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 David Dubofsky - March 22, 2021

Americans’ knowledge and understanding concerning finance and investments is, in general, abysmal. Just google and you will find literally dozens of surveys that have been conducted concerning Americans’ financial literacy.

Consider some of these reported findings:
• Only 20.7% of millennials understand the terms and policies of their student loans (and these are college students!)
• While 70% of Americans are saving for retirement, 23% know they are not saving enough
• 40% are concerned about how their finances will be when they are 65 years old
• 43% give themselves a grade of C or lower when asked about their knowledge of personal finance
• 78% say they could benefit from financial advice • Only 20% know that if interest rates rise, bond prices fall
• Money management was identified as the most important skill for children to learn…. more important that learning about the dangers of drugs and alcohol. One reason is that a lack of financial literacy itself contributes to subsequent substance abuse.

At the same time that your clients are likely to be poorly educated in financial matters, prior research conducted by David Dubofsky and Lyle Sussman (2009) found that 89% of financial planners and wealth managers engage in non-financial coaching and counseling. For those who do engage in coaching, on average 25% of their time is spent on these activities. The amount of time they spend on these non-financial issues is increasing. Most of the time, the clients initiate discussion of their problems. Only 17% of our planners actually advertise that they offer life planning services.

What are these non-financial issues that are raised by clients? The issues identified by Dubofsky and Sussman are (in rank order):
• Personal life goals
• Physical health
• Job/career/profession
• Death
• Conflict with children
• Marital problems
• Children’s medical and emotional problems
• Divorce

What incidents are faced by financial planners?
• 74% of financial planners experienced a planning session during which a client became emotionally distraught.
• 58% of planners were told a secret by a client that no one else knew
• >49% of planners prayed for, or with, a client
• >48% of planners mediated a conflict between a client and his/her spouse or children

SHOULD financial planners also engage in life coaching? Two comments we received illustrate the schism in the profession:
• “It is the only kind of planning that works. Most people receive tax, estate, and investment advice which is only loosely correlated with happiness, if at all.”
• “Life planning walks a very dangerous line. I have concerns about people who are strongly motivated to mix counseling on money and personal matters.”
Conclusions: Financial planners and wealth advisors have many clients that lack financial knowledge and understanding, and regardless of their financial wealth, clients often have many non-financial problems and they rely on their financial planners for help solving those problems.
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