|Our words need to address the relationship between money and the other important aspects of our lives.
The limits of my language mean the limits of my world.
It was a gathering of fine minds, successful practitioners and open hearts. Demographically diverse, different in practices, attitudes and philosophies, each was devoted to the emergence of an excellent financial planning profession and individual financial health. It was a great group and not a bit shy. Seated by fours at tables covered in red plaid cloth and butcher paper, they had agreed to participate in probing conversations.
After sharing some conversation rules, the leader wrote the first question on a large white board. It was one of those wicked â€œelephant-in-the-living-roomâ€ queries.
â€œWhat has financial planning gotten wrong?â€
Several participants were shocked at the negative tone. They complained that the question was harsh and judgmental.
â€œShouldnâ€™t we be more appreciative?â€
The leader noted that nothing is perfect, not even in financial planning. â€œWrong,â€ she suggested, â€œsimply asks whether we are missing something vital or core to the issues implicit to the personal finance domain. We can appreciate what we have done right, of course, but it does not hurt us to name our blemishes. We know we have gotten quite a bit right. So, for now, letâ€™s look for the dirt in the corners and the dust bunnies under the bed.â€
We nodded and talked excitedly at our tables. Some of those dust bunnies were not too hard to spot.
We noodled for a couple of rounds on such diverse issues as client relations, compensation systems, AUM (and its dominance in our compensation), academics, certification relevancies, FINRA, RIAs versus wirehouses, employee hiring and transition planning, fiduciary duties, expertise versus â€œskill sufficiency,â€ the people we under-serve, mission, meaning, purpose and the extent of financial planningâ€™s proper domain.
The butcher paper tabletops became resplendent with color and spontaneous art. It was funâ€”and some great ideas emerged together with mutual respect and understanding.
Now the leader raised the next question for the happy room. On the whiteboard she wrote: â€œIf we are doing aspects of financial planning wrong, how do we know what we donâ€™t know that we should know?â€
The roomâ€™s mood went somber. Mouths dropped. Nobody moved for several minutes. There was no place to hide. Of course, we could arrogantly fluff the question, claiming finesse. Or we could explore the inconvenient unknown. The only sound in the room was the silence of our minds warping. We had no words.
The leader laughed uneasily. Looking at the room full of her colleagues, she observed â€œYes. That is what I thought. It is a problem.â€
She continued. She observed that financial planning was unique. Other professions had grown into their roles over centuries. This one was created just recently from a mix of diverse financial product providers without common roots or understanding. It came about because advisors needed to understand what individual clients required of their financial products. Unfortunately, the founders had focused purely on the products without grasping financial planningâ€™s implications for other aspects of their lives.
Indeed, how could they foresee what would emerge? The dollar was still on the gold standard. Baby boomers had no economic clout. Computers were esoteric, expensive and clumsy. Most important, financial planningâ€™s founders were working from scratch.
There were no well-traveled paths to help them as they encountered new situations and circumstances. Worse, there was no vocabulary for important concepts.
Our group leader observed that we literally have no words to focus the inquiry. This means we lack clarity about what it is we do, or could do. Many of us still wonder whether financial planning is simply â€œan improved sales processâ€ for financial products for the wealthy or, does the idea mean we should be asserting ourselves within all aspects of the domain of personal finance?
â€œWe talk about â€˜getting it,â€™â€ she went on. â€œWe complain when consumers and regulators fail to understand us. I ask what is the â€˜itâ€™ everyone is supposed to get? Do we understand ourselves?
â€œThe truth is that we donâ€™t have the words to help us with it,â€ she said. â€œTo get specific, did you know, for example, that there is no English word or words for the relationship between individual humans and money? Even financial planners talk around these relationships almost exclusively from a macro perspective. For all of the talk about issues of man and money, there is not a single word or succinct conceptual descriptor to look at these issues from the individual point of view.â€ With that, she took her place at one of the tables and joined the ensuing conversation.
As Wittgensteinâ€™s pithy quote suggests, the linguistic shortcomings of our young profession impose limits upon it. They limit the development and emergence of an authentic profession focused on helping individuals address their personal money issues. Without better words, neither our art nor our craft will mature. Nor will we be able to hold our end of the rope with Big Money, Big Politics or macroeconomists and their various attempts to game the money systems.
The individualâ€™s perspective is a special one. It is the locus of decision and action. Thomas Jefferson emphasized that sanctity of the individual when he stressed life, liberty and the pursuit of happiness in the Declaration of Independence. We come into the world one at a time. We live our lives one by one.
Our experiences with money, the human experience and the qualities of our wisdom and expertise are quite unlike those surmised by the macroeconomists. Individuals are many and we are messyâ€”but we are the point of it, after all.
Remember, macroeconomic statistics are nothing more than aggregates of these individual decisions. Granted, money is inherently social. We need the macro in order to understand markets and trends. Obviously, each individual cannot communicate market data effectively on behalf of the whole. However the reverse is also true. Sweeping market generalizations do not help us understand individuals.
If we cannot name what we learn from our experiences with individuals, economic concepts with respect to individuals remain nothing but shadows. Right now, we cannot speak of them clearly, even if we know that they are essential and vital.
This vocabulary void exhausts our energy. Witness all the jabber over â€œlife planning,â€ â€œfinancial planning done right,â€ â€œfinancial life planning,â€ â€œinterior finance,â€ â€œfinancial therapyâ€ and â€œfinancial coaching.â€ These ideas all stand as proxies for different approaches to our personal relationships with money, yet none actually communicates succinctly or effectively.
