Wall Street Exposed – What You Must Know About Your Financial Advisor Now!

There is a simple but undeniable truth in the financial consulting and wealth planning industry that Wall Street has kept as a “dirty little secret” for years. That dirty little, and nearly always overlooked secret is THE WAY YOUR FINANCIAL ADVISOR IS PAID DIRECTLY AFFECTS THEIR FINANCIAL ADVICE TO YOU!

You want, and deserve (and consequently SHOULD EXPECT) unbiased financial advice in your best interests. But the fact is 99% of the general investing public has no idea how their financial advisor is compensated for the advice they provide. This is a tragic oversight, yet an all too common one. There are three basic compensation models for financial advisors – commissions based, fee-based, and fee-only.

Commission Based Financial Advisor – These advisors sell “loaded” or commission paying products like insurance, annuities, and loaded mutual funds. The commission your financial advisor is earning on your transaction may or may not be disclosed to you. I say “transaction” because that’s what commission based financial advisors do – they facilitate TRANSACTIONS. Once the transaction is over, you may be lucky to hear from them again because they’ve already earned the bulk of whatever commission they were going to earn.

Since these advisors are paid commissions which may or may not be disclosed, and the amounts may vary based on the insurance and investment products they sell, there is an inherent conflict of interest in the financial advice given to you and the commission these financial advisors earn. If their income is dependent on transactions and selling insurance and investment products, THEY HAVE A FINANCIAL INCENTIVE TO SELL YOU WHATEVER PAYS THEM THE HIGHEST COMMISSION! That’s not to say there aren’t some honest and ethical commission based advisors, but clearly this identifies a conflict of interest.

Fee Based Financial Advisor – Here’s the real “dirty little secret” Wall Street doesn’t want you to know about. Wall Street (meaning the firms and organizations involved in buying, selling, or managing assets, insurance and investments) has sufficiently blurred the lines between the three ways your financial advisor may be compensated that 99% of the investing public believes that hiring a Fee-Based Financial Advisor is directly correlated with “honest, ethical and unbiased” financial advice.

The truth is FEE-BASED MEANS NOTHING! Think about it (you’ll understand more when you learn the third type of compensation), all fee-BASED means is that your financial advisor can take fees AND commissions from selling insurance and investment products! So a “base” of their compensation may be tied to a percentage of the assets they manage on your behalf, then the “icing on the cake” is the commission income they can potentially earn by selling you commission driven investment and insurance products.

Neat little marketing trick right? Lead off with the word “Fee” so the general public thinks the compensation model is akin to the likes of attorney’s or accountants, then add the word “based” after it to cover their tails when these advisors sell you products for commissions!

FEE ONLY Financial Advisor – By far, the most appropriate and unbiased way to get financial advice is through a FEE-ONLY financial advisor. I stress the word “ONLY”, because a truly fee ONLY financial advisor CAN NOT, and WILL NOT accept commissions in any form. A Fee-ONLY financial advisor earns FEES in the form of hourly compensation, project financial planning, or a percentage of assets managed on your behalf.

All fees are in black and white, there are no hidden forms of compensation! Fee-Only financial advisors believe in FULL DISCLOSURE of any potential conflicts of interest in their compensation and the financial advice and guidance provided to you.

Understanding the conflict of interest in the financial advice given by commission based brokers enables you to clearly identify the conflict of interest for fee-based financial advisors also – they earn fees AND commissions! Hence – FEE-BASED MEANS NOTHING! There is only one true way to get the most unbiased, honest and ethical advice possible and that is through a financial advisor who believes in, and practices, full disclosure.

Commission and Fee-Based financial advisors typically don’t believe in or practice full-disclosure, because the sheer magnitude of the the fees the average investor/consumer pays would surely make them think twice.

Consider for a moment you need to buy a truck specifically for towing and hauling heavy loads. You go to the local Ford dealership and talk to a salesperson – that salesperson asks what type of vehicle you’re interested in and shows you their line of trucks. Of course, to that salesperson who earns a commission when you buy a truck – ONLY FORD has the right truck for you. It’s the best, it’s the only way to go, and if you don’t buy that truck from that salesperson you’re crazy!

The fact is Toyota makes great trucks, GM makes great trucks, Dodge makes great trucks. The Ford may or may not be the best truck for your needs, but the salesperson ONLY shows you the Ford, because that’s ALL the salesperson can sell you and make a commission from.

This is similar to a commission based financial advisor. If they sell annuities, they’ll show you annuities. If they sell mutual funds, all they’ll show you is commission paying mutual funds. If they sell life insurance, they’ll tell you life insurance is the solution to all of your financial problems. The fact is, when all you have is a hammer… everything looks like a nail!

Now consider for a moment you hired a car buying advisor and paid them a flat fee. That advisor is an expert and stays current on all of the new vehicles. That advisor’s only incentive is to find you the most appropriate truck for you, the one that hauls the most, tows the best, and is clearly the best option available. They earn a fee for their service, so they want you to be happy and refer your friends and family to them. They even have special arrangements worked out with all of the local car dealerships to get you the best price on the truck that’s right for you because they want to add value to your relationship with them.

The analogy of a “car buying advisor” is similar to a Fee-Only financial planner. Fee-Only financial advisor’s use the best available investments with the lowest possible cost. A Fee-Only financial advisor’s only incentive is to keep you happy, to earn your trust, to provide the best possible financial advice and guidance using the most appropriate investment tools and planning practices.

So on one hand you have a car salesperson who’s going to earn a commission (coincidentally the more you pay for the truck the more they earn!) to sell you one of the trucks off their lot. On the other hand, you have a trusted car buying advisor who shops all of the vehicles to find the most appropriate one for your specific needs, and then because of his relationships with all of the car dealers can also get you the best possible price on that vehicle. Which would you prefer?

