The Psychology of Money and How the Wealthy Really Live with Dr. Brad Klontz [Ep63]

Updated: 2 days ago



Welcome to episode 63 of The Innovating Advice Show. 


I’m joined by Dr. Brad Klontz who is a Founder of the Financial Psychology Institute, an Associate Professor in Financial Psychology at Creighton University, a Managing Principal of Your Mental Wealth Advisors, a CFP professional and a bit of a TikTok star.

This episode is all about the intersection of financial psychology and financial planning which is endlessly fascinating. We talk about why the field of psychology has ignored the topic of money, even though it’s one of the biggest sources of stress in people’s lives.


Dr. Klontz shares how financial trauma and money beliefs can be passed down through generations and his research on the effectiveness of financial education versus more of a visual, coaching, behavioral finance approach.


He also discusses his really interesting research on the psychology behind the ultra wealthy versus the middle class and his passion for changing the false messaging on social media about how the wealthy really live.

We wrap up talking about a few of his books which I highly recommend, the Certified Financial Behavior Specialist designation through the Financial Psychology Institute and listen until the end for his final words on the lifesaving power of financial planning.



Resources


Guest Bio


Bradley T. Klontz, Psy.D., CFP® is a Founder of the Financial Psychology Institute® and an Associate Professor of Practice in Financial Psychology at Creighton University Heider College of Business. He is a Managing Principal of Your Mental Wealth Advisors, a Fellow of the American Psychological Association, and a Former President of the Hawaii Psychological Association. He has partnered with organizations including Capital OneJP Morgan Chase and H&R Block in efforts to help raise public awareness around issues related to financial health and financial psychology.


Dr. Klontz was awarded the Innovative Practice Presidential Citation from the American Psychological Association for his application of psychological interventions to help people with money and wealth issues and his innovative practice in financial psychology for practitioners across the country.


Dr. Klontz has been a columnist for the Journal of Financial Planning, On Wall Street, and PsychologyToday.com and has co-authored/co-edited five books on the psychology of money. His work has been featured on ABC News’ 20/20, Good Morning America, and in USA Today, The Wall Street Journal, New York Times, Washington Post, Los Angeles Times, Time, Kiplinger’s, Money Magazine, NPR and many other media outlets and professional magazines and journals.



Timestamps


01:10 - Introducing Dr. Brad Klontz

03:12 - How the intersection between financial psychology and financial planning came about

07:15 - Money beliefs

08:34 - Financial flashpoints through generations

10:19 - How financial advisors and financial planners deal with money

11:40 - Looking at your own beliefs around money

12:50 - The biggest problem around money in America

14:28 - How coaching leads to behaviour change

17:55 - Two hacks you can implement right now

20:15 - Clients need both data and visual aids

22:10 - The psychology of the ultra-wealthy vs. the middle class

26:35 - The problem with social media

28:46 - How you can untrain yourself

32:53 - Book recommendation: Wired for Wealth

32:38 - Book recommendation: Mind over Money

33:55 - The tribe instinct

36:11 - The Financial Psychology Institute

36:47 - Continuing your education


Transcript


Kate: Dr. Brad Klontz, welcome to the show.


Dr. Klontz: Thank you. I'm super excited to be here.


Kate: We have so much to dive into and talk about, and I first want to hear, I love that you're at this intersection between financial psychology and you're a CFP professional. So how did that come about?


Dr. Klontz: Yeah, boy, those two things don't really go together do they?Not traditionally. Yeah, so I became a clinical psychologist, so I went through all that schooling. I got out of school at age 29. I owed $100,000 in student loan debt and I grew up lower income and, but very frugal parents who really taught me the importance of saving, but didn't really enjoy any wealth themselves, but I was always taught no debt. Okay. So I was, I had this terrified feeling about having all this debt. There was no other way for me to get through school though. And so it was a really tough thing. Every time I got the loans, cause I was like, Oh, stacking up. I would a hundred thousand dollars. And I saw a friend of mine in one year, make a hundred thousand dollars trading stocks. And the great thing about this friend is he knew nothing about stocks, just like me.


Dr. Klontz: He was a psychologist. He knew nothing. I'd be sitting with him at his computer. He'd be like, I just bought, you know, 200 shares of EMC. I'm like, what's  EMC? He's like, I don't even know! And he's just clicking the button. And he made a hundred thousand dollars doing that in one year. And I thought, Oh my gosh, this is a great way for me to get out of debt. So I did what any reasonable person would do in that situation. I sold everything I had a value and I put it all in the stock market and I had an incredible three months and then the tech bubble burst and I started to watch my money melt away. And I just had, you know, you can imagine the emotions that come up like, Oh no, it's going to come back, right? It's just a dip.


