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A few years ago, I was speaking to financial advisors about saving, spending, financial well-being, and life well-being. I noted the reluctance of many people possessing abundant financial well-being to spend some of their ample savings on themselves, their families, and their communities to enhance their life well-being by more than they sacrifice in financial well-being.
Advisors approached me after my presentation, describing the critical need to curtail spending and increase saving, the hazards of giving adult children money without asking them to pay it back, and the recklessness of widows splurging irresponsibly soon after their husbands die.
One advisor stood aside, however, waiting until the others had left. She said, “I burst out crying when you said, ‘It is better to give with a warm hand than a cold one.’” Indeed, she had tears in her eyes when she spoke to me.
It turned out that she had lent her son some $27,000 for college tuition and now insisted that he pay her by the agreed schedule. The mother had more than enough savings to forgive the loan without imperiling her financial well-being, but she reasoned that paying by schedule would benefit her son, increasing his future financial well-being by teaching him financial responsibility. Yet the son was financially strapped now, at the beginning of his career, lacking even money to buy his girlfriend an engagement ring, and his mother’s demand had soured their relationship.
Financial well-being comes when we can meet current and future financial obligations, absorb financial setbacks, and keep driving toward financial goals, such as adequate retirement income. Life well-being comes when we live satisfying lives, full of meaning and purpose.
My book, A Wealth of Well-Being, is about our road to financial and life well-being. The book is addressed primarily to financial advisors, enriching their knowledge and adding to their contributions to their clients. Yet my book is also addressed to advisors’ clients and all people who strive to enhance their financial and life well-being. All readers can learn from research by scholars in many fields, including finance, economics, law, medicine, psychology, and sociology, and all can learn from writers, journalists, and ordinary people of wide-ranging experiences.1
The biggest risks to life well-being
The biggest risks in life are not in the stock market. If you want real risk, get married. And if you want more risk, have children.
People laugh, because the point is obvious. Yet that point is regularly lost when we speak about financial well-being while neglecting life well-being. I was motivated to write this book by reflecting on my own financial and life well-being and those of others. We need financial well-being to enjoy life well-being, but it is life well-being that we seek.
Life well-being has many domains, including those of family, friends, health, work, education, religion, and society. The domain of finances has a special place among these domains because it is important on its own and because it underlies all other domains. We need finances to support ourselves and our families, paying for food and shelter. We need finances to maintain our own health and that of our families, paying for the services of physicians and hospitals. We need finances to pay for education that would qualify us for well-paying and satisfying jobs, careers, and vocations. We even need finances to experience and express our religion.
People vary in their perceptions of life well-being and the relative importance of its domains. Religion is an important life well-being domain for some people, whereas others are atheists. Work is a prominent well-being domain for some people, whereas others count the days till retirement. Some sacrifice well-being in the domain of finances for well-being in the domain of family, choosing flexible work schedules that accommodate family. Others choose the opposite, sacrificing well-being in the domain of family for well-being in the domain of finances, working long hours that keep them away from family.
Good financial advisors are well-being advisors, crossing the boundary from financial to life well-being. Indeed, financial advisors must evolve into well-being advisors if they are to compete for today’s clients and future ones, because many of the traditional services of financial advisors are now generic. Financial advisors provide portfolio asset allocation, but so do robo-advisors at a lower cost. Financial advisors rebalance portfolios, but so do robo-advisors at a lower cost. But robo-advisors cannot be well-being advisors, unable to form emotional bonds with their clients, bonds central in the contributions of well-being advisors to their clients.
The woman in my story could have increased her son’s life well-being and her own by forgiving the loan, sacrificing some well-being in the domain of finances, but gaining in the domain of family more than she had sacrificed. I hope that is what she did.
Parental support of life well-being: a personal example
I was reflecting on my own financial and life well-being as I was listening to that woman. I was born in 1947 in a displaced persons camp in Germany to Holocaust survivors, and we came to Israel in 1949. Navah, my wife, and I were students at the Hebrew University of Jerusalem when we were married in 1969.
A few months before our wedding, my parents traveled to meet Navah’s. After dinner Navah and I were excused to go for a walk, and our parents set down to business. Business meant deciding how much each set of parents would contribute to financially support the young couple, helping with a down payment on an apartment. My parents were far from wealthy, and Navah’s parents had even less but, as I learned later, Navah’s mother said to her father, “Whatever Meir’s parents offer, we will match.” They borrowed some of the money from relatives and repaid it later.
