Few people would argue that the primary determinant of how much a saver will get out of their workplace pension is actually how much they put in. While much valuable work has been done around the industry on issues like governance, ESG and transparency, I strongly believe we are not doing enough to address this single factor that will have the greatest impact on savers income in retirement.
While attending the recent Morningstar conference in Chicago I had the opportunity to see a wide range of tools that are being built to help address the contribution challenge. The company is doing really valuable work in identifying the overall value of advice and exploring how best to help customers accurately define their financial goals. Of the many new services I looked at, one
really stood out as unlike anything I have ever seen before.
Called Money Talk, it is the brainchild of Sarah Newcomb, director of behavioural finance at Morningstar. Presented as a chatbot called Dr Money, it is designed to be used by couples to help them better understand why they disagree with their partners over financial matters.
The overall objective of the service and many other tools Morningstar is currently developing is to identify how, as an industry, we can help people make better financial decisions. In this context it is really important to understand that emotion frequently gets in the way of making good financial decisions. When exploring this, Morningstar found that relationships are a key theme when it comes to looking at why people take poor financial decisions.
Money is one of the three main factors that cause divorce and while people may employ a good financial planner and have a marriage guidance councillor they can still end up getting divorced. Emotional disagreements over money were actually identified as one of the reasons why people might go through the process of taking financial advice, have a sound financial plan laid out for them, but then never execute it. By helping
couples better understand how each other feels
about money, it is hoped that it will become more likely that they proceed with good financial plans when offered to them, or seek financial planning advice if they are not receiving any.
Morningstar teamed up with financial therapists, this is a specific designation of planners in the US – see https://www. financialtherapyassociation.org/ and used a narrative financial therapy approach to design a digital financial therapist which comprises four sessions. The first three are undertaken individually followed by a joint session. In the initial session the aim is to identify that different approaches to money are an external problem, i.e. not about the people themselves but how
their finances operate.
In part two the user looks at
how they work with their partner when they are a great team. What do they both do well? The objective is to look at how differences can be explored in a positive context.
Newcombe highlights that in financial conversations emotions are present that do not exist in other conversations. She describes these as little monsters that distort the way people think and bring in negative connotations. By helping users recognise this they can begin to get financial decisions in better context.
The third session is more about good tips and tools to use, with open-ended questions to understand more about how your partner thinks about money. The fourth is a group session, where both partners come up with one thing to make each other’s financial lives better. You make one very small step forward and agree to do it over a time frame. Then you come back and reassess and do more.
While currently designed for couples, the concept could equally be applied to other groups such as housemates and families.
Although only in its early stages it’s clear this service could play an enormous role in helping people better plan their financial futures. I’m fascinated to see how it develops over the coming months.