New research reveals how financial attitudes influence consumers who tend to seek investment advice and those who tend to avoid it, providing new insights for finance professionals and researchers on how to help people with different attitudes towards money to evaluate investment advice.
“The Money Scripts Related to the Use and Trust of Investment Advice,” which was published in the Journal of Financial Therapy, uses the concept of money scripts to study consumer financial attitudes. According to previous research, money scripts are beliefs about money that develop in early childhood and profoundly affect one’s approach to finances in adulthood. Money scripts are often passed down from generation to generation, resulting in behavioral and emotional issues that are difficult to change.
“The results of this study shed light on how attitudes toward money are related to trust and seeking investment advice,” the researchers said. “Financial therapists, counselors, planners and educators can use this research when working with clients and developing educational programs to better understand the links between attitudes about money, advice preferences and investment and trust.”
Researchers used the Klontz Money Script Inventory to measure consumer behaviors associated with money avoidance, financial status, money worship, and financial alertness. Consumers typically have a dominant money script, and those whose dominant script is money avoidance, money status, or money worship are associated with lower levels of net worth and income, while financial vigilance is linked to frugality and positive saving.
According to the researchers, consumers with a dominant money-avoidance script tend to believe that money is “evil, fear-inducing, and associated with feelings of disgust.” Those with this script tend to avoid seeking help with financial problems, and they have a negative association with trusting finance professionals. The researchers say this trend aligns with their “bad behaviors, lower net worth and income, and taboo beliefs about money.” If they seek advice, they are more likely to turn to family members and friends for help.
“Since money scripts are passed down from generation to generation, family members may also avoid money and be unwilling to discuss the subject, which can lead to no or uninformed advice” , according to the study.
Meanwhile, people with a monetary status scenario try to collect goods to socio-economically differentiate themselves from others. The researchers found that the financial status scenario is negatively associated with confidence in one’s own research, while having no significant relationship – positive or negative – with professional financial advice. The researchers noted that those with the monetary status script tend to have lower levels of education and less understanding of the financial field.
“Perhaps those with the financial status script do not know enough to know that help is available or that help could benefit them and therefore never seek it,” the study says.
On the other hand, worshiping money has a positive association with receiving investment advice from financial software and doing your own research. Those who fall under the umbrella of the money cult believe that money solves problems and makes things better.
“Money worshipers were positively associated with using financial software and doing their own financial research,” the study said. “They were not likely to seek professional financial advice or advice from friends and family. This discovery could be related to the complex connection that money worshipers have with ongoing stressful money issues, such as revolving debt, and feelings that there is never enough money.
Finally, financial vigilance is positively associated with trusted advice from either a financial professional or from family and friends. Those with a dominant monetary vigilance script are generally seen as vigilant and concerned about their finances.
“So it’s no surprise that they are more likely to seek professional financial advice because getting professional advice hires another to monitor their finances…those with watchful personalities may find that having another eye would help them achieve their goal. of perhaps additional vigilance,” the researchers said.
Overall, according to the researchers, the study provides useful new information for those working with investors or potential investors.
“The intersection between financial decision-making and psychology may even be a place of greater common ground or focus versus starting to talk about investing and other financial principles,” they said. Researchers.
“Clients may be intimidated to talk about topics such as financial planning and investing, but may be less intimidated to discuss their thoughts and beliefs. For practitioners, it is important to have a solid understanding of what clients know and believe before embarking on teaching or making recommendations, as this can have a significant impact on the type of advice given and even on how they are delivered.