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Podcast:  Financial Well-Being: A Holistic Approach with Brian Portnoy from Shaping Wealth

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In episode 75 of the NewRetirement Podcast, Brian Portnoy, founder of Shaping Wealth, emphasizes holistic well-being within the context of financial planning. He discusses his journey in finance and behavioral finance, especially as outlined in his book “The Geometry of Wealth.”

The dialogue, hosted by Steve Chen, also explores the integration of AI in financial planning, highlighting its potential to enhance comprehensive, human-centric financial advice. Portnoy advocates for “funded contentment,” where wealth supports a meaningful life, underscoring the importance of aligning financial strategies with overall well-being.

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Transcript of the Podcast with Brian Portnoy

Steve Chen (00:18):

Welcome to NewRetirement Podcast. Today we’re happy to have Brian Portnoy with us, an influential figure in behavioral finance and the founder of Shaping Wealth. Brian is also the author of The Geometry of Wealth, a book that explores the interplay between money and meaning. In this episode, we’ll delve into Brian’s journey, his insights from writing the Geometry of Wealth, his work at Shaping Wealth and the role of AI in shaping the future of financial planning.

So get ready for our conversation filled with expert knowledge and visionary ideas, and we’ll dive into the world of Brian Portnoy and explore the true geometry of wealth. Brian, welcome to our show. Appreciate your time today.

Brian Portnoy (00:51):

Yeah, Steven, it’s great to see you,

Steve Chen (00:53):

Brian. It’s been great to get to know you kind of over the past year, and I’ve seen you on stage a few times. I’ve done a little reading of your book and you have a great reputation out there, seeing you on Twitter. I thought it would be good for our audience to hear in your own words about your background and what got you into the whole financial services space overall.

Brian Portnoy (01:09):

Thanks. Yeah, it’s been a long, very non-linear journey. Right now I’m CEO and founder of Shaping Wealth, which is a learning and development company that we can talk about, but getting here was interesting. I actually started out in academic career, decided I didn’t want to pursue that and kind of stumbled into finance because I liked research and writing and markets are pretty fascinating. So I started my career almost 25 years ago. At the time, small company called Morningstar, now a massive company called Morningstar.

Fast forward over a quarter century, did investment research, portfolio management and at a certain point along the way, 12 plus years ago, just got really captured by behavioral science, behavioral finance specifically, which is a fancy way of saying the psychology of money, how we make good or bad decisions about saving and spending and investing and the field so much. I’ve published a few books in this space. Most noteworthy you mentioned is the Geometry of Wealth. Wrote another one called The Investor’s Paradox and the third one edited with Josh Brown called How I Invest My Money. So it’s been a trip.

Steve Chen (02:23):

Yeah, that’s been awesome. What inspired you to write in the first place?

Brian Portnoy (02:26):

I think I’ve always been pretty curious about the world and there’s nothing better than writing to figure out what you think. It’s a little bit of a misconception that you have an idea and then you feel the urge to go write it down. At least for me, and most people I know who write and take the craft of writing seriously, you sort of write to figure out what you think because when you put pen to paper or fingers to keyboard and you get going, it’s usually within a sentence or three. It’s like, oh, I have no idea what I’m talking about.

I’m not really sure what I think. And to me, that’s the pain, the pleasure of the entire enterprise that you are compelled to sort through vague thoughts, conflicting thoughts, entertain others’ ideas, be critical, be synthetic. I mean, going back a long, long way as a student, I enjoyed writing, but the actual enterprise of writing books I didn’t give much thought to until I started and I joke it was like that scene from Forrest Gump when one day he just starts running and several years later he’s just traversed the country back and forth, back and forth and there was never really a plan.

(03:37):

I kind of feel like that’s my writing career. There was a day when I just started writing and then I just never stopped.

Steve Chen (03:42):

Were you blogging or anything before that or you just like one day you’re like, I’m going to write a book.