Truly unbiased financial advice and guidance comes in the form of Fee-Only financial planning. You know exactly what you’re paying and what you’re getting in return for the compensation your Fee-Only financial advisor earns. Everything is in black and white, and there are no hidden agenda’s or conflicts of interest in the advice given to you by a true Fee-Only financial advisor!

The fact is unfortunately less than 1% of all financial advisor professionals are truly FEE-ONLY. The reason for this? There’s a clear and substantial disparity in a financial advisor’s income generated through commissions (or commissions and fees), and the income a financial advisor earns through the Fee-Only model:

Example #1 – You just changed employment and you’re rolling over a $250,000 401k into an IRA. The commission based advisor may sell you a variable annuity in your IRA (which is a very poor planning tactic in most cases and for many reasons) and earn a 5% (or many times more) commission ($12,500) and get an ongoing, or “trailer” commission of 1% (plus or minus) equal to $2,500 per year. The Fee-Only financial advisor may charge you a fee for retirement plan, an hourly fee, or a percentage of your portfolio to manage it. Let’s say in this case you pay a $500 retirement plan fee and 1.25% of assets managed (very common for a Fee-Only financial advisor in this situation). That advisor earns $500 plus $3,125 ($250,000 * 1.25%) or TOTAL COMPENSATION of $3,625 – FAR LESS THAN THE $15,000 THE COMMISSION (or Fee-Based) financial advisor earned! In fact it takes the Fee-Only financial advisor over four years to earn what the commission (or fee-based) advisor earned in one year!

Example #2 – You’re retired and managing a $750,000 nest egg which needs to provide you income for the rest of your life. A fee-based financial advisor may recommend putting $400,000 into an single premium immediate annuity to get you income and the other $350,000 into a fee-based managed mutual fund platform. The annuity may pay a commission of 4% or $16,000 and the fee-based managed mutual fund portfolio may cost 1.25% for total compensation of $20,375 first year (not including the “trailer” commissions). The Fee-Only advisor would possibly shop low load annuities for you, possibly put the entire portfolio into a managed account, possibly look at municipal bonds, or any other variety of options available. It’s hard to say how much the Fee-Only advisor would earn as their largest incentive is to keep you the client happy, and provide the best planning advice and guidance possible for your situation. BUT, in this case let’s just assume that a managed mutual fund portfolio was implemented with an averaged cost of 1% (very common for that level of assets), so the Fee-Only financial advisor earns roughly $7,500 per year and it takes that financial advisor THREE YEARS to earn what the fee-based financial advisor earned in ONE YEAR!

The prior examples are very common in today’s financial advisory industry. It’s unfortunate that such a disparity in income exists between the compensation models, or there would likely be many more truly independent and unbiased Fee-Only financial advisors today!

Now consider for a moment which financial advisor will work harder for you AFTER the initial consultations an planning? Which financial advisor must consistently earn your trust and add value to your financial and investment planning? It’s obvious the financial advisor with the most to lose is the Fee-Only advisor. A Fee-Only financial advisor has a direct loss of income on a regular basis from losing a client.

The commission or fee-based financial advisor however has little to lose. You can fire them after they’ve put you in their high commission products, and as you can see from the examples they’ve already made the majority of the commissions they’re going to make on you as a client. They have little to gain by continuing to add value to your financial and investment planning, and little to lose by losing you as a client.

Wouldn’t you prefer a financial advisory model where your financial advisor must continually earn your trust and add consistent value to your planning?

It’s clearly more difficult to earn a living and run a profitable financial advisory firm through the Fee-Only financial planning and guidance model. For this reason, most financial advisors take the easy way and sell products for commissions and charge fees on assets managed – that way they can make a nice living on your investment portfolio and still have an ongoing stream of revenue every year. For this reason also, less than 1% of financial advisors are truly Fee-Only, yet it’s that 1% that is truly objective and unbiased, and that 1% whose only incentive is to manage your financial plan, investments, and overall wealth to accomplish the goals you wish to achieve!

The real “dirty little secret” Wall St. has is the undeniable truth that the commission and fee-based financial advisory model has inherent conflicts of interest, and your advisor may be “selling you investment products” rather than “solving your financial problems”!

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Why Would You Go to a Financial Coach Rather Than a Financial Adviser?

Something greater than financial advice

Earlier this year and shortly before I surrendered my Financial Services Authority permission to provide financial advice I met Bruce and Theresa, my long standing clients of some thirty years. The meeting was arranged to say farewell and to close our professional (but not social) relationship, and to finalise their plans for their retirement.

The meeting lasted for most of the day, and whilst their finances were on the agenda and were dealt with, much of the meeting revolved around how they were going to live in retirement, what they could and should do, how they were going to maintain family ties, decisions about their house and nearly all aspects of life in retirement. We also covered their relationship with money, dealing in particular with how to change their working life attitude of saving and prudence to finding the courage to spend their time and money on making the most of their lives in retirement. Whilst I was able to demonstrate mathematically that their income and assets were more than sufficient to allow them to live a fulfilled life in retirement, we had to deal with some deep emotional blocks to spending, in particular the fear that they would run out of money.

This was far more than financial advice. It amounted to ‘financial life coaching’, a relatively new professional field that treats money and life as intertwined and is truly holistic in its approach. It is an approach I started to adopt in 2006 after training with the Kinder Institute of Life Planning in the US. In truth, most of my client interventions since then have been holistic, coaching interventions. I have found that the coaching element is of far greater value to my clients than arranging financial products, which, within the context of most financial life plans, should be simple, low cost and commoditised.

Financial coaching is for everyone?

