Enjoy the current installment of "Weekend Reading For Financial Planners" - this week's edition kicks off with the news that the T3/Inside Information Software Survey is available, providing insights into which technology tools advisors use and their level of satisfaction with them, which highlighted the continued rise of specialized financial planning software tools for topics like taxes and Social Security as advisors continue to seek tools tobroaden and deepen their planning capabilities.
Also in industry news this week:
- FINRA has announced that, on the heels of its first enforcement action under the Reg BI rules, it will be ramping up its examinations of broker-dealers for potential violations (after a long period of relative leniency when firms were still determining how best to comply with the rule)
- A recent study from Ameriprise found that a growing number of Millennials are ready to listen to financial advisors, and that those who do have a financial advisor feel greater confidence in their financial situation
From there, we have several articles on practice management:
- How growth in the advisory industry can be a double-edged sword, allowing for more scale and ability to attract talent but also introducing greater complexity and reducing the control that firm leaders have over their business
- A 4-step framework for advisors to audit their processes and make changes when a process isn't fulfilling the function it was intended to do
- How transparent organizational goals – translated into clear objectives and reinforced regularly firmwide – can help create a shared sense of purpose that keeps everyone working toward the same goal
We also have a number of articles on client communication:
- Why different parts of the client journey present opportunities to ask different types of questions (and which questions to start with when deepening one's question-asking skills)
- The best practice for administering personality assessments to ensure clients respond honestly (and not with what they think is the 'best' answer)
- Why digging into clients' past history with money – rather than discussing future goals – can be the key to understanding what really motivates them
We wrap up with 3 final articles, all about finding balance:
- Why people are reluctant to change their beliefs, even in the face of evidence to the contrary, and why it's important to have the mental flexibility to update or abandon beliefs
- How the concept of 'work ethic' can result in more material wealth but less happiness, and why paying more attention to 'life ethic' can help prioritize enjoying one’s life
- Why the idea of 'work-life balance' misses the fact that people fulfill different psychological needs from multiple areas of life, and how to craft a life structure that satisfies those needs
Enjoy the 'light' reading!
(Bob Veres | Advisor Perspectives)
Each year, the advisor technology news platform T3 and Bob Veres' Inside Information conduct a survey of financial advisors' use of technology. The survey seeks to measure how frequently different tools are used by advisors (as measured by market share) and how happy advisors are with the technology they use (as determined by a satisfaction rating on a 1-10 scale). Over 3,300 advisors responded to the most recent survey, and the results, which were released last month, provide some useful takeaways on the state of advisor technology and how it continues to evolve.
At a high level, the survey highlights the growth in recent years of specialized financial planning tools (i.e., software that aids advisors in planning for specific subjects like tax, Social Security, and estate planning) –as the cost of providing diversified, asset-allocated portfolios has dropped, financial advisors are finding themselves needing to provide more complex, in-depth planning to justify their ongoing fees (a theme that was also found in the 2022 Kitces Research On How Financial Planners Actually Do Financial Planning). Accordingly, these specialty tools – such as Holistiplan for tax return review and planning, Income Lab for retirement distribution planning, and SSAnalyzer for Social Security analysis, among many others – have arisen to fill in the gaps left by more generalized comprehensive financial planning software.
Going deeper into the data, the survey results also highlight the ongoing battle for market share amongst the 'big-3' most-widely-used advisor tools: CRM, general financial planning, and portfolio management software. These categories often have 1-3 well-established platforms that make up the majority of the market share (such as in financial planning software, where 3 platforms – MoneyGuide, eMoney, and RightCapital – have over 75% of the market share), which makes it difficult for new entrants to gain a foothold (despite often having higher satisfaction ratings than the most widely-used tools, such as Advyzon for CRM outranking market-share leaders Wealthbox and Redtail in satisfaction), since convincing an advisor to switch from a software platform they're already using is much harder than getting them to try out software in a completely new (e.g., specialized planning) category!
