Advisors often ask new clients about their history with money. Did their parents talk about money? What are their early memories of saving or spending money? What financial lessons did they learn as kids?
The answers help advisors uncover a client's long-held attitudes about everything from budgeting to investing to risk-taking.
In some cases, clients admit that they didn't grow up around money. They may feel embarrassed about their background or uncertain about how to proceed now that they're on solid financial ground.
"We don't always realize how our own experiences shape our behaviors as adults," said Marianela Collado, a certified financial planner at Tobias Financial Advisors in Plantation, Fla. "If all you know growing up is money comes in and money goes out, then you don't learn the power of savings."
If clients were raised in a household that lived paycheck to paycheck, they may never have known what it's like to possess excess cash. Decades later, they look to their advisor for guidance as they build a nest egg.
Their history with money can lead some clients to develop a scarcity mentality. They may perpetually worry about depleting their funds even if that's highly unlikely. Advisors might run financial projections to reassure such clients, but there's no guarantee the message will sink in.
The good news is even if someone didn't grow up with much money, the larger lessons from childhood can prove valuable in later life. That's especially true if parents — or other key authority figures — modeled good financial behavior.
"If somebody isn't used to investing, they may not realize that the values instilled in them early on may lend themselves to a prudent investment approach," said Zachary Morris, a certified financial planner at Atlanta-based Paces Ferry Wealth Advisors.
Set Goals To Build Confidence
A client who's accustomed to living below their means and adopting a conservative investment philosophy is well suited to thrive. Such individuals often grew up in modest circumstances.
"They know there are no quick fixes or silver bullets to build wealth," Morris said. As a result, they may think twice before prodding their advisor to buy the latest meme stock or take undue risk with highly volatile investment products.
Morris favors a goals-based investment strategy when working with clients who didn't grow up around money. They gain confidence as they attain each steppingstone goal, whether it's saving for a child's tuition or funding their tax-advantaged retirement plan.
Nevertheless, such clients can sometimes pose a challenge.
For example, a wealthy older adult who recalled the Great Depression of the 1930s grew up in a debt-ridden household. He's maintained an aversion to debt throughout his life.
"He had a 30-year fixed mortgage at 3% and wanted to pay it off early," Morris said. Despite Morris' advice against doing that, the client insisted.
"He chose to pay it off and now he's happy," Morris said.
Similarly, Morris finds that some clients who grew up with little money are eager to take Social Security as soon as they hit full retirement age instead of waiting until they turn 70.
"Emotionally, they may want it sooner," he said. They may prefer to access the money now for fear of an uncertain future.
Dig To Learn More About Clients' History With Money
Like Morris, Collado has found that clients who didn't come from money are more cautious about how they manage their wealth in adulthood.
"There's an insecurity in some cases," she said. "There can be a 'Something can happen and I can lose everything' mentality."
She cites a client who didn't grow up around money who wanted to boost her philanthropic giving. But she fretted about giving away her money because she thought it could run out in retirement.
Collado ran the numbers to assure her client that she could donate funds now — and still have ample savings on hand for her later years. The client ultimately came around and increased her charitable gifts.
"Giving away her money while she is alive has allowed her to witness the change it has made in people's lives," Collado said.
Advisors also like to learn more about a client's upbringing before counseling them on how to save and spend. When new clients tell Wendy Hartman that they didn't grow up with money, she asks gentle follow-up questions.
"It's important to probe so that we learn more about their experience," said Hartman, a certified financial planner at Buckingham Strategic Wealth in St. Louis, Mo. "We don't want to make assumptions" that they grew up poor or that they lack financial literacy.