Brian Portnoy (03:47):

I was blogging a little bit. This is well before, I can’t even remember. Was it in Tumblr, if you recall that blogging site? Yep. I was doing some stuff, actually, I haven’t thought about this in ages, but my wife and kids and I moved to London in 2007 for an investment job I had at the time. I started a blog called Portnoy UK Adventure. Nice. And it was just sort of a private thing. I didn’t publicize it, it was just shared with friends. I ended up really, really enjoying that. There was something that made a good experience great by observing and writing and posting pictures and just talking about the kids and what we were seeing and doing. And it’s funny, I really haven’t thought about that in years, but that was the beginning of me really feeling a fire to express myself. So in 2011 when I started writing the Investors’ Paradox, it felt very natural and it was just almost a physical enjoyment to get into those flow states where hours would go by and I was just in it trying to figure out what’s going on around me professionally and personally, and I’ve always written my books in a way that are quite personal, so whether it’s the Investors’ Paradox or Geometry of Wealth or How I Invest My Money where I contributed a chapter and edited everybody else’s chapters, my story, my voice is in all of that.

(05:11):

I try not to be academic about things.

Steve Chen (05:14):

That’s awesome. Someone on our team just recommended the book, the Art of the Impossible. It’s about getting into flow states. Have you read that book?

Brian Portnoy (05:22):

I have not. I think I’ve heard of it. Yeah. Flow states are pretty cool. I mean there’s a ton of research. There’s a gentleman with a nearly impossible name to pronounce, Mihaly Csikszentmihalyi. I couldn’t begin to spell his name. It’s like 17 characters long, but he was one of the original pioneers in this field of positive psychology, which the science of happiness was founded in the eighties and nineties and he did the pioneering work on flow. His big work is called Flow and just from a neurotransmitter point of view, it’s a deeply pleasurable to be that I think all of your listeners know whether it’s at their job or with their hobby or something and playing an instrument, you’re just so in it and you’re just so connected to the activity in the moment.

Time literally stops and next thing you know look up and it’s been an hour or three and you’ve entered that flow state and it’s deeply pleasurable.

Steve Chen (06:20):

Hopefully more people can find their way into it. I was reading about this. I feel like I’ve been in it. I mean sometimes, I mean when we’re building this business, I can get into the work that we’re doing in a very deep way, but this book talks about ways to induce it and it’s around focus, it’s around purpose. It’s around having agency in your life and doing work that matters to you, and there’s ways you can stack these emotional triggers if you’ll or emotional states in your life that together they compound it. It’s pretty interesting.

Brian Portnoy (06:49):

Yeah, I’m big on frameworks and so-called Mental Models. I like showing up in the world with pre considered buckets or categories. So when I think about things I want to do at my job or thinking about my overall wellbeing or thinking about my relationship with my family, rather than it all just being fast and loose and hey, what am I feeling in the moment? What I’ve done in all of my writing and a lot of the work that we do at Shaping Wealth is about sharing frameworks and categories. The brain already very naturally categorizes everything and a process, a phenomenon known as mental accounting. We put everything in a bucket. It’s either left or right, up or down, red or blue. There’s no un-categorized thing in our life, and so you could be more or less thoughtful about as you’re alluding to the things that bring you joy and happiness. If you go into the day or into life generally with a loose model for those things, then it’s easier for you to recognize where you are to be more self-aware in the moment.

Steve Chen (07:56):

It’s super interesting. I mean I feel like for professionally, a lot of us or more people are accessing coaching and then some of us use coaching for I think mostly physical stuff today it’s like exercise more. That’s probably the most common pattern, but eating better. I know you in your business, you help wealth management firms coach their clients better. Does that expand beyond their money to their families? Like you mentioned the family, which I think is this huge untapped area of how do you do better with your family and be thoughtful about it and intentional. This is the last thing I’ll say on this topic because as a parent of three kids, it’s like you’re like, Hey, do this hugely important job with the only training you’ve had is watching your own parents do this and then you can read a book and that’s like it versus they’ll teach you to drive a car,

Brian Portnoy (08:41):

Right? Short answer is yes, and there’s a bigger answer because we’re talking about money and you’ve got this cool firm focused on investing and retirement and we’re focused on financial planning, but I think really critical, and this is part of my journey over the last 15, 20 years to try to situate our financial health, our financial wellbeing in the context of a broader life, and there I do abide by a model that we created. It’s not like it’s patented or anything. I think it’s pretty straightforward. And by the way, there’s this old line that I quote to death that all models are wrong, but some are useful. Any approximation by definition isn’t the reality. There’s another line that the map isn’t the territory, but a life-size map is no longer a map. You’ve got to abstract and you’ve got to consolidate and you’ve got to create frameworks.