Surveys like the T3/Inside Information Study (as well as the Kitces Research on Advisor Technology Use, which is currently open for advisors to participate!) can be helpful for advisors to want to either seek alternatives for their existing tools, or find new tools to augment the technology they're already using, by highlighting what software is widely used and/or highly-regarded among other advisors. Because as the T3 survey highlights, advisors are on the whole generally increasing their tech stacks rather than swapping out one tool for another – and as advisors continue to look to do more and deeper planning for their clients, their need for tools to help them do so grows in kind.
(Tracey Longo | Financial Advisor)
The early days of the SEC’s Regulation Best Interest (or Reg BI) rule, which went into effect on June 30, 2020, saw no small amount of confusion from brokerage firms about how to comply with the rule. Because although the rule stated broadly the obligations broker-dealers are required to follow (i.e., Disclosure, Care, Conflicts of Interest, and Compliance), it wasn't clear about how firms were specifically expected to comply with the rule – e.g., although the rule states that broker-dealers must mitigate conflicts of interest when making investments recommendations to clients, it doesn't specify how, exactly, they are expected to do so.
Although Reg BI is an SEC rule, the firms that it covers are, as broker-dealers, also Financial Industry Regulatory Authority (FINRA) members, which makes them subject to examination by both regulators. However, enforcement of Reg BI by both entities was notably light in the rule’s first two years of existence: Instead of bringing enforcement actions against firms for not complying with Reg BI (which would arguably have been somewhat unfair since there was little existing guidance on how to comply in the first place), regulators instead used the results of their initial years of examinations to issue more guidance based on how firms were (or weren't) complying with the rule.
Over the past year, however, industry regulators' approaches have shifted gradually from one of lenience (as they worked to build out more concrete guidance for firms to abide by Reg BI) to more strict enforcement. The SEC issued its first enforcement action under Reg BI in June of 2022, and after holding back for a few more months, FINRA announced its own first Reg BI enforcement action in October. Coming into the new year the regulators have picked up the pace: For example, FINRA has already announced 3 enforcement actions relating to Reg BI so far in 2023, most recently settling on a $35,000 fine for a Long Island-based broker-dealer for failure to "establish, maintain, and enforce written policies and procedures" to comply with Reg BI, failure to "establish, maintain, and enforce a supervisory system", and failure to prepare, file, and deliver its Customer Relationship Summary (Form CRS) to its clients.
And now, according to FINRA's leadership, the regulator plans on ramping up enforcement of Reg BI in 2023, stating that they plan to complete at least 1,000 examinations of broker-dealers under Reg BI by year-end.
FINRA's enforcement announcement, combined with their intention to ramp up examinations under Reg BI, demonstrates how, although firms could often expect lenience from regulators in the early days of Reg BI when the firms (and the regulators themselves) were still working out how comply with the rule, the SEC and FINRA now believe that broker-dealers have had enough time to sort out those questions – at least to the point that they have some set of policies and procedures in place to comply with Reg BI, and can demonstrate that they are following those policies and procedures. At a minimum, the enforcement serves as notice to firms that haven’t taken any action yet to comply with Reg BI that they can expect fines and public announcements for their inaction (since at this point they have had nearly 3 years to put policies and procedures in place, and the excuse that they may simply not know how to best comply with Reg BI becomes less and less viable). Though ultimately, the broader question for the industry remains whether FINRA's enforcement of the new Reg BI rules really does lead broker-dealers to adhere to a higher standard it was purported to establish, or whether in the end it still permits enough of the industry's existing conflicts of interest that broker-dealers simply adapt their existing ways of doing business to the new rules, especially since enforcement actions thus far have focused on behaviors that would not have been permissible under the prior Suitability standard, either.
