Wealth Advisor Insights from “The Psychology of Money”

As part of our onboarding process for new wealth advisors, we ask that they read The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness by Morgan Housel. The book explores people’s behaviors when it comes to financial decisions and shares a collection of 19 short stories surrounding how people deal with wealth and money.

We asked each of our wealth advisors to share their individual takeaways from the book and any insights they may have gleaned. By helping clients through a variety of life circumstances and seeing the psychology of money firsthand, you may find they have a unique perspective to share on Housel’s advice.

Elizabeth O’Malley, Associate Wealth Advisor

One idea that really resonated with me when reading The Psychology of Money was when Housel discussed Napoleon: “Napoleon’s definition of military genius was, ‘The man who can do the average thing when all those around him are going crazy.’  I think it’s the same in investing.”

All too often we are caught up in what is happening today or what might happen tomorrow, when really we should be focused on putting a good plan in place and adjusting along the way.  If things seem especially volatile, sometimes it can be helpful to pause instead of making a “crazy” decision. Focusing on our goals and progress can help us weather both the peaks and the valleys.

After thinking about this from an investment perspective, it ties nicely into one of my favorite life quotes from Ralph Waldo Emerson: “It is easy in the world to live after the world’s opinion; it is easy in solitude to live after our own; but the great man is he who in the midst of the crowd keeps with perfect sweetness the independence of solitude.” It can be challenging to choose what is best for each of us, but when it comes to finances, having a financial plan in place can help keep us in check. 

J.P. Dowds, CFP®, CPA, Wealth Advisor

In the book, Morgan quotes a great story told by the founder of Vanguard, John Bogle, that’s worth sharing:

“At a party given by a billionaire on Shelter Island, Kurt Vonnegut informs his pal, Joseph Heller, that their host, a hedge fund manager, had made more money in a single day than Heller had earned from his wildly popular novel Catch-22 over its whole history. Heller responds, ‘Yes, but I have something he will never have…enough.’”

I couldn’t agree more with the importance of having “enough”. Inevitably, when people find out I’m a financial advisor and start asking me questions about wealth, I’ll refer back to this story as an example of what I’ve learned the most in my career – that the people who have figured out what “enough” means to them are much wealthier than the person with the most money, who is merely rich.

Nick Pileggi, CFP®, Senior Wealth Advisor

An insightful topic for me in The Psychology of Money was the idea of avoiding extreme ends of financial planning. Many successful professionals might find themselves working endlessly to “chase dollars” or maintain their status/identity. On the other end, some people may assume they will be able to live and be happy with little income/resources.

In either case, extended periods in either direction can ultimately result in regret. This is why working with clients to take an intentional approach with a long-term view to meet their financial independence goals can be critical.

Paula Nangle, CFP®, President & Senior Wealth Advisor

I have lots of highlights in my copy of the book! Chapter 11 is one of my favorites. Housel emphasizes the value of trying to be reasonable is better than trying to be “coldly rational”. We are all emotional beings and have personal experiences that can greatly influence our thoughts and behaviors around money. If you aim to be “just pretty reasonable” when making financial decisions, you have a better chance of sticking with a plan than if you are coldly rational. If you’re able to commit to a strategy during lean years, your performance is likely to be better in the long run.  

When I discuss various financial decisions with clients, I often say there is rarely ever a right or wrong decision. The right decisions for you may not be completely rational, but they account for your values and peace of mind – so in the long run, they are reasonable decisions.

Alexander Pimental, Associate Wealth Advisor

One of my favorite quotes from the book The Psychology of Money is: “People from different generations, raised by different parents who earned different incomes and held different values, in different parts of the world, born into different economies, experiencing different job markets with different incentives and different degrees of luck, learn very different lessons”.

These life lessons can substantially impact the emotional aspect of how someone views money. When working with a client, I keep this in mind to help me truly understand where a person is coming from.

Matt McGraw, CFP®, Wealth Advisor

Morgan Housel speaks about “accepting the reality of changing our minds.” I found that quote really resonates with me. Reaching your life goals is a marathon, not a sprint. Your childhood dream to become an astronaut likely is not the reality of what your adult career became, just like your future retirement plans imagined while in your 30’s likely aren’t the plans you’re making now at age 60. Being able to adapt can be a key attribute to living a healthy and enjoyable lifestyle.  

Jim McGowan, CFP®, Senior Wealth Advisor

Chapter 17, The Seduction of Pessimism, rang true to me in reading The Psychology of Money. It helped me understand why I always seem to be pushing back against the market fears projected by the media.

Housel does a great job explaining why the media focuses on negative stories about the market. Being a pessimist can be a safer angle because you sound smart and “helpful”, while an optimist sounds oblivious to the risks. Pessimism and fear are stronger forces than optimism, which is why it’s long been used as a sales or political tactic. Unfortunately, I’ve seen fear hold people back from making decisions that could have ultimately benefitted them.

Russ Weiss, CFP®, Chief Planning Officer & Senior Wealth Advisor

The hard part about investing and building wealth is maintaining a faith in the unknown for long periods of time. Human beings are notoriously poor at seeing past the horizon, especially when they are influenced by external sources, e.g., the media, to perceive a potential for danger.  We tend to think the worst and react without understanding why. 

“We all do crazy stuff with money, because we’re all relatively new to this game and what looks crazy to you might make sense to me. But no one is crazy—we all make decisions based on our own unique experiences that seem to make sense to us in a given moment”

In my career, I have learned that understanding and managing behavior related to money is much more impactful to long term success than the technical expertise on managing money.  Average returns are good enough, but often it’s good behavior that’s the reason for success. Think about maintaining a diet – staying disciplined is hard, especially for long periods of time, and you don’t see results overnight. Building wealth can be the same way. It takes discipline and control, and the benefits are realized over time, but if we’re able to stay the course, financial independence may be on the horizon.

Don Scholz, CFP®, MBA, Senior Wealth Advisor & Chief Investment Officer Emeritus

Whether it’s trying to climb the corporate ladder, pushing for a higher salary, or aiming for bigger profits in your investments, it’s always good to know how far to push. “There is no reason to risk what you have and what you need for what you don’t have and don’t need”. Greed for more can distort what’s reasonable. 

Knowing how much is ‘enough’ might look too conservative and like you are leaving opportunities on the table.  “Enough is actually realizing that an insatiable appetite for more will push you to the point of regret” and potentially ruin – think of once successful people such as Bernie Madoff or Rajat Gupta!


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