(09:36):

The framework that I abide by that we coach on for holistic wellbeing has four parts, physical, emotional, spiritual, and financial to use an old grad school term. Those four things are sui generous, meaning they’re each something in and of themselves, but then in the world they are deeply connected and it’s complex and interesting and confusing, but we’ve got our physical wellbeing and we engage in nutrition and movement and rest, and we’ve got our emotional wellbeing and that has a number of different components to it. We have our spiritual wellbeing, which we almost never talk about in financial services, but it’s central to the way most people lead their lives. The sense that you’re connected to something bigger than yourself doesn’t mean religion per se, but it means that you’ve thought about your place in the cosmos who hasn’t done that. And then the fourth, which is kind of the odd man out, is financial wellbeing.

(10:34):

We can have body, mind, spirit and wallet, and it does sound a little bit awkward and different and in some ways it is, but the fact is that money is an emotional lightning rod for all of the big things. Happiness, fear, envy, greed, joy, hope, despair, regrets, and I’m repeating myself. I’m sure if you go around the emotional word wheel and you think about the big things that we feel money is a deeply emotional experience, money is a relatively new invention in the span of human history. The first coin was invented in what is now modern day Turkey 2,700 years ago. The human brain is hundreds of thousands of years old, so we’ve got old software and new hardware coming up against each other, and so financial wellbeing is a thing in and of itself that we really should be thinking about and then situated in this broader search for a life well lived, that’s what really motivates me. That’s been the last eight to 10 years of my career trying to synthesize all of that.

Steve Chen (11:46):

When you think about those components, the physical, the emotional, the financial and the spiritual side, do you ever stack rank them like a hierarchy of needs where you have to do certain things first or is it you have to do them all at once?

Brian Portnoy (11:58):

No, you don’t have to do them all at once and they’re all abstract, and to me it’s the type of framework where it gives you the opportunity to think through the environment that you live in, the choices that you have, the constraints that you have, the imagination that it inspires. The model is useful in many ways, and one of them is just to be able to just categorically take stock and ask, how am I doing? It’s a kind of rough world out there as we know it. It’s big and it’s confusing and it’s intense, and social media and technology have really done a number on us, and so to be able to step back and say, Hey, how am I doing across these four dimensions and maybe your model for holistic wellbeing has seven components or three components. It doesn’t matter. Again, all models are wrong and some are useful, this four-part model could be useful to me and you and your listeners and our neighbors and friends and families, and we say, Hey, physically how am I doing emotionally? How am I doing spiritually? What’s going on? How am I feeling? And then financially, how am I doing? So it’s not a matter of saying one’s more important than the other. It’s saying I have the opportunity to think about each of these individually and then ask even harder questions about do I have a bigger deficit in one area versus others, and maybe I should lean into that a little bit. Maybe I should give it some more thought. Maybe I should devote some more resources. I don’t mean money per se, I mean cognitive or emotional resources into that particular thing.

Steve Chen (13:31):

Right. It’s awesome listening to you describe your work and how you think about it. I feel like when we think about financial advice and planning, it starts with financial. So for many people in the industry, but if you’re not healthy, money doesn’t matter and if you get rich, very often people are then like, but now what do I do? My purpose was getting rich or we’re doing my career and now I’m confused. We see this all the time. So I think going into it with this framework, and I do love your statement, I’ll give you credit, I adopt it, but all models are wrong, but some are useful. To

Brian Portnoy (14:01):

Be very clear, that was a quote from a gentleman long since passed named George Box, who I think said it in the 1950s that he was some sort of scientist way back when. That ain’t me.

Steve Chen (14:12):

Yeah, there’s so much good stuff out there. We were just having to be riffing on Peter Drucker. That guy was like a management genius who actually had also a lot of good life insights.