(Karen DeMasters | Financial Advisor)
The Millennial generation has been subject to a lot of negative perceptions over the years, particularly from older generations: That they've been coddled; they prefer fleeting pleasures like lattes and avocado toast over responsible saving for the long term; would rather rent their homes than take on the responsibilities of homeownership, and so on. However, the real story is more complicated: Enduring two historic crises – the global financial crisis and its aftermath, and the COVID-19 pandemic – during the years when they may have otherwise been establishing themselves in their work, home, and family lives has left Millennials with less wealth, more debt, and more financial precarity than other generations – and yet, these Millennial stereotypes have held stubbornly.
Those perceptions of Millennials matter for financial advisors (outside of the fact that nearly half of CFP certificant financial advisors are themselves in or around the Millennial generation) because, when deciding on which market(s) to serve, financial advisors often rely on their idea of who would make a good client. If the perception of Millennials is that they don’t plan to invest responsibly or use their money wisely, then they won’t stand out as potential clients that many advisors would want to serve – even though the reality is that, because of the financial hardships that have dogged Millennials through their adult lives (like high student loan debt, low job security, and skyrocketing housing prices), they may actually be more attuned to ways to improve their financial situation than other generations.
A recent study released by Ameriprise Financial lends support to the idea that Millennials may have more financial awareness than they’re often given credit for. According to the study, Millennials (defined as being between 27 and 42 years old) are more aware of the need to budget, and were likely to have started saving for retirement earlier than other generations. At the same time, Millennials in the survey were likely to feel the pressure of juggling between different financial priorities, and also feel significant stress due to factors ranging from inflation to uncertainty to ongoing debt burdens. Also of note is that Millennials were more likely to have received financial help from family and expect more assistance in the future – which on its surface may conform to the 'coddled Millennials' stereotype, but also may reflect that other sources of stability enjoyed by older generations, such as employer-provided pensions and a stronger Social Security system, have been eroded over the years, leaving family to stand in for those institutions to fulfill the need for stability.
Ultimately, there are two key takeaways from the survey for advisors to note (with the caveat, of course, that the survey itself was created by a financial services company): First, Millennials who work with a financial advisor are 31% more confident in their financial situation than those who don't, suggesting that Millennial clients can see meaningful improvements from hiring an advisor. And second, despite the ongoing financial pressure they feel, most Millennials (61%) feel optimistic about their future – and having optimism about the future means that the future is worth planning and saving for, which is an obvious trait to want in a client and should only increase the appeal of Millennials as a target market.
(Jeff Benjamin | InvestmentNews)
Advisors are often bombarded with the idea that more growth is always good. More clients, more assets under management, more revenue, more employees – everything improves as long as long as the chart goes up and to the right. Or so the thinking goes.
But while there are plenty of upsides to growth in an advisory firm – it can provide more stability, better scale, and improved ability to attract and retain talent – there are also downsides. For instance, company culture almost always changes with growth, since the policies and management styles that work for a small, lean startup don't often work for a bigger corporation. And the more that an organization grows, the harder it is to keep growing at the same rate – meaning that if the expectations for growth remain the same year after year, it becomes an increasing burden on the firm’s employees just to meet those goals.
Schwab Advisor Services' Independent Advisor Outlook Study, compiled from both quantitative polling results from 862 participating advisors and qualitative interviews with 8 industry experts, lays out how many advisors view and experience growth in their own careers, and illustrates some of the opportunities and challenges that growth creates. For instance, while most of the survey respondents reported that growth enables them to invest in the long term and take more risks, continued growth also comes with an increase in complexity of firm operations and less centralized control by firm leadership – in other words, the opportunity for financial returns that growth provides is tempered for firm owners by a loss of control over day-to-day operations, which could prove to be a challenge for owners who get more satisfaction from advising clients than managing the growth and direction of a bigger advisory business!
It's worth noting, as the survey does, that 'growth' itself can be defined in various ways; not only in traditional metrics like AUM and clients served, but in other ways ranging from the number of types of services offered to the range of tech solutions available to the overall number of RIAs in the industry itself. And so while it is often true that growth is a necessity – particularly for smaller and independent RIAs who need to compete with larger firms that have scaled up during the mergers and acquisitions boom of the last few years – advisors still have a choice as to where they want to focus their growth goals. Because while not everyone wants to continue adding more clients, assets, or employees indefinitely, investing in other avenues of growth (like education or additional credentials to provide more advanced planning that increases the value of the advisor to their existing clients) can help independent advisors stand out and grow in their own way, without feeling the pressure to add more of everything.