Dr. Klontz: Just hold on. Oh, things are cheaper, buy more. And so I just rode this thing all the way down, that terrible, terrible ride. And at the bottom of it in my misery, I was like, whywould a reasonably intelligent person do something so stupid with his money? So that was the question I asked myself because I'm reasonably intelligent, but I obviously did this terribly stupid thing. and luckily as a psychologist, we're sort of taught the value of, of, for lack of a better word, blaming yourself for things, you know, versus blaming the rest of the world because there's really no juice in blaming everyone else because essentially there's no growth for you. There's no insight, there's no discovery. and so I was really curious, so, okay. So why would I do something  so stupid? So I went into the field of psychology.


Dr. Klontz: I'd like literally got on my computer. I started doing lit reviews. I'm like, all right, I'm gonna find some studies done on the psychology of money. And it's going to explain what I did. I'm not going to do it again. I'm going to find the right way to do it and I'm going to move on, but I came up empty. So thefield of psychology at that point had utterly ignored the topic of money. And I've actually done some studies on why that is, but we have a tendency to be money avoidant as a profession, right? So like we don't really like rich people. We don't really like money. Like we're here to help people. Soit's this really terrible thing where the field of psychology has totally ignored money, which happened to be the biggest source of stress in the lives out of three, out of four Americans.


Dr. Klontz: So as psychologists we're meant to help people deal with stress, money is ithe biggest stressor in the lives of three out of four Americans. Yet it's something that you can't talk to a psychologist about. And so anyway, I got really curious about that. So essentially I became, I would say like the world's leading expert in   financial psychology after about three weeks, I'll be trying to figure out as a psychologist, why people do what they do around money. And so I went home, I sat down with my mother and my poor mother. She's been through this many times where I pull out a notebook, you know, and I start interviewing her about her, her upbringing and her beliefs about things, you know, because she's, she had to gone through that several times with me grad schools, I'm trying to figure out my own psychology, right. My poor mother. So I found all these stories coming out from my mother, from my grandfather, from my great grandfather. Andit was just profound for me because I'd never heard these stories, but I had all these feelings. I had all these feelings of fear around money and it's all of a sudden seeing where this came from. It just totally blew my mind and it made me and all my terrible financial decisions make perfect sense. And then I just frankly, became obsessed with doing research on the psychology of money.


Kate: Okay. So a few questions. So first of all, why have you discovered that psychologist didn't study money and the impacts? 


Dr. Klontz: So one of the things that I've done, through the course of my career is I developed something called the Klontz money script inventory. And essentially what we did is we over 10 years, took down every belief about money that we heard come out of client's mouths. So we had hundreds and hundreds of them. And then we put, we put them through statistical analysis and gave them to a bunch of people. And essentially we found four categories of money beliefs that seem to be, that exists. And then we looked at those money beliefs and whether they predict success or a lack of success, income, net worth, et cetera. And so what I did is I then took that and I gave it to a bunch of psychologists and mental health providers and compared them to other business people. And what we saw is that peoplewho are drawn to the mental health field have a tendency to be higher in money avoidance type beliefs, the belief that rich people are greedy, money corrupts, that there's virtue in living with less money. Like this is somehow virtuous. And so there's this negative association with money and wealth. And so I think that helps explain why we avoid the topic, which by the way is terrible, terrible for your own financial health. it's just absolutely terrible. And it leads to a bunch of self destructive behaviors.


Kate: Yeah, absolutely. And then when you went in and did the research into your own background and your family background, does it almost somehow become genetic, even though it's not literally genetic, but as you're talking about like your grandparents and great grandparents, does that somehow get down to you and form your money beliefs?


Dr. Klontz: Yeah. There's some actual evidence that trauma experienced in previous generations gets passed down genetically. And so essentially you, you don't know the story, but you're walking around with the trauma, which is really, really fascinating. and so, but essentially yes, so these beliefs around money and get passed down through the generations and you might not even know where the originating event came from. So in our writing, we call them financial flashpoints, these like incredibly, emotionally intense experiences we have around money. And I invite your listeners to just think about their own, you know, it's like you've had these things, you know, whether you grew up poor and you didn't have enough, or you saw a relative swoop in and saved the day when you guys, when your parents were about to lose their house, or you saw your parents lose their job. I mean, there's these really profound money memory experiences for people.


Dr. Klontz: And in our studies, we found that they lead directly to beliefs around money. Cause we're just trying to make sense of the world, right Like if you grew up in a lower income family and the only rich people you saw were kind of mean people or snotty and you heard stories about people who have money or mean or bad, you can see how you make that association, cause you don't have any disconfirming evidence because you don't know any very generous, incredibly giving wealthy people. And so these beliefs have a tendency to then get reinforced and then it becomes just the reality you swim in. And what's so interesting is these beliefs, as I said, they predict your income, your net worth or credit card behaviors and a whole host of financial behaviors.


Kate: Wow. So knowing that psychologists aren't great at dealing with money, do you actually have any research, even looking at how financial advisors and financial planners deal with their own money? It's,  it can be the do as I say, not as I do.