I have witnessed the impressive changes that financial life coaching can bring about in clients, and I would argue that everyone needs a life coach. In reality, the service is less suited to what Ross Honeywill and Christopher Norton call ‘Traditionals’ and more suited to what they call the ‘New Economic Order’ (NEO) (Honeywill, Ross and Norton, Christopher (2012). One hundred thirteen million markets of one. Fingerprint Strategies.), and what James Alexander and the late Robert Duvall in their research for the launch of Zopa (the first peer-to-peer lending business) called ‘Freeformers’ (Digital Thought Leaders: Robert Duvall, published by the Digital Strategy Consulting).

Two types of consumer

These distinctions are important in the context of a key concept about money, which I will cover shortly. First, lets consider the differences between the two groups. Honeywell and Norton describe ‘Traditionals’ as primarily interested in the deal, features and status. A sub-group of ‘Traditionals’ is ‘High Status Traditionals’ for whom status is the highest priority. They cite Donald Trump as the epitome of a High Status Traditional.

Honeywill and Norton contrast ‘Traditionals’ with NEOs. According to the authors, NEOs buy for authenticity, provenance, uniqueness and discovery. They are more likely to start their own business, are usually graduates, see the internet as a powerful tool for simplifying their lives, understand investing (money and personally), and are repulsed by conspicuous consumption. They are highly individual and express their own individual values through what they say, buy, do and who they do it with.

Honeywill and Norton discovered NEOs in the US and wrote about them in 2012 but Robert Duvall and James Alexander arrived at a similar concept in the UK in the early 2000s. In their research prior to launching Zopa, Duvall and Alexander identified a group of people they called ‘Freeformers’, a new type of consumer ‘defined by their values and beliefs, the choices they make, where they spend their money. They refuse to be defined by anyone, they don’t trust corporations or the state. They value authenticity in what they buy and they want to lead “authentic” lives.’ Duvall and Alexander saw these people as the core of an IT society based on self-expression, choice, freedom and individuality.

Two attitudes to money

In my own career as a financial adviser, planner and coach I have identified two prevailing attitudes to money. There are those who see money as an end in itself, and those who see money as a means to an end. I cannot admit to having carried out detailed research on this, but I have seen enough to make a reasonable assumption, namely that it is the Traditionals who see money as an end in itself, and it is the Freeformers who see money as a means to an end. (At the risk of upsetting Messrs Honeywill and Norton and conscious that NEOs and Freeformers are not exactly the same, I am going to refer to both simply as Freeformers in the rest of this paper as I feel the word is a better and more evocative description of the species than NEOs.)

In very general terms, Traditionals are intent on making their money go as far as possible by getting the best deals and features. Psychologically, they equate money with ego and status. Conversely, Freeformers use their money to achieve their individuality and authenticity and to express their values. Whilst they do not spend entirely irrespective of cost, their spending criteria are written in terms of authenticity, provenance, design, uniqueness and discovery.

Mapping attitudes to life and money

In my own experience Traditionals respond to financial advice, but not financial planning or coaching, whilst Freeformers only start to value financial advice when it is supported by an individual and unique life and financial plan born out of a deep coaching and planning process.

Putting it another way, Freeformers understand that the link between life and money goes deep, so respond well to coaching that addresses their life and money. Traditionals, on the other hand, do not harbour such a powerful connection between life and money, and are less likely to respond to the concept of ‘financial life coaching.’ Traditionals form the key market for financial services institutions and packaged products, especially those that provide deals (discounts / competitive fees), features (pension plans with flexibility, for instance) and status (high risk, high returns). Freeformers are more likely to select a platform (an online service to aggregate all their investments and tax wrappers) and concentrate on selecting investments to suit their values and goals.

The spectrum of help with personal finances

In the UK and other parts of the world you can now find many different forms of help for your personal finances. Its a wide spectrum with financial advice at one end and financial life coaching at the other. In between, families and individuals can access financial planning, guidance, training, mentoring and education. Of course none of these are mutually exclusive and some firms or organisations will provide a combination so it is important to understand what is available and the limits and benefits of each.

Financial advice

Financial advice is product oriented. In the UK the Financial Conduct Authority (FCA), which regulates personal financial advice, defines financial advice as advice to buy, sell or switch a financial product. Whilst there is a regulatory requirement to ‘know your customer’ and ensure any advice is ‘suitable’, the thrust of financial advice is the sale of products.

A financial adviser must be authorised by the FCA and abide by its rule book.

Financial planning

Financial planning goes deeper than financial advice. It aims to ascertain a client’s short, medium and long term financial goals and develop a plan to meet them. The plan should be comprehensive and holistic. It should cover all areas of the client’s personal and family finances and recommendations in any part of the plan should maintain the integrity of the plan as a whole.

The Financial Planning Standards Board (which sets the standards for the international Certified Financial Planning qualification) defines a six step financial planning process:

Establish and define the client relationship
Collect the client’s information
Analyse and assess the client’s financial status
Develop financial planning recommendations and present them to the client
Implement the financial planning recommendations
Review the client’s situation
Although one of the practices in Step 2 is to ‘Identify the client’s personal and financial objectives, needs and priorities’, the process is primarily about finance rather than life.
Certified Financial Planners must also be authorised to provide financial advice by the regulator of the country in which they operate.

(Financial Planning Standards Board: Financial Planning Practice Standards available at https://www.fpsb.org/standards-for-the-profession/framework/ )

Financial life planning

We are beginning to see a number of different style here. Arguably, George Kinder and the Kinder Institute lead the field and Kinder has developed the EVOKE five step financial life planning (or simply ‘life planning’) process consisting of:

Exploration: getting to know the client in the deepest sense
Vision: working out the client’s life goals, values, projects etc
Obstacles: dealing with practical, emotional and financial obstacles preventing the client achieving their vision
Knowledge: providing the internal and external knowledge to achieve the client’s goals
Execution: coaching the client in the execution of their plan
(Kinder, George and Galvan, Susan. Lighting the Torch: The Kinder Method of Life Planning. FPA Press 2006)
There are two important distinctions between financial planning and life planning: life planning takes as its starting point the client’s life rather than their money, and life planning contains the important middle step of dealing with obstacles, which is absent in the financial planning process.