Brian Portnoy (14:20):

At a certain point, things roll up to the big picture, and I think if we’re just throwing names out there, to me one of the more quotable guys is a guy named EO Wilson who invented the field of sociobiology many decades ago. He was the world’s foremost expert on ants, but he’s also, he passed two years ago. He’s written multiple books more broadly on the meaning of life and the nature of humanity. Probably the thing that I quote the most out of anybody is a quote from EO Wilson, which is that we’re drowning in information but starved for wisdom and connecting it back to our financial lives and financial planning specifically. We live in this vast overwhelming financial supermarket. There’s this paradox of choice. We like having more choice, but you get so much at a certain point it it’s overwhelming. So we’re not lacking for choice or for information.

(15:12):

What we’re lacking is actually perspective, calm, stillness and easy direction. I think it’s now legitimate for the wealth management industry to provide a little bit of wisdom. Doesn’t mean the financial advisor is sitting on the philosopher’s stone or anything, but a lot of times people are coming into their office or virtual office nowadays and asking for context and asking for perspective. Part of what we do at Shaping Wealth is kind of give permission to advisors to have those conversations as distinct from, oh, we’re only going to talk about the portfolio. We’re only going to talk about your spending behavior. All of the details.

Steve Chen (15:53):

Yeah. One of the ways we’re looking at it is helping a lot of people achieve financial confidence so they can have more control over their human capital and they can use that. You think about our lives, the only thing we’re born with is human capital, our potential in life, and then some of us get lucky and we inherit money or whatever. You have better educated parents and you have definitely a big leg up, but mostly what do you do with your scarce resource, non-renewable resource, which is your time, but we spend very little time thinking about it. I think most of us are kind of defaulted into if you’re like us, you had the opportunity to be well educated and read and then you fell into a career. At least you’re like, I got to make money, and then you go into this career and then you kind of get down this path, and I do think increasingly people are more thoughtful about how they’re using their time as they get more control.

(16:41):

This is becoming a bigger thing and then trying to get more intentional about how they use that time. So I do think it’s actually, and to your point about the role of the advisor, if people do take a pause, which is like, Hey, I’m going to take a minute and think about my two big resources, my money and my time, and with an advisor, you’re like, I think about all my money, my life savings. It’s a huge responsibility. At the same time, thinking about your time, which is your depleting resource, how do you use those together in an intelligent way? There’s a huge opportunity to help people do better there.

Brian Portnoy (17:12):

Well, Steven, I should let you know that we have full-blown coaching programs on time, affluence, it’s a hot topic. I would say that it’s really a mixed bag out there in the world right now. On the one hand, we do live in the cult of busyness, and this is a relatively new phenomenon. If you go back a hundred plus years to be rich meant to be idle, to do nothing. So if you read an F Scott Fitzgerald novel and were deeply bored, well that’s on purpose because the whole point of being rich was to do nothing, and then fast forward to the 21st century, there’s a lot of data showing that the richer you are, the more time constrained you are. So that deep trade-off between money and time, I’ve spent a lot of time on this topic. When you pull people at higher and higher income levels, they’re much more willing to prioritize making money than allocating their time more wisely.

(18:12):

There’s a status element to that busy as a status symbol. Think about our day-to-day interactions with friends and colleagues. Hey, what’s going on? What’s the refrain quote? I’m so busy, and then you’d launch into whatever you’re busy, but I don’t think we would all be saying that if there wasn’t a status component to it as opposed to, Hey, what’s going on? I have so much time, I’m just enjoying things. And I think a lot of us would be like, what’s wrong with you? Why aren’t you doing something more productive? So to have that conversation, well first to have the internal thought process and then second to have the conversation, whether it be with a partner or a friend or a financial advisor on the train off between financial and temporal affluence, there’s a huge opportunity there for the industry writ large to help people allocate, as you eloquently put it, our most limited resource, the depleting resource that we’re not getting any more of.

Steve Chen (19:11):

I feel like people are writing and thinking about behavioral finance, but you’re really the first person I’ve talked to that is being super intentional about building it as a practice throughout the industry. Do you see other people leaning into it the way you are and what percentage of advisors do you think are super thoughtful about this or make this a real part of their practice? The time part of it?