Not all parents have the means to support their adult children. Parents must consider their own financial and life well-being as they consider those of their adult children. My own parents’ financial means were limited.
When Navah and I pursued graduate degrees in New York at Columbia University, we had sufficient means to live as students. But at some time during the application period I was concerned that we would have to forgo our plans because we would not have sufficient means. I asked my father for a loan. “I wish I could lend you money,” said my father, “but you have a younger brother and sister and they will also need support when they are married. I do not have financial means beyond that.”
Fast-forwarding a few years, I was not surprised to hear after my talk from advisors describing the critical need to increase saving and curtail spending. My own personality is like that of many, perhaps most, advisors. Like them, I am high in the personality trait of conscientiousness; people high in conscientiousness have strong self-control.
The downside, however, is strong aversion to spending even from ample portfolios, an aversion that turns some into misers, diminishing life well-being even while increasing financial well-being.
One advisor told me that he has been increasing his life well-being over the years by loosening up on the strict spending taboos his parents engrained in him, learning to share his ample portfolio with others. This advisor shares his lessons in prudent saving and spending with his clients, prodding them to share their ample portfolios with family and community. Sharing ample portfolios benefits parents and children. It can also benefit advisors. Many adult children switch away from their parents’ advisors when parents are gone. Adult children who know that their parents’ advisors prodded them to share their portfolios with their children with a warm hand might be more inclined to stay with their parents’ advisors.
Don’t shy away from pain points
All people and families have pain points that diminish their life well-being, such as a disabled child, a difficult marriage, or a serious illness. Disclosure of pain is crucial in good advising, forming emotional bonds between advisors and clients and enhancing the contributions of advisors to clients’ life well-being.
Our family is not exempt from pain. Barbara, our older daughter, lives with bipolar illness. Her illness was not diagnosed for years, during which Navah and I let our anguish seep into our marriage, diminishing our life well-being in that domain, beyond the domain of parents and children.
We enjoy greater life well-being now, as Barbara’s situation is stable. She says “I love you” at the end of every conversation. Navah continues to enhance the life well-being of many people living with mental illness and their families as a volunteer at the National Alliance on Mental Illness (NAMI). We are fortunate to have an ample finances domain, able to support Barbara without constraining our budget, and we are even more fortunate in the family domain as Ruth, Barbara’s younger sister, loves and supports her.
I no longer feel constrained from disclosing our family’s pain. When I recently disclosed that pain to a colleague, he responded by telling me about his daughter who suffered a traumatic brain injury several years ago. Now, he said, his life and that of his family revolve around supporting their daughter. We empathized and comforted each other and turned from colleagues into friends.
Some years ago, an advisor I know called to ask for my advice. His young son had just experienced a psychotic break. He and his wife were shocked and bewildered. I invited them to our home for a conversation with my wife and me. We described our identical shock and bewilderment years before, offered our empathy, and shared with them what we learned from our experiences and those of others.
This advisor now cares for many clients living with mental illness and their families. Some people living with bipolar illness may spend recklessly when in manic states. The advisor described a client admitted for psychiatric care who requested the custodian overseeing his funds remove his advisor so he could withdraw a large sum of money. When his manic state subsided, the client was surprised at what he had done, and reinstated the advisor. Concerned about recurrence, the client has designated a trusted person to evaluate his requests before proceeding.
In my book, I share what I have learned about financial and life well-being. I hope that my words help you reflect on your financial and life well-being and those of your clients, and enhance them.
Meir Statman is the Glenn Klimek Professor of Finance at Santa Clara University. His research focuses on behavioral finance. He attempts to understand how investors and managers make financial decisions and how these decisions are reflected in financial markets. His most recent book is A Wealth of Well-Being: A Holistic Approach to Behavioral Finance, published in 2024.
Meir’s research has been published in the Journal of Finance, the Journal of Financial Economics, the Review of Financial Studies, the Journal of Financial and Quantitative Analysis, the Financial Analysts Journal, the Journal of Portfolio Management, and many other journals. The research has been supported by the National Science Foundation, the CFA Institute Research Foundation, and the Investment Management Consultants Association (IMCA).
1 Statman, Meir, “A Wealth of Well-Being: A Holistic Approach to Behavioral Finance,” Wiley, New York, 2024
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Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.