So much of the financial plannerâ€™s work takes place in conversations about feeling, meaning and purpose. Yet a personâ€™s interior life is not susceptible to the sorts of analyses that satisfy the scientistsâ€™ need for precision.
Financial product manufacturers and service providers, meanwhile, employ literally thousands of finely tuned words to describe matters of consequence to them. Words for products and product function, for business and politics, for currency markets, for stock markets, for various forms of insurance and banking services, for real estate, statistics â€¦ the list is long and the nuances endless. They even have words to describe types of people and where they fit into the macro world. The macro world looks at sociopolitical trends and the opportunities provided by changing demographics. Game theory and mathematical analysis provide new ways to distill and employ information.
The point is that large systems have effective language, one in which there is a capacity for the system to correct itself and one where finer points can be asserted.
The contrast between large groups and individuals could not be more glaring. Because we donâ€™t have the words for the individual/money relationship, we tend to use words better suited to institutional behavior. It simply doesnâ€™t work.
If â€œmacroeconomicsâ€ describes large systems, one might suppose â€œmicroeconomicsâ€ would be the word for individual relationships and issues. But one would be wrong. Microeconomics already has a definitionâ€”as a branch of economics.
It gets worse. When macro theorists could not wholly eliminate individual humans from economics, they did the next best thing.
By concocting Homo economicus, the so-called rational human being who always reliably attempts to maximize his personal utility, they substituted a laughable doppelganger for the authentic human being helped by financial planners. For decades, this dreadful, soulless, dimensionless troll reigned as caricature supreme in economic theory. As an emotionless automaton, Homo economicus single-handedly enabled economists to play white coat scientist while literally denying humanityâ€™s essence.
Thankfully, behavioral finance and behavioral economics has emerged to fill this vacuum. At least behavioral economists acknowledge that individuals have brains and emotions. Unfortunately, even behavioral economists deprive individuals of our fundamental dignity, tending to treat individuals as fungible units for slicing, dicing and analyzing from the eyeball side of the microscope. From there, they generally equate emotions with stupidity and irrationality. At least they acknowledge that emotions exist.
Still, they seldom regard victims of large-scale abuse (perhaps those caught up in real estate manipulations and Ponzi schemes) as flesh and blood casualties. Rather, the slicers and dicers tend to see such people as statistical fodder, as victims on their way to becoming Greek letters in an esoteric macroeconomic formula.
These diced slices are our people: our clients, neighbors and loved ones. And these economists are talking about them in ways that hurt them. And us. The insufficient language of financial planners makes it difficult to take our work seriously, with the pride and potency it deserves. We are struggling with words at a time when the work weâ€™re doing is critical to the health, safety and welfare of individuals. We are struggling with our words in a world where money and economics shape daily reality and are, in fact, 21st century survival skills. Without proper words, we cannot speak for the individual or explain what has happened with his money. In the tug-of-war between our profession and economics, we cannot hold our end of the rope.
I wonder. If we had had the words in the past, could we have advocated for individuals in a way that altered history? For instance, if weâ€™d had the language to express our concerns about currency integrity, rational interest rates and sound banking principles, would we have let derivatives, and derivatives of derivatives, be created without raising alarm? Would we have let the government repeal Glass-Steagall without protest? Would health care conversations be different now? Would people have ever concocted the phrase â€œtoo large to failâ€?
The capitalist/socialist/communist dialectic is trite and tired. If articulate theorists could speak for individuals, would these macro theories have dominated public conversation and stifled new ideas? Financial advisors were the proper critics to assert that financial manipulation gimmicks were dangerous to individual health, safety and welfare. What happened?
Of course, these are no small matters to the members of our profession. Financial planning emerged to serve individuals. Its founders believed individuals should be able to access financial products through one knowledgeable sales source. Modern practitioners have matured to recognize even bigger pictures and to accept self-imposed standards of fiduciary care for defining client relationships.
Our relationships with money are among the most important aspects of our lives. Individuals come to financial planners to seek advice and perspective on these relationships. Can we see through their eyes? Can we find the words to connect with them and their issues?
To do the interior, psychological work, we need more information and new views of old information. Perhaps we could think in terms of telescopes and microscopes. With telescopes, we can see the heavens and infer black holes, and we can often know what we are looking at by what is missing (consider Stephen Hawkingâ€™s work). With microscopes, we can magnify the tiniest details of the smallest units such as the 50 trillion cells found in a human body, inferring levels of consciousness and interaction not visible to the eye (consider Bruce Liptonâ€™s research). Both these methods can allow us to work from inference rather than precision while creating language for contending with those inferences.
This is how knowledge and wisdom evolve.
Financial planners are looking at questions and issues that occupy huge portions of our lives. With the right words, we can look more thoroughly at those places where our lives touch money and where money requires responses and decisions. We could start to understand the nuances that would enable meaningful conversations. What does an individual need from money? What must individuals do to survive and thrive given the demands money makes on them? How can we more effectively address money pathologies?
Our words need to address the relationships between money and the other important aspects of our lives: Marriage. Children. Health. Jobs. Family. Education. Relationships with others. Relationships with the divine. Notions of what makes life worth living.
â€œIn the beginning was the Word â€¦â€
Richard B. Wagner, JD, CFP, is the principal of WorthLiving LLC, based in Denver. He is the 2003 recipient of the Financial Planning Associationâ€™s P. Kemp Fain Jr. Award, which recognizes a member who has made outstanding contributions to the profession.
Originally published in Financial Advisor Magazine January, 2010