Dr. Klontz: Yes. So it's interesting. So we have seen the actually they have healthier beliefs around money, you know, thank goodness it's really, really good. but they are just as vulnerable to the emotional response related to these financial flashpoint experiences. So for example, wedid a study back in 2008 in the midst of the great recession. The stock market was crashing. People were in full panic mode and we looked at post traumatic stress symptoms in financial planners. And we saw that over 90% of the people that we surveyed had moderate to severe levels of post traumatic stress they were experiencing in the midst of that crisis. And so we as advisors, we're not immune to this. And actually I think we need to be much more conscious of it than the average person, because you know, we're not only just talking about our money where it's our, it's our parents' money, it's our best friend's money. It's our clients that we really love. And so I think it's, it's a, it's a mistake to think that we are, not vulnerable to some of those emotional experiences. Cause we absolutely are. And it's sometimes it's even more exaggerated because there's so much more at stake for the people we care about.


Kate: Yeah. So what should advisors be doing to do that work on themselves first?


Dr. Klontz: Yeah. Well, first of all, I think doing that work on themselves is incredibly important. and it's something that I certainly promote in my writing and essentially it's looking at your own beliefs around money and where they came from and shining a light on this because what's so interesting is money is a taboo topic. So we don't really talk about it. So there's not a lot of experiences and opportunities for us to examine our thinking, to think about our thinking about money. And so I think it's just incredibly valuable to do that. And so just even questions like, you know, what was it like for you growing up in terms of your socioeconomic status? How did you feel about it? Did you, did you feel proud? Did you feel embarrassed? Did you feel guilty?  what did your mother teach you about money? So what three things did she teach you about money? What about your father? What three things did he teach you about money? What is your happiest money memory, your, your worst money memory, your earliest money memory? Theseare just examples of questions that will help you shine a light into your relationship with money, which in our studies, this is way more important than financial literacy in terms of shaping your behavior.


Kate: Cause then it probably shifts from the  financial literacy and education is kind of the knowing things. But now we get into the doing, right? And  how are you doing and interacting and what actions are you taking or are you not taking?


Dr. Klontz: I would love your opinion on this because this is, this is what I observe. I think that the biggest problems in the lives of Americans around money are actually super simple and, and everybody already knows better. So the biggest problems I see are people spending too much and not saving enough for the future. And I've yet to meet somebody who's like, that's due to a lack of financial literacy. Like everyone I know I've never met anyone who's like, Oh really I didn't know I was supposed to do that. And so that's, that's my problem with financial literacy. It's like, I think that the two biggest problems, everybody already knows. So, so what exactly are we educating them on? What do you think about that?


Kate: That's spot on. And that's a conversation that I've been having with people. And I actually was recently having a conversation around why are we seeing the shift towards coaching and to having deeper conversations and somebody asked like you just did, what is my opinion on that? And I said, look, as we look around clearly what we've been doing isn't working, whether it's on the financial literacy side or even I'm going to say on the financial advice and financial planning side, you know, giving someone a document of, Hey, you need to get life insurance. You need to save in your retirement plan. You need to spend less like, like you just said, these are all things you're like, yeah, I know, but guess what Six, 12, 18 months later, they still haven't done it. So clearly something that we're doing isn't working. So we are seeing the shift towards coaching. And so I'll throw it back to you. Do you have any research on how coaching leads to behavior change?


Dr. Klontz: Yeah, so actually the, the study that I'm the most excited about that I've ever done came out, a few months ago in 2019. And what we did is we did a double blind randomized control trial. Okay. Which is a lot, a lot of junkity junk that says that, Oh wow, this is a good study. That's all you got to think about. but it is designed basically essentially the way you would design a medical study study deciding on which treatment is more effective. We ran it in five different cities across the country. And we put half the people in a financial education seminar where we taught them about the importance of savings, about all the right ratios, the cash, cash equivalents. I mean, all this stuff that you would imagine that you would educate somebody on why they should save and how to go about saving more.


Dr. Klontz: The other group, we didn't talk about any of that stuff. We didn't talk about any, any financial literacy stuff whatsoever. What we talked about was money scripts. Like we just talked about beliefs around money. I had people create, really exciting visual representations of why they would save to begin with, like the idea is we have to override this natural inhibition we have to, we're all wired to just try to enjoy the moment right now. and I can prove it to you, like in terms of weights, right Like your, your impulses to eat sugary fat things and as much as possible. And our impulse is to actually not move around much. You know, it's, it's sort of like, this is the way that we're wired. And so we're asking ourselves to like, to not do that, to like delay gratification for what exactly.


Dr. Klontz: And so it tends to be extremely abstract for people, financial goals, and you can't motivate yourself with abstractions. So this is the way our brain works. So we got people to get really excited about their goals, to create essentially vision boards around their goals. And then we asked them to track, well, we asked them when we started, like, how much are you saving for your goals as a percentage of gross income And then a month later we asked them the same thing. And so two groups, one in a financial education seminar for one hour, one in a group where they got them all excited and we put all the financial psychology stuff in there. And what we saw is the financial literacy group increased their savings by 22%, which by the way is pretty good. That's pretty incredible actually. The financial psychology group though, 73% increase in how much they were saving.