Brian Portnoy (19:34):

Well start at the end there. I don’t think advisors and wealth advisory firms generally have been given the opportunity to learn this the right way. There’s a legacy issue, which is that people are interested in something called behavioral finance, and we think about the true pioneers, Danny Kahneman, almost, Richard Thaler, pathbreaking mind blowing stuff, and at a very high level, I think people find this field interesting because it’s on everyone’s favorite topic, which is themselves, hey, look at me, look at the decisions we make. Look at these frameworks that are sort of hardwired into our brains. This is how we go about doing things, and that’s all fascinating and interesting, but one of the launching pads or big departure points for what I’m trying to build at shaping wealth is to say that over the last 40 plus years, whatever interest or even obsession with behavioral finance we find in our industry is anchored on behavioral biases and heuristics.

(20:39):

That’s actually been very counterproductive in the sense that when you’re focused on behavioral biases, and so for listeners, think about anchoring meaning you believe something and it’s very hard for you to get off of that. The recency bias, it’s something I heard the most recently that I’m going to believe. Availability bias. You watch a particular television station or surf particular websites and that’s in front of you, that’s what’s available, and so that tends to be what you believe as opposed to surveying a broader landscape, there are literally hundreds of supposed biases. The doozy that this has done on the industry and why it doesn’t feel like many people aren’t talking about things the way we are, which happens to be true, is that it paints us humans as deeply flawed and maybe even unfixable, and it puts the advisor in this awkward, lousy position of, one, having to understand all of these quirks and biases.

(21:41):

Number two, putting them in a position to diagnose their clients as if they’re even qualified to do that. I mean, one of my partners, co-founders, Joy Lere, she’s a PsyD in psychology, she’s a practicing clinician. She would struggle to enumerate and diagnose 300 human behavioral biases. It’s not what we’re really trained to do, and ultimately we are pathologizing normal, understandable human behavior. So instead of saying, my client is irrational, and by the way, irrational is an economist’s fancy word for stupid, so instead of saying, my client’s really dumb, I can’t believe they would want to sell their portfolio. When things get volatile, it completely shuts down the opportunity for more emotionally intelligent conversations to take place. Just tying a bow around this, this has been a rambling answer. There’s a number of different pivot points to where the industry’s going. I’ve built my firm to take advantage of those pivot points, and part of it is back to wellbeing and happiness, recognizing that the game here isn’t about cognitive distortions. The game is really about whether or not someone’s position to lead the life that they want to, and then figuring out where money plays a part, which will never be the whole thing because it’s connected to everything else.

Steve Chen (23:06):

Yeah, no, it’s awesome to hear how you frame this up. It definitely feels that so many people could benefit from really thinking deeply about a holistic life and understanding money’s place in it, but money’s not the only thing, and for so much of us, that is the thing we get focused on at the expense of other things because if you’re spending all your time thinking about your career and building your business or whatever you’re doing and making money at the expense of the emotional side, the relationship side of your life, the physical side, then it’ll come back to haunt you later. It feels like so much of this is educating people and as people get more educated, I do think is happening, I do think generations, there’s more information, there’s more knowledge being spread, which is good. People are learning that investing can be, it actually is pretty simple, but it’s not easy to do.

(23:55):

The whole behavioral side is hard, but I could see the future of this industry and we should talk. We’re part of the future in this podcast talking about ai, it’s really going to be about more life coaching than money management. Everyone’s focused on money management, but I think over time you might say, well, money management, more of that’s going to get automated. What can change your life? Well, understanding yourself and then understanding your behavior and then really making great decisions and taking action, which is also super hard for human beings to do without other people around them. That’s why we have coaches, but it feels like that could definitely be the future of where this industry goes.

Brian Portnoy (24:32):

So it is and it isn’t, so I’ll kind of make the case and then undermine my own case. There’s no doubt that there’s a need to provide a broader perspective on financial wellbeing within which a number of very practical decisions are made. Hey, how much of my paycheck should I allocate to my retirement fund? How do I save for college? I’m selling a business. What are my considerations there? There are thousands of complex financial decisions that we need to make. The challenge, Steven, is that when we’re so in the weeds with making all of those decisions, we pretty quickly lose sight of the big picture and we no longer ask ourselves, what is the point of all of this? These aren’t just sort of a series of endless games that we’re trying to win. These are things that we want to solve efficiently and then effectively and to some extent not have to think about it much.