(Sarah Cain | Journal of Financial Planning)
One way to describe the job of an advisory firm owner is that they are a manager of processes. For example, starting an RIA is in large part about setting up processes: How, specifically, things like client onboarding and creating a financial plan and moving client assets will work so it is always clear what steps need to be taken in which order so the advisor can provide the services to the client that they agreed to provide. And on an ongoing basis, firm owners need to ensure that those processes are actually followed, since any process is only valuable to the extent it is used towards its intended purpose.
But once those processes are in place, and any kinks have been worked out and a rhythm has been established for following them, it can be easy to forget that sometimes the processes themselves become outdated. Maybe the firm has added new services that aren’t captured by the existing processes, or there’s new technology that can be optimized by being used in a slightly different way than the old one, or maybe the firm and its clients just evolve enough over time that what worked in the firm’s early days doesn’t work as well anymore. Missing these opportunities for change can lead to less efficiency, worse client experiences, and more stress on the firm's employees and owners. It follows, then, that many firms could use a process…for reviewing and updating their processes!
As Cain writes, certain events, like hiring a team member, hitting certain AUM or revenue milestones, changing service models, or setting firm goals, should trigger reviews of firm processes to examine if they’re still working as they should. The resulting "process audit" can follow a 4-step framework:
- Taking a high-level look at the process, such as whether it’s needed and if it's generally working well or not;
- Reviewing each task or step in the process to identify those that can be removed or reworked;
- Adding new steps in the process (or replacing existing steps) to fill in any gaps left by the existing steps
- Stepping back to a higher-level look at the revised process to determine how it will fit within the firm as a whole (e.g., do new team members need to 'own' different parts of the process, and how does that affect the rest of their role?)
The key point is that each process – and each step within each process – should have a clear 'why' – that is, it should be easy to define what purpose it serves for the organization as a whole. If the only answer that anyone can come up with is "because that’s how we've always done it", that’s a pretty clear warning signal that a process or task could use an update. Because ultimately, processes exist not for their own sake – though it can feel like that at times – but to ensure efficient operations and better outcomes for the firm and its clients.
(Jennifer Goldman | Advisor Perspectives)
When a team is working towards a shared goal, it's often relatively easy for everyone to stay focused, motivated, and in tune with each other. This dynamic often stands out when there is a project to complete under deadline: For instance, when preparing for a client review meeting, the parties involved usually know what the deliverables need to be and who is responsible for producing what (e.g., the lead advisor sets the agenda and gives recommendations, the associate advisor gathers and analyzes data, and the CSA prepares paperwork and handles follow-up tasks).
However, when the project isn't quite so immediate, it's often harder for team members to stay on the same page. Longer-term goals – those that can take a quarter, or a year, or 10 years – can have a huge impact on the firm and the lives of the people who work there, and yet their long-term nature means that there is almost something to take care of that feels more urgent at the moment – and the realities of staff turnover and shifting economic and industry conditions can make it a constant battle to ensure that employees have the same sense of shared purpose for the direction of the firm as a whole as they do for their shorter-term projects.
Setting SMART goals – those that are Specific, Measurable, Achievable, Relevant, and Time-bound – has been recommended for individuals and business leaders alike as a way to turn vague goals into something more concrete, exciting, and achievable. But while the benefits of SMART goals are often framed primarily from the perspective of the individual setting the goal, organizational SMART goals have the benefit of being clear to team members as well. Furthermore, by breaking down the goal into a set of relevant objectives, the firm can manage its employees in a way that aligns with those objectives – e.g., to design compensation and career development incentives for employees that are tied to progress towards the firm’s objectives.