Life planners are usually (but are not required to be) authorised financial advisers.

Financial literacy

Financial literacy is generally poor and there are a growing number of organisations and institutions in the UK dedicated to improving financial literacy. The UK Government has attempted to do this through the Money Advice Service (www.moneyadviceservice.org.UK/en) and in 2014 financial literacy education became part of the National Curriculum in England and should be a compulsory part of every school’s timetable (Long, Robert and Foster, David. Financial and enterprise education in schools. House of Commons Briefing Paper number 06156, October 2016).

Financial literacy is not financial advice or planning, and does not have to be provided by a financial adviser or planner.

Financial guidance

Financial guidance is a relatively new concept, given weight by the Financial Conduct Authority in its review of the financial advice market (HM Treasury and Financial Conduct Authority. Financial Advice Market Review Final Report. March 2016) which defines it as any form of help provided to consumers which is not regulated financial advice. The FCA sees ‘guidance’ as a way to tackle barriers to consumer access to advice, the three key barriers being affordability, accessibility and the threat of liabilities and consumer redress to advisers.

The FCA cites a number of options, including basic advice, simplified advice, streamline advice, general and generic advice and guidance. Some of these will require authorisation, others not.

Financial coaching

There does not appear to be an authoritative definition of financial coaching / financial life coaching. The International Coach Federation definition of coaching is:

Partnering with clients in a thought-provoking and creative process that inspires them to maximize their personal and professional potential.

My own definition of financial life coaching is:

Financial life coaching is a process to help a client move from where they are now to a better personal and financial position as defined by their beliefs, attitudes, values, behaviour, actions and relationship to money.

Personally, I have long believed that you cannot help people move to a better personal position without addressing their finances, and people cannot better their finances without having a clear idea of what their finances are to be used for in the short, medium and long term. I know I am not alone in this opinion. When I have talked to psychotherapists and counsellors about my work I have often been greeted with enthusiasm as so often their clients have been confounded in their best intentions by financial issues.

In practical terms, it is possible and desirable to structure the personal finances of a household so they support and advance the personal goals, values and interests of the household. However, this implies a need to understand what those goals, values and interests are.

This definition makes clear that the process is holistic in the truest sense of the word, covering our thoughts, feelings and actions, dealing with right and left brain activities and working in the entire field of a client’s life. It also deals not so much with money per se, but with our relationship to money. It is our relationship with money that defines how we use it, not how much we actually have or do not have.

Lynn Twist, a global activist committed to alleviating poverty and hunger and supporting social justice describes how the Achuar people, an indigenous group of people from deep in the Amazon rainforest have lived without money for thousands of years (Twist, Lynn (2003). The Soul of Money: Reclaiming the Wealth of our Inner Resources. WW Norton, New York). Not just lived but thrived on the social currency of reciprocity rather than the financial currency of cash.

I think we have to be careful here and not confuse ‘better’ with ‘more’. Thought leaders such as Lynn Twist and Brené Brown are adamant that scarcity (‘I don’t have enough money / time / sleep / leisure / work / kudos / friends etc) is the root cause of much of the world’s dissatisfaction. But wanting ‘more’ is different from wanting ‘better’. From a moral and ethical point of view, we arguably all have a responsibility to make better not only our own lives, but the lives of others. That, however, is very different from wanting more of anything simply for the sake of wanting more, particularly wanting more in order to stay connected to our peers.

Indeed, I see financial life coaching as a process that helps people deal with the problem of scarcity by helping them to let go of their own excessive demand for whatever commodity they think they are lacking, not by trying to increase the supply of the commodity in the first place.

Others will say that trying to ‘better’ our lives is a futile exercise, that we should just accept our situation as it is. Trying to lead a better life takes energy, is exhausting and requires so much focus on a goal or goals that we cease to be aware of the wider (and probably deeply enriching) environment around us.

The demand for financial life coaching

I built my business, Planning for Life, on the back of demand for advice that went far deeper than financial advice as defined by the FCA. Neither I nor my clients called it ‘financial coaching’. We did not even realise the term existed, but that is what I was doing.

Where did this demand come from, and does it still exist? I would argue more than ever, for many reasons.

‘Life is s**t’

I don’t actually believe this, nor do most people. However, they do recognise that ‘the more the planet is fractured, the more distress individuals feel inside’ as leadership and life coach Danielle Marchant puts it when commenting on the 2016 ICF Coaching Study (International Coaching Federation 2016 Coaching Study Executive Summary available at http://www.coachfederation.org ). This study suggests that there are now 65,000 people working globally as professional coaches, or using coaching in a management or leadership role. The distress Danielle refers to precipitates a demand for a less structured form of help than, say, skills development or financial advice. It creates a demand for someone else to talk to, to be challenged, to brainstorm ideas, to be accountable to, to find meaning in life. In particular, it precipitates a demand for help in overcoming the practical, emotional, professional and financial obstacles to a better life.

Reacting against commoditisation

Honeywill and Norton discuss this at length. They argue that the demand amongst NEOs for a more authentic, genuine, individual life is partly a reaction to the uniformity of commoditisation. Why is this important? First, because in a highly commoditised, globalised world its difficult to actually live the NEO or Freeformer lifestyle and there is a growing demand for help in achieving this. This is not just about money, it is a whole lifestyle issue and if individuals are not achieving their desired lifestyle they will seek appropriate help to get there in the form of life coaching and, by extension, financial coaching.