Dr. Klontz: Yeah. So they went on average. The one group went from about 10 to 12%. The other group went from 10 to 17% of their income because they were so fired up about why they were saving. We attach it to their values, like why it really meant what it means to them. And it meant led to radical financial change and by, and we didn't educate them anything about, about what you would, what you actually need to do with it. They just were like, they were unstoppable. We, we, we got them fired up about why they would save to begin with. And that's ultimately, I think where the coaching to answer your question, I think that's where the coaching is so incredibly important because people already know kind of what they need to do. I mean, the biggest problems in the U S aren't not knowing the difference between a traditional versus a Roth IRA. I mean, that's not where we're tripping up.


Kate: Yeah, yeah. That is that's fascinating and awesome. And it is so gets back to like bringing the why into why would people do something? Yeah, they know they should spend less and save more, but I don't know, that's just not exciting. Just like telling me I shouldn't be eating dark chocolate and drinking wine every night. Not exciting.


Dr. Klontz: Absolutely. So, so a hack that  your listeners can use right away, whether with their clients or themselves, is to get extremely specific about a goal. So don't ask the client, you know, when do you want to retire? I mean, that's an okay question, but how about like, paint a picture of your ideal retirement for me. Where are you? What are you doing? Who are you with? So now what we're doing is we're making this visual where we're starting to motivate the part of the brain that actually gets you to do things. And it's not the part of your brain that's like, 'Oh, I don't know,' abstraction about retirement. It's the emotional connection to the retirement. Because people have associations with it. You have no idea what it is. Like somebody might have an association with, when you retire, you stop working and now you're useless and you might as well die.


Dr. Klontz: Right So some people actually have that association. So as you're sitting there talking about retirement, and then you're wondering why they're not taking the steps. Well, maybe it's a terrible idea for them on an emotional level. It's not something they've really thought about. So you can catch that right away when somebody is like, well, I don't know. And then you're like, Oh, Whoa, stop you. This is super important. Like, we need to really figure, we're asking you to do all this stuff. What's the point? We need something super exciting on the other end. So let's talk about that. And what you'll run into are some of these beliefs around retirement that you have a chance to change and say, Oh, wow, well, so I have some clients here's an example of, well, well, I have some clients who actually, you know, look at retirement as sort of the next phase of their evolution.


Dr. Klontz: And they might, you know, they're just not as anxious about their day job. They get to go create this other thing and do this other thing and, and express themselves in these other ways. So essentially redefining retirement for somebody who might be incredibly intelligent, but they've just never thought about this. They've never talked about it. And so that's the opportunity. And so the more you can build that incredibly exciting emotional vision, the better, and another little hack is to actually name your financial goals. So instead of retirement, maybe it's a financial freedom fund, right or instead of a savings account, it's a, you know, 2020 for family reunion in Europe accounts, or are naming your child's educational accounts because we attach value to that. And it's so much harder to go steal from it. You know what I mean It's really easy to steal from an amorphous savings account to go buy a new boat. But when it's like, my son's name is Ethan Ethan's college fund. I'm gonna tell you what, I'm not going to take a dollar from that because I love my son and I want him to go to college. And so it's hacks like that are incredibly powerful.


Kate: So a lot of what you're saying and talking about is visual. And you've mentioned the vision board and creating this visual of what your goals and future look like. And I'm an incredibly visual person, but what we do a lot in financial planning is so data-driven, and I've talked with a lot of planners that say, Oh no, you know, I work with, I'll just say engineers, you know, and they just like the data and they look at the numbers and they want the charts. As humans though, we are wired to respond and connect with stories, which are always visual. So when we think about engaging with clients and helping people on this journey and moving more towards this coaching, are all humans visual thinkers? And do they respond visually or are there some that truly are that, 'Nope. I just want the data and the numbers and what are the numbers telling me'?


Dr. Klontz: Well, I think some people want both and so, well, I should say, so I've already framed it like that. I think they need both. and so for example, we did a similar thing with a traditional 401k signup meeting. So essentially, we worked with mutual of Omaha. They're like we redesigned their 401k signup meeting. So instead of the charts and ETF graphs, we essentially did very similar things. We put on music, everyone got a little stuffed animal. and we did this with like a group of truckers to  so just before the experiment, the experimenters were like, Oh geez, these guys are gonna kill us abort. We're not gonna do it. We're giving them stuff, the animals. Right. And they created little sticker, word visions of their goals and all this. And we saw 33% increase in 401k  savings and right immediately, immediately because people got attached to these goals. And so I think, you know, some clients want to see the charts and they absolutely do. and so of course do that, but also do this other thing and make sure they're properly motivated to execute on achieving these goals.


Kate: And when we think about working with different types of clients, ultra wealthy versus middle class, people are creating more solutions for lower income or the HENRYs of the world. You've done some research on the psychology behind ultra wealthy versus middle class. What did some of that show?