Once the firm's goals and objectives are transparent for the whole team, team members can feel more empowered to make their own decisions in their day-to-day work than if they were in the dark about what’s expected of them – which can result in both happier employees and a reduced burden on managers who might otherwise get pulled constantly into low-level decision making. And by reinforcing the organizational goals on a regular basis – e.g., by incorporating them into one-to-one check-ins and company-wide meetings alike – firms can keep their employees engaged with company goals throughout the year. Put differently, elevating the big-picture company goals so that they occupy the same brain space as employees' day-to-day jobs can create the sense of shared purpose that motivates everyone to get things done.
(Brendan Frazier | Advisor Perspectives)
Financial advisors are often told that the best way to learn about, and connect with, clients is to ask questions. Which may be true as far as it goes, but that blanket statement leaves out the important caveat that not all questions are helpful to ask all of the time. Even a question that may yield important information or create a deep bond between client and advisor in some contexts might backfire in others: For example, asking emotionally-loaded questions in a meeting with a prospective client who just wants to know whether the advisor can help them save for retirement might come across as off-putting and drive the prospect away, while in other contexts (such as with more established clients) such questions could reveal deep insights about the client’s priorities that can help them understand which goals really matter to them.
And so the hangup for many advisors – even those who know that it's generally a good idea to ask questions – is knowing which questions to ask. Because while there's a virtually unlimited number of questions that could be asked at any given time, when the advisor is face-to-face with a client or prospect it becomes a complicated processing task to determine which questions will lead the conversation along, or draw out more useful information, or put the client at ease – and nobody wants to sit there with a deer-in-headlights stare while trying to think of the next question to ask.
To start, advisors can think of a small handful of questions to remember for certain situations – even just one question for each to start out, and likely not more than 2 or 3 – that will be easy to remember and get comfortable with using. For instance, advisors can remember to always ask the question, "Why did you reach out now to hire a financial advisor?" during an initial prospect meeting, since doing so can give the advisor an immediate sense of what's on the client’s mind and whether the advisor can potentially help. Likewise, at the outset of the client relationship, advisors can ask something like, "What role do you want us to play in your lives?" to clarify expectations. And with more established clients, the question to ask may be, "What's possible now?", to potentially uncover new goals and help nudge the client along in their journey.
Ultimately, what's important for advisors interested in deepening their question-asking skills is to start with a manageable number of 'go-to' questions and getting comfortable in using them before branching out further. Keeping the number small minimizes the amount of mental processing needed to decide on an appropriate question to ask – because an advisor who is continuously cycling through questions in their brain to think of the 'right' one to ask can't subsequently listen to what the client says in response (which of course is the whole point of asking questions to begin with)!
(Sarah Fallaw | DataPoints)
Recent years have seen increased interest in the burgeoning field of financial psychology. Unlike traditional behavioral finance, which tends to focus narrowly on individuals’ irrationality and behavioral biases around investing, financial psychology explores peoples' broader attitudes, values, and relationships towards money and how people talk and make decisions around money. Applying these principles to individual’s financial life can help them achieve a better sense of overall financial well-being.
For financial advisors, the rise of financial psychology has dovetailed with the shift of emphasis towards holistic planning (and away from a narrow focus on investment management). To this end, many advisors today use personality assessments with their clients to achieve better insight into their clients’ money psychology.
One issue that can arise, however, is that when taking personality assessments, people (often unintentionally) tend to give answers that they feel present themselves in the best possible light, or that conform with the results they think the assessor wants, rather than answering in the way that describes them most accurately – which, if the advisor takes them at their word and incorporates the results into their recommendations, can result in anything from a client taking an inappropriate amount of risk in a portfolio to saving up for a goal that doesn’t ultimately mean that much to them.
Advisors who give personality assessments can follow a few basic best practices to minimize the amount of 'self-presentation' bias that seeps into the results. For instance, being in the room with the client while they take the assessment will increase the temptation for the client to respond with their 'best' self, so it’s best for advisors to let clients take the assessment on their own. Additionally, providing clear and consistent instructions to each client for taking the assessment (e.g., take the test on your own, don’t take too much time on each question, set aside time to take the whole test at once, and note questions for follow up) can help ensure accurate results by removing inconsistencies or distractions that could skew results.