Second, if you hate commoditisation, you probably hate traditional financial services and look for a more individual, authentic and highly personal form of help which financial life coaching can provide. You will also want to seek help from a like minded individual who shares your ambitions and values, and probably has been through – and is prepared to admit to having been through – life’s downs as well as up. You will seek help from someone whose expertise and provenance is founded more on their own life struggles than on their technical expertise.

The search for meaning

In Western economies many people have reached the pinnacle of Maslow’s hierarchy of needs – self-actualisation. Their physiological and safety needs are met through the purchase of basic commodities. Their needs for love and belonging are met through relationships and brands. Their need for esteem is met through their work or profession. What is left? The search for self actualisation – or meaning and empathy as commentators such as Professor Rowland Smith and Bernadette Jiwa put it.

Maximising your potential or doing the best you can is a little more complicated than building a portfolio, and comes down to answering questions such as ‘Why I am here?’, ‘Who I am?’, ‘What is my purpose and relationship to the rest of the world?’. Identifying gaps and filling them is rich material to work on with a coach and is undoubtedly a key driver of the demand for coaching.

Scope

Financial life coaching has a far wider scope than financial advice. Brendan Llewellyn, a UK commentator on financial services, wrote recently of how ‘for most people, money concerns income, expenditure, borrowing and savings’. He goes on to say that, although the financial services industry concentrates on the last two, ‘for most people income and expenditure are the most important variables.’ Llewellyn goes on to talk about the need for a new type of financial adviser, a counsellor or guide who would help people increase their incomes, look at personal development and retraining, seek new employment opportunities, analyse and improve expenditure patterns.

The focus of our interventions should be on where the client really needs help, namely balancing the work / income and life / expenditure equation. In recent years another layer has been added to this: sustainability. Freeformers in particular are environmentally aware and want to live sustainably. Traditional financial services concentrates on investments and borrowing when what people need is help in controlling their cash flow, spending smarter and doing it sustainably, which is a clear role for financial coaching.

Repairing the divorce between life and money

It is my contention that over the last 30 or so years financial services have become more left brain, commoditised and productised. This has resulted in the steady separation of life and money and a shift in emphasis towards the concept of money as an end in itself, rather than a means to an end. Much financial advertising is based on returns and the efforts investment teams make to be seen as the top performing fund in a sector are phenomenal.

High early surrender and switching rates testify to the fact that financial products tend to be chosen for their short term performance rather than the long term suitability in a life plan.

However, people are beginning to see through this and I was often gratified by how many of my clients appreciated their portfolios being structured round what we term the Cascade, which recognises the pros and cons of the main financial asset classes and allocates money between them based on the client’s short, medium and long term needs for cash, rather than for the maximum returns (which also of course incorporate the maximum risk).

As long as traditional financial services continue to be driven by growth and returns it will not reconnect with life. However financial coaching, which seeks to reunite life and money and build a working personal relationship with money, can do much to repair this divorce.

Dealing with obstacles

Traditional financial services and even certified financial planning do not address the matter of obstacles to achieving a client’s goals or desired lifestyle. We only have to look at our own lives to see that our struggles are usually around dealing with practical, emotional, professional and financial obstacles to achieving a better life. Financial life coaching can fill this gap.

A natural extension

The concept of coaching is becoming more familiar in home life as well as business life. After all, we hire coaches in a number of areas today, including leadership, business, sports, health and life. Dealing with personal finances is no less challenging than, for example, staying fit or building a business and lends itself to coaching. In my experience, clients came to me for this very reason, even if they did not recognise or understand that it was financial coaching rather than financial advice that they sought.

Not the Listening Bank

It used to be said that the average length of time between the start of an adviser / client meeting and the adviser starting to sell a financial product was ninety seconds. Whether there is truth in that I don’t know. However, I do know that individuals shun financial advice because they don’t want to be the subject of a hard sell. What they want is someone to listen to them and to council them objectively and independently.

On many occasions I have sat with couples hardly saying a word, just listening to them talk to me and each other in an empathic, secure environment. At the end they would often thank me and talk about how in all their years of marriage they had never had that sort of deep and meaningful conversation.

People want to be heard, to be able to tell their stories to someone prepared to listen and help them to understand the meaning of those stories.

Go to a financial coach before a financial adviser

Financial products such as savings accounts, loans, mortgages, pensions, and investments fulfil an important part of any family’s financial plan and belong firmly in the field of expertise provided by financial advisers. So, why would you go to a financial coach first? Here are just a few reasons:

The scope of financial coaching is much wider than financial advice; ultimately it is about getting life right then building a sound framework for financial products
In spite of those financial ads that tell you a bank account or other financial product is the route to freedom, it is the deep inner journey around life and money that financial coaching will take you on that is the true source of freedom
Coaching will provide you with new ideas and new perspectives on life; you will brainstorm obstacles and assess different scenarios before committing to financial products
You will be able to make informed decisions about your life and money and minimise the probability of making serious mistakes
Your existing norms and attitudes will be challenged
Limiting beliefs and self-beliefs will be identified and addressed
Bad financial habits will be identified and addressed
You will become accountable to someone other than yourself
You will build a life based on a deep exploration and statement of your most important values
You will have the opportunity to explore how your money can be used to express your humanity and ideals, how you can make ‘contribution’ your primary driving force instead of ‘consumption’
Your relationship will be based on trust, authenticity and partnership; you will build a support team to help you on your journey
A coach will give you a highly personalised service, especially compared to the upcoming alternative of robo-advice
You will develop a financial framework that supports your life goals which you can either fill with financial products yourself or use as a brief for a financial adviser to do the work for you
Life will become simpler, different and under control and you will become financially well organised
Conclusion
By coincidence, I find myself finalising this article on Black Friday, 25th November 2016, the day after Thanksgiving Day in the USA. Print, television and online media are awash with adverts and encouragement to go out today and buy, buy, buy. I have no doubt that savings accounts and investment portfolios will be raided, credit cards and overdrafts will be pushed to the limit and for what? The chances are that much of the stuff purchased today will be used once then relegated to the back of a cupboard or attic. By the time we have got through Christmas and New Year and into January many, many people will be suffering from a monumental financial hangover.

