Why the „financial wellbeing“ of their customers must become the bank’s business target
Article by Friedhelm Boschert
Are we okay on our finances? According to a Gallup survey on financial literacy, half of people have a rather negative approach to money, and half also rarely look at their bank balance. Feeling uncomfortable about having too much or (far more often) too little money, with even constant brooding and stress, are described in other studies as the predominant emotional states when it comes to money. Barclays, for example, found that „poor financial wellbeing can lead to the greatest sense of insecurity and unhappiness“.
Discomfort and stress with money and finances often show up as „money avoidance“, as the American psychologist Brad Klontz calls this phenomenon. In several studies he has investigated how people deal with money and finances, how they think and feel about them. People who like to bury their heads in the sand when dealing with their finances, who only look at their account very irregularly and superficially, who have little control over their income and expenditure, and who perhaps continue to hold a belief that money is not important, all belong to this category of people. Klontz has identified three other types of “money disorders”. And there is something of at least one of these in each of us, to some degree.
The crucial point here is that those who ignore – or perhaps do not know – their own anomalies will sooner or later be confronted with financial difficulties and even more problems. It could be that they spend too much or too little, make the wrong investments and provisions or are permanently selling below value. Or it could be
that they stick it out in a job they don’t love „because I need the money“. This is definitely not good for your health.
EMOTIONS AS A GUIDE
To be at peace with yourself and your finances is less a question of the balance of your account than a question of your inner attitudes, the money mindset, says the psychologist Klontz in his book “Wired for Wealth”. He concludes: „The biggest threat to your financial health is not a recession, it’s your mindset“. Enlightened with a sober view, unexcited, focused, and at peace with oneself in dealing with one’s finances and money – this is financial well-being. Not to let yourself be driven by your money emotions, but to see the emotions surrounding money as a helpful guide to yourself.
FOUR REASONS FOR BANKS
At this point we do not want to ask what the individual can do to achieve financial well-being. That would be better done elsewhere. Rather, we are asking here whether it should not be in the strong interest of banks today to make an active contribution to the financial wellbeing of their customers themselves. Some of the reasons for this are:
1. Individual stress with money creates or exacerbates existing financial problems. This makes it a question of risk management for banks. Preventive risk management would be to take care of the financial wellbeing of their customers at an early stage. And to help them before it is too late.
2. In the age of digitalisation, bank branches are emptied – to be honest, when was the last time you were in a branch? Personal and trust-building contacts with customers hardly take place anymore – to be honest, the sales-driven call from „my bank advisor“ does not really increase my sympathy for my bank. If, on the other hand, the customer felt that the bank were genuinely interested in his financial well-being, he would almost certainly develop into a more loyal customer, even online!
3. After the banking crisis, the image of banks, and the public’s trust in them, have suffered massively. Taking authentic care of customers and their well-being could help to restore the lost trust. And, in the age of „sustainability“ and „social investing“, to make the human element in banking tangible again. Those who start out can certainly gain competitive advantages here.
4 The need for financial education – for young people and adults alike – is no longer questioned by banks today. But knowledge of hard facts such as shares, stock markets, commissions, compound interest and bond prices is far from sufficient for this. The clarification of the individual’s personal and emotional attitudes towards money, the „money mindset“, should be the starting point and the goal should be the fear-free and relaxed handling of money.
AND HOW SHOULD THIS BE DONE?
The training of bank advisors in emotional intelligence, the creation of free time for customer advisors, a wide range of events and seminars on the topic of „financial well-being“ for customers, with simple apps and tools for a joyful handling of their finances, and a corporate culture that also focuses on well-being for bank employees would make sense for a bank, both in terms of business and in terms of civil society. Of course, this requires the courage to look beyond one’s own nose at cost cutting, profit pressure and regulation and to look honestly towards the customer again.
#mindfulfinance #financialwellbeing #financeforfuture #sustainablefinance