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Maximising lifetime returns: wellbeing measurement in financial planning

In the world of financial planning, one purpose reigns supreme: to maximise the returns of investment decisions. But focusing on the financial gain misses out much of what is a truly intimate and involved process. So, can wellbeing theories and practices help shift the focus from maximising investment returns, to maximising quality of life?

Financial planning means thinking about your future, what matters to you, and your hopes for yourself and your loved ones. Although veiled in the language of financial markets, considering different options forces people to think about the risks involved in decisions, about whether their plans can be realised.

Those working in the industry get to know – often intimately – the intricacies of family life. Who and what is involved and how different dynamics play out, both in relationships, lives lived and in how people make decisions. So, can wellbeing theories and practices help inform this process?

A starting point

In late 2018 Human Wealth, a financial planning company based in California, contacted NEF Consulting to see how they could take a broader view of their work. As Evan Coles, their Creative Strategist noted on an early call:

“What are we doing? What are we providing for the client? We find that a lot of it is counselling, family dynamics… but the only measure against which we are assessed is the rate of return. How do we create a shift here?” 

Human Wealth understood the language of wellbeing: they had read some of the New Economic Foundation’s literature and were excited about translating these ideas into practice. But how to go from theory to practice? 

Applying existing theory to a new context

When looking for evidence of how financial planning and decision-making affect wellbeing, much can be applied from our existing understanding of the components of the Dynamic Model of Wellbeing. How we spend our time (working and volunteering, for example), how we connect, our autonomy in decision-making, having a sense of our meaning and purpose. These all relate closely to the financial planning process.

But there are limitations. For example, while there’s a wealth of evidence on the impact of employment[i] and financial stability on purchasing the things we need for wellbeing, it’s much harder to find evidence of the impact of other contributors, such as financial capability: the knowledge and skills you need to make good financial decisions. There is also contrasting evidence on the impacts of optimism on careers[ii] and entrepreneurship[iii] and how it can affect financial decision-making.

That said, the existing wellbeing literature is a good starting point for a more wellbeing-focused support process. By explicitly naming the components and drivers of wellbeing, we can start to guide our conversations to focus on what matters to us, and the decisions needed to get there. Taking stock of wellbeing also serves as good starting point for assessing what are the most valuable assets in life, material or otherwise. 

From concepts to practice

From the theory and evidence of wellbeing and its drivers, there’s another step in embedding such ideas in a process of supporting people to make decisions: introducing these ideas in a way that is meaningful and useful for them. Financial advice customers already disclose significant details about their lives: how can you request further information about their desires and hopes without creating an onerous process, or invading their privacy?

One way to do this is using the idea of a pulse survey – a short, snappy survey that enables someone to check their current level of wellbeing, in a useful way. You can back up the survey with a series of curated qualitative questions, linking back to the existing theory and evidence.

Testing in California

We developed a 10-question survey for new clients, with follow-up questions to guide the first meeting. We also designed analysis and visualisation tools to standardise the process of reviewing the results. Human Wealth tested this on the ground with a group of 15 people and found that it allowed them to explore their current status – over and above their finances and career – and think about what that meant for their life plans. One person felt it helped them identify their outlook as conservative – instantly useful when thinking about risk and financial planning. Others found the survey review meeting a useful space to navigate sensitive areas of life in a safe and accessible way, revealing important insights about an individual’s wellbeing that may have otherwise taken years to arise.

Taking it forward

NEF Consulting works alongside organisations of all kinds to identify the outcomes and indicators they find most useful. Measuring wellbeing is a key part of this. We hope that more organisations will build on the example of Human Wealth to take a broader view of how they best serve their clients and their communities.

The authors

This article was written by Rosie Maguire, Associate, and Christian Jaccarini, Senior Consultant, NEF Consulting.

[i]  Clark et al. (2017) The origins of happiness. Princeton University Press.
[ii] Kaniel et al (2010) The Importance of Being an Optimist: Evidence From Labor Markets. National Bureau of Economic Research. Working Paper 16328. (Accessed 5th August 2019).
[iii] Puri, M and Robinson D.T. (2007) Optimism and economic choice Journal of Financial Economics 86(1): 71-99.

Photo by Andrea Piacquadio from Pexels