This isn’t about money. Its about our relationship to money, our attitude to life and our deep seated hopes and fears about our lives. But these can be addressed and with guidance and coaching they can be changed to ensure people can lead more fulfilled lives in the knowledge that they are the masters of their money and not vice versa. Get to grips with life and financial relationships first, then go to a financial adviser with a clear plan and brief for your money.

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Opportunities for Africa to Deepen Financial Inclusion and Development

economic development and economic policy effectiveness.The benefits ICT enabled financial services include the possible creation of employment- mobile money vendors, increases in revenue receipts of government, helps firms productivity (both private and public), aid in cost control and efficiencies, and Could contribute to rural development and governance: Governance and revenue mobilization efforts, especially at local government levels, can be enhanced through ICT which aids in overall improvement in corporate governance. Importantly, Innovation Technology can help in the deepening of financial inclusion either through access, usage, reducing risk and improving quality of services, thus, per formula for Financial Inclusion (FI), thus, FI = (Unlocking Access + Unlocking Usage + Quality) – Risk.

Access to financial services can generate economic activities-Sophisticated use of financial services even presents bigger economic and social possibilities for the included. In Mexico, a research by Bruhn and Love revealed that, there were huge impacts in the economy in Mexico, that is, 7% increase in all income levels (in the local community) when Banco Azteca had rapid openings of branches in over a thousand Grupo Elektra retail stores when compared to other communities that branches were not opened. Also the savings proportion by those households in the local community reduced by 6.6%, a situation attributed to the fact that households were able to rely less on savings as a buffer against income fluctuation when formal credit became available.

Here, it must be noted that through savings is encouraged, the reduction in savings by 6.6% means more funds can rather be channeled for investments into economically viable entities or services. As the cycle continues, and in sophisticated use of financial services along the financial services value chain, they will need to save however for other investments later. Similar or even more positive correlation is observed if the medium of access and usage is through innovative technology.

Using Digital Financial Inclusion Strategies in Humanitarian Services

Despite the use and usefulness of financial services in crises situations, financial exclusion is particularly acute among crisis-affected countries. 75% of adults living in countries with humanitarian crises remains outside of the formal financial system and struggle to respond to shocks and emergencies, build up productive assets, and invest in health, education, and business.

Researchers continue to show the growth in acceptance of electronic payments especially through the use of mobile phones. There is growing evidence supporting digital financial inclusion. GSMA in its reports revealed that there were 93 countries between the periods of 2006-2016 of with 271 mobile money operating service providers which had registered over 400 million accounts globally. They give some evidence in some countries – which have been receiving humanitarian assistance- where there is growing acceptance of digital financial inclusion through use of a phone.

In Rwanda significant numbers of refugees used phones for mobile money services whiles some do so commercially for service fees. In Uganda, Refugee communities are noted for use of mobile money service as per the report. This has necessitated MNO Orange Uganda, a telecommunication firm to expand mobile money service to refugee communities by building a communication tower to improve access and usage of the services. In Pakistan, one of the largest refugee communities- third largest- has the government using mobile money for cash transfers to refugees. The evidence abounds and this calls for humanitarian agencies to rethink and reconsider digital inclusive financial services beyond the current numbers. In Lebanon (The largest refugee community) those on humanitarian assistance uses ATM issued by aid organizations to access their cash transfers.

Sarah Bailey, however, observed that humanitarian areas that were receiving cash transfers through mobile money could increase the use of certain services but does not automatically lead to widespread or sustained uptake. People may prefer to continue using informal financial systems that are more familiar, accessible and profitable. Her study revealed that that, the provision of humanitarian e-transfers, even when combined with training, was not sufficient to enable the vast majority of participants to conduct mobile money transactions independently.

The findings are certainly acceptable in the short run per our knowledge. However, on a long-term basis and with financial capability activities – not just training- the results could possibly be different. Financial capability activities deal with not just training and education, but the overall financial health and well-being of the people. And this should be done in a hierarchy- bits-by-bits- and not at a one leap jump approach. This seems to have been echoed by the United Nations. According to Ban Ki-moon as cited in advised that we must return our focus to the people at the centre of these crises, moving beyond short-term, supply-driven response efforts towards demand-driven outcomes that reduce need and vulnerability. Financial inclusion strategies may not lead to widespread uptake within a few days, but evidence abounds that in a long-term, it could.

The thirteen countries in the world with the most mobile money penetration today had some being on humanitarian support just a few years back-. Sustained access and use of innovative technology for inclusion then would have a better impact on them the more today.

Undertaking a case study on the use of digital means for humanitarian transfer will show that in the short term run there may be lack of interest or even rejection. Coupled with regulatory barriers and other barriers mentioned, people during a humanitarian crisis may not really be thinking much of connecting to the economic system on the whole or how their support comes (This is the business of policymakers on humanitarian service) but rather be much interested in survival within a short run. The psychology of that period of need is centred on – What is needed is the urgency of support – money – physical cash in most cases to enable them to get the basics of security and food with the most liquid instrument. Humanitarian communities have needs just as all other communities within the financial services need a framework.

Indeed evidence suggests there have been few instances only worldwide where the use of digital transfers in humanitarian transfers has led to widespread use of services. Digital transfers in humanitarian services must be a process and done within the particular context of time. In this sense, the digital strategies must be humanitarian, and must embed in the social and behavioural change financial capability activities capable of two-way communications with practices on usage and the benefits it brings in the long term- It must be in a hierarchy. Simple financial needs should be met before sophisticated needs. Any deviation will of course results in lack of interest in the services.