Dr. Klontz: Yeah, so that, that is some really exciting research for me personally, as I mentioned, I grew up in lower income culture and, very early on, I realized that the word culture actually is a pretty good description, where it's like, they're totally different cultures. And I'm talking about people who, have the same ethnicity, you know, but they're just in different cultures. They look at the world very differently. And so I got extremely interested in that. and so one of the studies I did with was with Paul Sullivan and the New York times. And we, we looked at about a thousand ultra wealthy people and middle-class people and we ran analysis on a bunch of different variables and how they look at the world differently and how they spend differently. and what's so fascinating for me is there's all these myths about what ultra wealthy people do that the middle class and working class and lower income people have that just do not fit reality.


Dr. Klontz: And the problem is that these myths will keep you from becoming successful. And so, for example, what we saw in the ultra wealthy people was around spending habits. So the ultra wealthy people had about 10 million in net worth. And we compare them to a group of people that had about 500,000 in net worth. So they're doing pretty good, right But we compare it to the people are ultra wealthy. And what we saw is that the ultra wealthy had  18 times more money, but they only spent twice as much on things like, well, specifically houses, vacation, cars and watches. So we have this fantasy middle-class and lower income  have this fantasy that ultra wealthy people are just buying Lamborghini's and Rolex watches. And, but absolutely not. That's actually not what most, the vast majority of them are not doing that at all, because the only way to become wealthy is to actually not spend like that.


Dr. Klontz: It's sort of ironic, like if that's your mindset, like that's how you're going to spend, you're actually not going to become wealthy. So it makes sense that these and most of them are self-made by the way, mostly went to public school. Most of them weren't born rich. That's another myth, right. I think it's the study show about 88% of millionaires in the United States are self-made in a sense, you know, not obviously they probably had help along the way, but they weren't born rich. They were born middle class or lower, but they found the right mindset and the right opportunities. And there, they went in, they climb that ladder. and so, so anyway, just as an example, and another one that, that came out in the study that that was pretty profound is, and this is a sticking point in, and I know, I know you've worked with middle class people.


Dr. Klontz: and this is a huge one because it is so difficult. Like I call it, do it yourself-itis, you know, like middle-class, it's like, you just gotta do it yourself, right I mean, your car breaks down. Your uncle knows how to fix cars. Your aunt knows how to do your taxes. I mean, this is how I grew up. We all help each other. And one of the biggest things that is so difficult, I was just talking to somebody yesterday who just has a bunch of success. And this is just so hard for her is to actually get expert advice. so to actually sit down with a CPA or an estate planning attorney or a financial planner, and I tell people too, you don't need to hire them and put them on staff. You know, you can just pay for an hour of their time until you can afford more of their time. But just getting that expert advice is a huge mental barrier for a lot of middle-class individuals. But it's just what all the ultra wealthy people do. It's like they know that like ultra wealthy people don't suffer from the illusion that they're going to be able to day trade their way to success or going to be stock pickers, whereas the middle class and lower income, this is actually how they think they're going to become wealthy. And as you know, it actually leads to them losing their money. Like my experience that I talked about.


Kate: Yeah. Well, and I had one memory that will always stick with me. I went to university for a while in Santa Barbara and went down to rodeo drive one day with friends and just started talking with the security guard who was on a break at one of the super fancy stores and just got in this fascinating conversation with him. And he said, he was like, look, the people that come into this store and on rodeo drive, you know, with no makeup on and they're in their sweats and flip flops, those are the people that are going to come in and spend $20,000. The people that come in in the three piece suits just come in and look around because they actually bought it at 75% off at the outlet mall, you know, up the freeway. And they just come down here to feel rich. And it was just so fascinating. Just this guy that's worked down there for so long. We got on this whole conversation, like you just said, around the psychology behind all of it. And so how can you untrain yourself?


Dr. Klontz: Oh, you know, it is so difficult. And it's one of the reasons I'm super active on social media. Like I'm fired up about this because so many young people are being, well and everyone of all ages are being utterly lied to about this. And social media just makes it so much worse. I mean, it's like, Instagram is just, Oh, it's just, it just makes me sick because what's happening is you're you have people, and I know some of these people, and they don't actually own that Lamborghini. They're just standing in front of it. You know, they actually have studio sets you can rent in California, just so it looks like you're sitting in a private jet because you're selling your get rich quick course. I mean, it's, it's unbelievable what's being peddled to people. And then it leads to them feeling a sense, we call it relative deprivation in psychology. So what happens is we don't define how good we're doing in life based on how much money we actually have.


Dr. Klontz: It's it's not related to that. It's how we compare ourselves to the people around us. That's where we suffer or we feel good. So it's sort of fascinating. It's not really how much money you have. It's where do you see yourself stacking up And social media just inundates us with all this information that, Hey, you know what, you're not doing quite as well as everybody else, you know, I'll cross across everything like, Oh, wow, look at that lovely couple. You know, they're, they're sitting together, cuddling up, you know, with some hot cocoa in the middle of the pandemic. And here, my wife and I are fighting, you know, or I'm single, or, you know, my kids, my kids are on the iPad and oh look at that parent's doing an art project with their kid. I mean, just all these things make us feel terrible about ourselves.


