and in control. Although Warriors will listen to advisers, they make their own decisions and rely on their own instincts and resources to guide them.
THE MAGICIAN: The Magician is the ideal money type. Armed with knowledge of the past, the Magician has made peace with his personal history, and understands that his source of power exists within, in his ability to see and live the truth of who he is.
Profound insights into money patterns and behaviours
Money coaching then helps clients understand how their money types were formed and what they can do to change it.
I have a client who has both the archetype of an innocent and a victim. She is where she is today because she saw how speculating in stocks caused her father to go bankrupt and her parents’ marriage broken. She had a terrible childhood as the family was always on the run from creditors. As a result, she has great fear of the risk of the equities market and tends to want to bail out whenever the markets go down, for fear of her own life reflecting that of her parents.
So besides having written a financial plan, I put together a coaching programme that focuses on helping her understand how her money archetypes were formed and, as a result, how they are affecting her investment decisions today. I am now coaching her to slowly change her archetype to that of a warrior-magician, and also understand what investments really are and how she can cope with market volatility so as to stay invested and keep investing.
I strongly believe that a key ingredient to our clients’ financial success is money coaching. As advisers, we can put up the most suitable plan and find the most suitable instruments for our clients. But if we cannot get our clients to stick to their plan, we cannot help them reach their investment goals. As a professional firm, we have invested in building up this skill. Money Coaching is a very powerful process that provides profound insights into the clients’ money patterns and behaviours, and invaluable tools for understanding and managing their financial needs and thus fulfilling their long-term financial goals.
Christopher Tan is Asia’s First Certified Money Coach & CEO of Providend Ltd, Singapore’s sole fee-only independent financial advisory firm
* Published in print edition on 24 September 2010