Howard Thomas observed that “Financial technology still leaves out swathes of people, and this means missed opportunities for development,” And in some cases, community structures may not be innovative or agile enough to allow new technologies to spread, he adds. “Savvy entrepreneurs are not necessarily from established authorities. Sometimes it’s a matter of identifying individual leaders, networks or pathways through which to promote new technologies.”

Indeed there have been some lessons however on how to manage humanitarian remittance, the parameters, however, are that financial inclusion is a continuous and sustaining effort of providing access and usage of financial services in a sustaining and responsible manner which meets the needs within a reduced risk – it is not just one time project of implementation policies at speed but rather concentrate on meeting the basic before sophisticated needs. Within a humanitarian certain, a complex multiplicity of issues may serve as barriers to using digital financial services including location and urgent needs; however those barriers when managed within a considerable period and coupled with financial capability activities (the act of complete financial well-being), then favourable results would be achieved.

The use of behavioural change financial capability education, training and practice into humanitarian communication on digital transfers would help in improvement in the uphill acceptance over a period of time. sub-Saharan African countries have been realizing some tremendous gains in the use of innovative technology, and expansion of ICT services and infrastructure on the continent. Its study time past points out those countries on the continent totally made revenues amounting to 5% of Gross Domestic Product (GDP) from telecommunication related services as compared to European countries where revenues from the telecommunication services represented 2.9% of their total GDP.

Sub-Africans Countries need repositioning and further investment in the “digital economy” in order to open up and benefit fully inclusiveness of their economy. Here our interest is in mobile technology and innovation which is the critical avenue that Africa could use mostly in achieving financial inclusion within the short to long term.

Kenya is making giant strides and leading the way in digital innovation for mobile financial services globally. Researchers have shown that sub-Sahara Africa countries are leading the technological innovation drive in the usage of mobile financial services.Kenya and other Sub-Saharan African nations are making the greatest strides in mobile money accounts penetration and with lots of opportunities foreseen. Globally the thirteen countries that mobile account penetration has been over 10 %, all 13 are from Africa -Botswana, Cote d’ivoire, Ghana, Mali, Kenya, Somalia, Rwanda, Namibia, Tanzania, South Africa, Uganda, Zambia and Zimbabwe (ranging from 10%-58% for the 13 countries).

Kenya is leading at 58% mobile money account penetration, with Somalia, Tanzania and Uganda “following closely” reporting around 35%. Namibia out of 13 countries has the least of mobile money penetration of about 10% (still higher than all others in the world except the other 12 African countries). Mobile money account is recorded to be widespread in East Africa (20% and 10% of adults have mobile money accounts and mobile money account only respectively) than any other region.

Firms providing financial services, be it services or infrastructure is the most important and unique set of stakeholders who should be encouraged to take the lead roles in financial inclusion activities and implementations. Financial services firms are uniquely positioned, to use their existing infrastructure and leverage to creating access, and usage of digital financial services.

They do so effectively and at a lesser cost as compared to government agencies because they can do so through their already existing departments as the marketing and customer service departments. Financial services firms are driving innovation for digital finance across the globe. Firms as GCAP have been investing in solutions to accelerate financial inclusion. It announced that in its call for proposals on innovative digital technology with huge potential to advancing the financial inclusion drive in sub-Saharan Africa, out of the over 200 applicants and proposals submitted, Financial Technology (Fintech) firms submitted (56%), Financial Services Providers (18%), Non-Governmental Organizations (NGOs) (13%) and Technology Services Providers (9%).

Growing evidence from other similar calls suggests that there is a trend, that the journey of using innovative technology and financial inclusion in the sub-Saharan African is not only picking up but even shows a rather promising outlook for the future, the opportunities for countries in the region are enormous for nations in advancing financial inclusion.

The call now is for countries at their policy levels to position themselves, armed with policies and willingness of governments to support and collaborate with the private sector to drive financial inclusion activities. However, to further enhance financial and economic for much better gain is a continues process and does not take just a few days but undoubtedly without collaborations between public-private role and decision establishment and support, it will take us rather too long. Collaboration is therefore important for financial inclusion drives and actions.

For governments or the public sector, their support in creating the needed supportive framework and regulations for the industry is important. Regulations and environment that supports innovation and drives whiles customer rights are supported are so much needed in this sector. In providing support and helping in creating an environment for financial inclusion activities to make the required impacting effects, government policies must have some balance of care. By doing so, any policy by a government on financial inclusion that does not take views from other important stakeholders may be implemented at last, but not without difficulties and in some case unreasonable delay in implementation.

This can be attributed to a variety of reasons: more importantly, policies may be concluded, but if Financial services providers are not ready or not able to implement those policies, then, problems of “distressed“ policies then begin to show. In financial inclusion drives, success depends mostly on collaborations for improvement between the public-private sectors.

The Opportunities for sub-Saharan African Economies
The opportunities exist for groups of people who need access and usage of financial services yet unable because of the barriers they confront mostly. Sub-Saharan African governments and private stakeholders can improve on the regulatory constraints and allow for the tap in technology innovation respectively to design solutions that will open access and usage of financial services

An important Segment of organized groups usually out of the formal financial economy thus, the “Savings Groups” always have their common values and beliefs most often deeply rooted with cultural and social entrenchment that must be considered when targeting with financial inclusion products and designs.

The groups usually common in Asia, sub-Saharan Africa and Latin American come together for social and economic benefits and supports. They have different specific objectives but commonly among reasons are for group savings, group insurance, good trading and all kinds of group support systems. At best design of product and services for “savings groups” if the top is successfully accepted can only be through a consultative process, sometimes customized or tailor-made services (most appropriate where possible) and winning the genuine interest of the groups.