Dr. Klontz: but all that content is curated. And a lot of it is designed to make you feel deprived so that you'll buy whatever they're selling. But I think social media has just made it so much worse. And so one of the things that I do on social media is I try to educate people on what actual wealthy people do. if you want to become wealthy, you actually need to have a savings mindset, right I mean, you can't get there otherwise. It's not about how much money you make. It's how much money you set aside so that it grows to help meet your goals. And so I'm, I'm actually full force trying to put out that content every single day. But I gotta tell you, it's, it's super difficult.


Kate: And one of the places you put out a ton of that content is on the crazy platform of TikTok. So how did you get involved in TikTok?


Dr. Klontz: So,  I have two 14 year old nephews and, I think it was about a year and a half ago. They're showing me this new platform and it's TikTok  and you get on there. And it's like these 15 second videos and they're really compelling. And their music and people lip syncing and dancing, and it's, it's quite hypnotic. And as we discussed before the show a little bit disgusting, like with some of the content that goes on there, but it's a bit hypnotic. And so, I came back home and I had downloaded the app and I went down there again and I was looking and I started to see these day traders pop up. And I gotta be honest with you. So I just talk to you about my story. I thought they went extinct, you know, back in the tech bubble.


Dr. Klontz: I hadn't even heard about it since then, but then of course I'm like, Oh my gosh, we've had the biggest bull run in history, of course they're back. cause everyone lost everything back then lost their house. Had to go back and get there. I mean, so I thought there was this cultural event, like, okay, we're not going to do that anymore because all the data on day trading is just horrific to actually, you know, sports gambling I think you have a better shot at, so I was so appalled by it because I knew that young, first of all, these are my nephews. They're 14. They're, they're the ones watching this stuff. And I'm like, Oh my gosh, is it an entire generation is going to be fed this poison around this is how you become wealthy. And this is how wealthy people do things. And so that, that's what drove me on the platform. I'm like, no, no, no. I am going to start making content, trying to show people what actually happens. you know, with, with somebody who actually is an expert who has credentials, who isn't just day trading in their mother's basement, you know, because I just saw the profound impact. This was likely to have on young minds. And that's what got me on there. I was, I was upset.


Kate: Yeah. And so a lot of it, it's kind of like a debunking the myths of the wealthy also, right. Going back to sort of that ultra wealthy versus middle class and what we see on social media and the Lamborghinis and private jets.


Dr. Klontz: Yeah. My most popular video series just in the last few weeks and I'm talking like 1.3 million views I'm getting out of these things, which is just ridiculous. Right. It's crazy is I, it says welcome to the real millionaire TikTok, because what happens is, you know, it's going up against videos where people are in those Lamborghinis and getting out of helicopters or whatever the heck they're pretending to be doing, frankly. and so what, what that pops up is is Whoa, me all of a sudden, well, what's this, Oh, wait, look, he's riding his bike to work. Cause I ride my bike to work. You know, it's like, Oh, what, he, he, he took his kid tubing, the tube cost 26 bucks. And essentially I'm showing people, you know, he drives a Toyota, not a Lamborghini. And essentially what I'm showing people is that true wealth is actually owning your time essentially. Right I mean, that's true wealth is when you can own your time. And also ultra wealthy people. Like self-made ones that if they're bought into the trappings of the Rolex watches, that kind of thing, as we discussed previously, they never get there because you're always looking to buy that next thing. as soon as you get some money and it's lifestyle inflation, you're never taking chips off the table. And those people, aren't the ones who end up having that ultra high net worth.


Kate: Okay. So for all the people and I'm going to include myself in this that are super keen to learn more and advisors that want to upskill. So you've got five books, but I want to start with two of them. The wired for wealthy:  change the money mindsets that keep you trapped and unleash your wealth potential. And this is where you dive into a lot of those money scripts.


Dr. Klontz: Yup. That's right. And so there, I start talking about, you know, the top 10 money scripts that mess up with people's financial lives, as well as our general philosophy around financial psychology and how to unwind those.


Kate: And so was that book originally geared towards consumers Is it geared towards advisors It kind of just good for everyone.


Dr. Klontz: Yeah. I think it's good for everyone. of course that's what every author says, right You're like, Oh, my book is great for every human being on earth. but it's definitely geared towards consumers. So it's not a professional book.


Kate: Yeah. And then mind over money overcoming the money disorders that threaten our financial health.


Dr. Klontz: Yup. There that's a newer book. And so we wove more of the research on the brain research that's coming out and how we interact with money related to that. And the big difference for my work is so I teach behavioral finance. So I do teach that, but my focus is on financial psychology because, for me, I'm much more interested in what it was actually like for you growing up. Like, what did your parents teach you We all have these cognitive biases that screw us up. It's it's human nature. So that's the field of behavioral finance. And it's interesting, but my focus is really on you as the individual and how, and on the professional side, how can we shape your behaviors and beliefs around money


Kate: So again, I would imagine that that's good for everyone. Breaking the rule, but...