Notably, the quality of the assessment itself also matters, and using assessments that are reliable (i.e., provide consistent results each time) and valid (i.e., measure what they claim to measure) can help ensure accuracy as well. But ultimately even the 'best' assessment can fall victim to the subject's desire to respond in the best light possible – and even though few clients would have reason to intentionally 'fake' a personality assessment, the powerful effects of wanting to put their best foot forward mean that how an assessment is administered can be just as important to the accuracy of its results as the design of the assessment itself!
(Mitch Anthony | Financial Advisor)
Many advisors take a goals-based approach to financial planning. As the thinking goes, by asking clients about what they want in the future – and taking an active role in helping develop those goals – advisors can both better tailor their advice to be in their clients' best interests while also creating more compelling goals that make it more likely the client will actually follow through on the advisor's recommendations.
But the issue with talking about goals is that many clients don’t really know what their goals are. They may come up with an answer when pressed, like wanting to travel more or spend time with family, but the reality is that people are not great at knowing what their future self will want.
On the other hand, evidence from the field of financial psychology has shown that peoples' pasts can have an enormous impact on their (current and future) financial behavior. Which means that rather than asking about their future goals, which may provoke a vague and not-necessarily-accurate answer, asking clients about their past can open the door to real insights on how they view and behave around money today.
Anthony suggests 3 questions that advisors can ask to start conversations around their clients’ histories: "What was your first job?", "What kind of work did your parents do?", and "What were the events that you would describe as defining moments in your life?". These questions give clients space to talk about their 'humble' origins, how they developed their values around money, and what shaped them as the people they are today – and the stories they tell about their past can reveal a great deal about the core of who they are now (and will likely continue to be in the future).
Of course, it isn't always easy to talk about the past, particularly if there is some trauma that brings up strong emotions, so a strong foundation of trust and familiarity is essential for clients to be able to open up and speak freely about their own stories. But ultimately, those conversations might be necessary if the advisor wants to understand what really motivates the client in order to provide advice that will stick in the long run.
(Morgan Housel | Collaborative Fund)
In a basic sense, a belief is a conclusion that a person draws about a subject based on the evidence they see in front of them. It’s something that goes deeper than a thought, a feeling, or an observation, but is instead what a person deep down finds to be true, to the extent that it begins to inform how they perceive other things and becomes a part of their worldview. And so beliefs can become a major component of peoples' identity, when they feel as though who they are is entwined with the truth of what they believe.
Deeply-held beliefs can often serve people well: Religious beliefs can serve as a source of community and can serve as a framework for morality; political beliefs can create a sense of purpose and a drive towards justice; and beliefs about how people think and behave can help with navigating the trajectory of our career and social lives.
Trouble can occur, though, when a belief becomes so embedded in a person’s identity that it can’t be dislodged, even in the face of evidence to the contrary. When one's sense of self, and their feeling of belonging in the world, relies on a particular belief being true, it becomes too dangerous to even question the belief. Rather than admit the possibility of being wrong, the response is often to reject any new information and cling to the belief even more tightly. Many people have risen in success and fortune believing one thing, only for the world to change or new evidence come to light and have it all fall apart when they couldn’t bring themselves to update their beliefs. (The 2008 global financial crisis came about in large part because many investors, executives, and individuals simply couldn’t believe that housing prices could ever go down).
And so it can be useful to have a bit of 'mental liquidity', i.e., the ability to change beliefs in the face of new information. Because while certain beliefs are worth holding indefinitely – e.g., it’s almost always worth having the belief in one’s self to get through challenging times and achieve things that would seem to be unlikely from the outside – in other cases it's better to have a willingness to question one’s beliefs and to admit when a belief no longer holds true.