There are over 14 million members of “Savings Groups” across 75 countries in sub-Saharan Africa, Asia and Latin America, representing a promising platform for financial inclusion in under-served markets. Savings Groups offer an entry point for financial service providers to isolated communities; they are organized, experience and disciplined; they aggregate demand across many low-income clients, and they have identified needs that financial service providers can address. Also, these groups are very goal oriented and purposeful but lack certain financial services- Some basic needs like accounts and payments and others sophisticated needs like saving platforms. Tailoring products to meet these segments who lack access to some financial services and are in need of those financial services would create opportunities for financial inclusiveness.

Prioritization of digital payments is one way of minimizing corruption within expenditures, be it the private or public sector. Digitizing payments means better tracking of records of payments throughout the value chain of spending and transfers. In the Agriculture economy, it means that when the government pays 1 million dollars ($1.000.000.00) directly through “mobile money` to its citizenry for goods and services, then its most likely that, subject to cost of the transaction, farmers will receive their funds intact and same. The vulnerable citizen would then have value for money in dealing with the government whiles having to benefit from the opportunities that having an account and using it comes with. Such is not the case when physical cash changes hands in payments.

The adoption level of digital financial inclusion with mobile money is generally high for sub-Saharan African. Stakeholders in the Public in the region can leverage its strong foundation and application of mobile money services to scale up the use of digital payments, but courses they must be the backing infrastructure to expand access as well. Increase in account ownership as a foremost financial inclusion indicator has primarily been through financial institutions except those recorded in Africa where mobile money accounts drove the growth in accounts ownership from 24% to 34% in 2011 and 2014 respectively.

An area Africa is making giant strides – Mobile money account penetration. Accounts ownership and its definition have changed over just three years when Global Findex Database launched its first data for comparable indicators among countries on financial inclusion. In 2014 it considered mobile money accounts as recognized accounts in their right, hitherto in 2011 that wasn’t the case. The opposite was rather the accepted case, and rightly so. Today the digital disruptions in the financial, telecommunication and economic arena are having is impacts.

For policymakers and private sector stakeholders, more keenly important is the fact that 5 of the thirteen sub-Saharan African countries (The only five in the world) – Somalia, Uganda, Côte d’Ivoire, Tanzania and Zimbabwe have an adult population with more mobile account than they have from a formal traditional financial institution. What this means is that, in those five countries, an ordinary man on the street is more likely to have, use, trust and save in a mobile money account or wallet than saving with a traditional formal bank account. This comes with enormous opportunities and breakthroughs. Digital payments are comfortable, fast and less expensive than physical cash payments platforms.

Tailoring products to meet these segments who lack access to some financial services and are in need of those financial services would create opportunities for financial inclusiveness. Prioritization of digital payments is one way of minimizing corruption within expenditures, be it the private or public sector. Digitizing payments means better tracking of records of payments throughout the value chain of spending and transfers. In the Agriculture economy, it means that when the government pays 1 million dollars ($1.000.000.00) directly through “mobile money` to its citizenry for goods and services, then its most likely that, subject to cost of the transaction, farmers will receive their funds intact and same. The vulnerable citizen would then have value for money in dealing with the government whiles having to benefit from the opportunities that having an account and using it comes with. Such is not the case when physical cash changes hands in payments

The adoption level of digital financial inclusion with mobile money is generally high for sub-Saharan African. Stakeholders in the Public in the region can leverage its strong foundation and application of mobile money services to scale up the use of digital payments, but courses they must be the backing infrastructure to expand access as well. Increase in account ownership as a foremost financial inclusion indicator has primarily been through financial institutions except those recorded in Africa where mobile money accounts drove the growth in accounts ownership from 24% to 34% in 2011 and 2014 respectively.

An area Africa is making giant strides – Mobile money account penetration. Accounts ownership and its definition have changed over just three years when Global Findex Database launched its first data for comparable indicators among countries on financial inclusion. In 2014 it considered mobile money accounts as recognized accounts in their right, hitherto in 2011 that wasn’t the case. The opposite was rather the accepted case, and rightly so.

Today the digital disruptions in the financial, telecommunication and economic arena are having is impacts. For policymakers and private sector stakeholders, more keenly important is the fact that 5 of the thirteen sub-Saharan African countries (The only five in the world) – Somalia, Uganda, Côte d’Ivoire, Tanzania and Zimbabwe have an adult population with more mobile account than they have from a formal traditional financial institution. What this means is that, in those five countries, an ordinary man on the street is more likely to have, use, trust and save in a mobile money account or wallet than saving with a traditional formal bank account. This comes with enormous opportunities and breakthroughs. Digital payments are comfortable, fast and less expensive than physical cash payments

Recommendations
1) Regional and sub-regional bodies in sub-Saharan Africa should take up the financial inclusion drive as a priority and ensure peer-to-peer commitments of its members based on individual country socio-economic dynamics.
2) Each sub-Saharan African country should develop a National Financial Inclusion Strategy in a highly consultative manner at their country levels to guide their efforts.
3) Sub-Saharan African governments should continuously support ongoing literature and research work on Financial and Economic inclusion to provide reliable data will guide the policymakers developmental aspirations and economic policies. Therefore countries should set up Financial Inclusion Research Fund as part of their National Financial Inclusion Strategy to support continues research on financial inclusion issues for their jurisdiction.
4) Sub-Saharan African Countries should commit a percentage (at least 1%) of their annual GDP as the budget for Innovative technology for the support of the digital economy stimulus for sectors like financial service and other industries to perform.
5) Efforts should be made at country and regional levels to make the use of financial services delivered electronically cheaper – best practice is Wechat and AliPay payment solutions in China. Wechat specifically has no cost build up for use of its platform for payment of goods and services, therefore promoting the use of mobile phones and users can transfer cash and

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