Dr. Klontz: Yup. I think it is, you know, so I use that in some of my classes at Creighton, the, the, the text that is used the most in the financial planning world. And I think it's being used in about 15 universities right now to train financial planners is called Facilitating Financial Health. And in that book, we have taken what we know from the field of psychology to help shape behaviors and applied it to the financial planning world.


Kate: Well, one of the things I'm thinking about is there was an article that came out. I have no sense of time anymore. So a few years ago on people that work on wall street in and live in Manhattan, how they can't even get by on a million dollar salary. And it's because they had to have that, you know, super high end apartment and drive the fancy car, even though you live in Manhattan and have the $800 suits all the time. So, you know, even if they're not sort of the retail advisors and planners, we do see that, you know, among the advisor planner community of, Hey, if I'm going to show up to a client's house, or if I'm going to have clients in my office, I have to be in the expensive outfits with the nice car.


Dr. Klontz: And if you think you're immune to this, you are lying to yourself. Cause I know we all sit back and go like, Oh, that's not going to happen to me. You know, this stuff creeps in there though, because your brain is wired to exist within a tribe. This is how, this is how your brain has evolved. So you are so vulnerable to this. And so you, you move to a new area and it's going to start creeping in things you've never thought about, you know, I had this experience, so I do this for a living in, I was living on Kauai. I was on Kauai for 20 years. And all of a sudden I just realized, I was telling my wife, you know, I, we need a truck. You know, we need to get a pickup truck. And I had all this rationale that was very, very well designed because I'm a smart person.


Dr. Klontz: Right. And so I designed this rationale and it made a lot of sense. And literally as I'm driving this thing after purchasing it, I'm looking around and everybody has a Ford or Toyota pickup Tacoma and I'm sitting there driving home, going, Oh my gosh, you know, this just happened to me. Right. And so wherever you go, there's, there's what what's expected that you wear what you drive, where you eat and this creeps into your subconscious. And then before you're knowing you're convincing yourself that, of course I need to get, you know, this particular thing and you'll have this entire rationale related to it. And the unfortunate part is it might have nothing to do with your actual financial goals or your actual financial situation. so in our, in our studies, we call it the financial comfort zone. And so it's this culture, it's the way you look at the world and we all get stuck in one of these. and it can be really devastating. And for people who actually want to increase their net worth, they have to look at it like there's an entire other universe on how to look at money and how to approach money and interact with money. And if I want to move either frankly, up or down the socioeconomic spectrum and be happy, I need to learn about that culture and how they look at money.


Kate: So for people that want to learn more, you were also the co founder of the financial psychology Institute.


Dr. Klontz: That's correct. So there we do. We have training groups for financial planners. We have something called executive circle. We meet a couple times a month. We unleashed that  during the midst of the pandemic, because we're all trapped inside and we wanted to find ways to continue our interaction. and there we have a certified financial behavior specialist designation, that basically advisors can use if they have had training in this area. So the other thing I do is I'm a professor in financial psychology at Creighton university, where we have a graduate certificate in financial psychology, behavioral finance. it's, it's also interesting to get an MBA with an emphasis in financial psychology at Creighton, which is super, super exciting. and so it's just a great place and a fun place for me to teach because cause when you do research, it's like, you know, nobody cares about your study. Okay. But, but my students, they have to care because I grade them. And so it's a fabulous way for me to like share this research with, with people who just have to pay attention.


Kate: So who would be kind of the ideal person and knowing that the audience is financial advisors and financial planners for getting that certified financial behavior specialist designation.


Dr. Klontz: So most of our students are, I would say financial planners. So many of them are practicing already. I'd say most of them are actually, most of them are probably like mid-career. on average. So financial planners who realize that, financial planning has evolved beyond just setting up portfolios for people. and you know, there, there are some threats in our industry related to this. I mean, everybody knows about it. You know, as, as investing becomes more of a commodity, it's like, you know, how can we help people And what's so exciting for me is this is actually how you should have been helping people and how you provide the most value for people. Like, look, we just said that financial stress is the biggest source of stress in the lives of Americans and financial stress kills people. Like it literally kills people. There's studies done that it's just as deadly as heart disease and cancer, like it kills people.


Dr. Klontz: So I look at, and who do you go to get help for this it's financial planners So I actually have this, this mission as a financial planner and this, this, this way of looking at it, like, look, you're here. Not to just help people, but actually save lives and make lives better. So I feel really passionate about that. And so in order to help people shift behaviors, so you really have to have a skillset that frankly hasn't been taught in traditional financial planning. Now the great news is that there's more and more movement in that direction. So the CFP board is actually putting energy into this. They're realizing that, Hey look, you know, they just came out with a book called client psychology was one of the last books written by the CFP board. and, and fortunately I was able to contribute a few chapters to it, but I think they're looking for ways to put this in the curriculum. So by the way, this is the future of financial planning is how can we be more holistic servers of our client and look at their entire lives. And to me that's where the opportunity is. Because again, people don't go to therapist to talk about their money, stress, because therapists are stressed about talking about money.