(Khe Hy | RadReads)
The word ethics connotes a set of moral principles, sometimes associated with religious guidelines or professional standards, but generally connected to a greater sense of right and wrong and a person's duty to others. It's a particularly American thing, then, to attach this concept to work, as in work ethic: Rather than putting our principles to work in order to serve others and build a better society, we've instead fashioned them into an ethical responsibility to be productive. As we think of an ethical person as someone who puts others' interests before their own, someone with a good work ethic is someone who puts the demands of a job – no matter what the job is, and how useful it is to society – ahead of their own needs and wants.
We can see the effects of work ethic in various ways. On one hand, it has made America the richest country in the world: The biggest economy, the most dominant culture, and more material wealth than people in many countries could dream of. On the other hand, however, the culture of work ethic has – by some measures – made Americans worse off than people in many countries: We are alone among fully-developed countries in having no national paid parental leave; we lag behind most of the world in paid vacation, and we have the third-largest share of people working beyond age 65. Only in America could the conscious decision to do one's job without going beyond expectations or hustling for advancement be given the name 'quiet quitting'.
In a society that valorizes work ethic and pushes people to prioritize their job above family, friends, and leisure time, it can be helpful to pay more attention to your 'life ethic', i.e., letting work take a backseat to the things you enjoy. It could mean taking more time off work to travel, committing to eating meals with the family each day, and even just taking a nap when you feel tired. But as the name implies, a deeper commitment to a life ethic might require internalizing the idea that life exists to be enjoyed, and that the point of work is to support a life that can be enjoyed. Which ultimately might make it easier to consider taking more extended breaks from work, such as a sabbatical or even a 'mini-retirement', to reset one’s focus on enjoying life rather than living ‘just’ to work!
(Jessica de Bloom and Merly Kosenkranius | Psyche)
Up through the early 20th century, work for most people was done at a distinct physical location: When the workers went home at the end of the day, the work stayed at the office or factory or construction site until everyone came back the next day. In the age of cellphones, laptops, and improved broadband access, people started to bring their work home with them, and the boundaries that had existed around work began to erode. Flash forward to the COVID-19 pandemic and its aftermath, when huge numbers of workers were driven to remote work (only some of whom eventually came back to the office, either in a full-time or hybrid capacity), and work has more fully pervaded peoples' lives, to the extent that for many people checking email is the first thing they do when waking up and the last thing they do before going to sleep.
All this has led to growing interest in the subject of work-life balance, which seeks to find equilibrium between the work and non-work parts of a person’s life. But what the work-life balance concept misses is that peoples’ lives divide into more than just 'work' and 'non-work' categories: They have social lives and hobbies and act as caregivers, just to name a few, and each of these domains (including work) fills certain psychological needs – including detachment from effortful tasks, relaxation, autonomy over one’s choices, mastery over skills, meaning, and caring/being cared for. How a person's life is structured dictates how well these needs are met – for instance, a person with a relatively unskilled job may take up a hobby like woodworking or archery in order to fulfill the need to master a skill. And what a person feels as 'unbalanced' may come not (just) from working too much, but from having not found other domains that can fulfill the psychological needs that the job doesn’t provide.
So the key may not be just to achieve balance between work and life, but to find a harmony between the different domains in one's life that ultimately satisfies the full assortment psychological needs. To this end, "needs-based crafting" seeks to create a life structure that fulfills these needs, regardless of which domain they come from. For some, work may provide the benefits of mastery (while perhaps having little in the way of autonomy or meaning), while for others it may provide opportunities to care for others, while being very low in relaxation or the ability to detach. Ultimately, what’s important is to understand how work (and one's other obligatory roles like chores and caretaking) fulfill those psychological needs, and to make space for other activities that can help to boost up those needs that aren’t being met.
We hope you enjoyed the reading! Please leave a comment below to share your thoughts, or make a suggestion of any articles you think we should highlight in a future column!
In the meantime, if you're interested in more news and information regarding advisor technology, we'd highly recommend checking out Craig Iskowitz's "Wealth Management Today" blog.