Kate: Oh yes. So  in the, the curriculum for the certified financial behavior specialist is  that then looking at the money scripts and you mentioned kind of the, the research that you've talked about. So diving more into that to understand the differences in psychology.


Dr. Klontz: Yeah. So we have several main content areas. So one is looking at what is financial psychology. So as I talked about the intersection between these financial flashpoints, money scripts, our money behaviors. and for that course, I actually basically essentially do financial therapy on all the students, right So they have to write their own money story and they have to think about their own money scripts. And I think it's, to your point, I think it's incredibly important that you know, your own psychology around money. And then we have a course very much, the entire course is focused on communication technologies. So using things like motivational interviewing, like somebody who's resistant to change, what techniques can I use to get them to move forward, for example, on getting a will when they're somehow resisting it or not following through in my financial advice, which is a universal experience for financial advisors, every client, there's something that's a sticking point for them.


Dr. Klontz: They're not ready to move on. So what can we do for that We have a course that's focused on family, financial psychology and couples, financial psychology, because many of us work within family systems. So we have parents who are worried about their kids. We have trusts that are perhaps enabling bad behavior in some people or less optimal behavior. We have couples who are in conflict around money. Have you ever met one of those They're not on the same page, right This sort of universal. And so these are the situations that we run across. And so that course is focused on that. And then we have one that's focused on behavioral finance, the cognitive biases, but all of our courses are focused on. Great, great. So, so there's a confirmation bias. Got it. What am I supposed to do with that You know, so there's a client in my room and they're exhibiting this, what am I supposed to do with it So it's, it's one thing to know about it, know that it exists, which is important, but it's not really helpful if you're in the room with somebody who's exhibiting it. What am I supposed to do in that situation How can I help this person and not hurt them?


Kate: That's awesome. Yeah. That's been one of my challenges with when I first started learning about behavioral finance, like 10 years ago, I was like, okay. Yeah, I was reading all this stuff and I was like, but I'm just not clear on what I do with that?


Dr. Klontz: I laugh because you know what I do in my course, I tell, I illustrate this point by explaining, for example, what a confirmation bias is. So, so confirmation bias essentially you're believe something. And you're going to find all the evidence to prove yourself. Right. And you're gonna ignore all the other. So, so I tell people just sort of jokingly, like, okay, great. So what I want you to do is the next time you have a conversation with your spouse and they're exhibiting a confirmation bias, just go ahead and tell them, you know, just go ahead and tell them that that's what's happening. You know, it's like, so sweetie, I know that you're upset that I didn't wash the dishes. And it seems like you're just looking for evidence though, to show that I'm not a very good partner. I think you have a confirmation bias because you're going to get, you know, it's not going to go well, okay. And you're not going to be helpful at all. And, and so that's where we stumble in terms of behavioral finance. So for example, our course is all focused on like there's techniques. So you run across this, what are you supposed to do Like when you see that kind of cause telling people about their biases is a great way for them to fire you and for you not to be helpful at all.


Kate: Yeah. Fascinating. So I assume this is available online and I know you've got these certificates around the world, so it's something that's open to everyone.


Dr. Klontz: It is. It is. So, at the financial psychology Institute, we, like I mentioned, the executive circle, that's online training. People can access right away at Creighton university. That's, that's a whole nother deal. It's like, you got to go to graduate school. Right. You got to take five classes. So that's a different level of commitment I would say. but yeah, it's all on all the programs are online. So I'm very fortunate with that. I've been teaching online for over 10 years now.


Kate: That's awesome. Well, Brad, thank you so much for being here. You clearly have a full schedule with teaching and endless videos on TikTok. I know you're on the other social media platforms, so thank you for spending time with us today for inspiring us. Any final words on the future of financial planning or calls to action.


Dr. Klontz: I think the opportunity for financial planning is to really engage with the concept that we are there to help people much more holistically. We're their financial life advisor, if you will, it's almost like you're, you're going to be walking with them through life, around the issue that is the most stressful for most people. And so it's not, it's not just about putting them in a portfolio and sitting down at meetings and running over performance reports every quarter. I mean, go ahead and do that. But, but if, if that's where you're staying, you're really missing out on an opportunity to be, in one of my articles, I called it a financial health physician, right I mean a healer, a healer in essence, like, like hopefully this doesn't creep you out. I mean, it's like, you're essentially in a position to help basically extend people's lives and the quality of their lives because you are the one who is bringing the knowledge and the tools to help them navigate the thing that is the most stressful in their lives. And I think it's a beautiful, beautiful opportunity. It's one of the reasons I love financial planning. and I would just encourage everyone just embrace that mission.


Kate: That's fantastic. I love that. It kind of gave me goosebumps. That was such a powerful way of putting it. Awesome. Brad, thank you so much.


Dr. Klontz: Thank you. It's my pleasure.

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