(25:28):

I mean, there’s a real element of peace of mind. You use the word confidence. These are all connected, and so I would say that there’s been kind of a 50 year arc in the financial advice industry that has ranged from, it started with just being a brokerage business, buying and selling of securities. Then it became an investing and allocation business, choosing the right funds and securities, packaging them in the right optimized portfolios, and then financial planning, meaning that that portfolio is situated within a broader goals framework, and now this next level, which we might call coaching, it’s not the best word. We might call it guidance. Maybe we just call it advice. It’s the fact that we don’t have a great word, I think tells you that this is where the action is. This is what people are trying to struggle to figure out in any industry.

(26:21):

When you don’t know what the right word is to describe the hot activity, that’s where people are interested, and you also know that’s where margin is because everything that came before it is increasingly commoditized and margins are being squeezed. There aren’t very many people at all. Almost no normal person goes to a financial advisor and says, I want you to be my life coach. I think many people at the same time would love to show up at a financial advisor’s office and have her ask about what’s really important to them and align their money lives with the bigger picture that we’ve been talking about. At the same time, I don’t think many advisors, that’s what I do. I talk to thousands of advisors per year and we have advisors all over the world. There are some, but most advisors wouldn’t tell you that they want to be a life coach.

(27:12):

Most advisors would tell you though that they’d love to employ effective coaching techniques in their practice in order to help their clients achieve their goals and dreams and avoid their fears and challenges. So this is sort of the messy place that we’re in right now and firm by firm, whether it’s a two person RIA or a $7 trillion wirehouse, everybody is trying to figure out what is the nature of the advice that we’re trying to provide and to whom I love it. It’s just like this massive jump ball because in the biggest pictures, there’s such an opportunity to help people lead better lives. The fact is that for the other three dimensions of wellbeing that we talked about, physical, emotional and spiritual, we have physicians, we have counselors, we have clergy. They’re legitimate, they’re accessible, they’re there to help. When it comes to money life, it’s not like the financial advice business has the greatest PR.

(28:16):

I mean, lots of people like their financial advisor as reflected in the fact that retention rates across the industry are like 98 or 99%. Most people stay with their financial advisor forever. At the same time, if you ask people, what do you think of this industry? Think it’s a group of crooks in charlatans. So there’s that mismatch going on. The opportunity to show up as a helper in one way or another, just like you have doctors and clergy and counselors, the financial advisor, the modern financial advisor can be that helper if she or he positions themselves in the right way and actually delivers on that value proposition, which isn’t always easy.

Steve Chen (28:56):

Yeah. Well, I think this is actually a really good framing for the whole industry. One of the things that I see happening out there now is there’s increasing awareness of the financial cost of the fee structure for financial advisors, right? This traditional 1% of AUM (Assets under management), and if you have a hundred thousand dollars, it’s a thousand dollars a month or a thousand dollars a year, but if you have a million dollars, it’s 10,000 and you have a couple million, it’s 20,000 a year. It’s real money. It ends up impacting your terminal wealth. But on the flip side, if you’re the kind of person that could really benefit from making better decisions and having behavioral coaching, and I mean if you zoom out and someone can help you achieve way better outcomes for your life than you would on your own, then the cost clearly worth it, and it’s such a better framing. And to go to someone and say, well, look, the argument isn’t about we’re going to help you pick a better portfolio, which is what the robos did, and it’s totally commoditized. The argument is we’re going to help you understand yourself and your own behavior and take those steps so that you have this outcome over decades that changes your life and your family’s life. That is a powerful idea. The thing is, I don’t see lots of advisors framing their work this way and dissing this way.

Brian Portnoy (30:12):

Yeah, well, I mean you do and you don’t, right? I mean, you go to your normal financial advisor’s website and there’s an aging couple in white linen walking on the beach, and the script is about goals and dreams and hopes, and that’s fine, but then you actually go see what is being delivered in terms of that financial advice, and it’s pretty standard investment management. Oh, we’re going to build you a risk balance portfolio that matches your time horizons and risk tolerance and tax optimized and all that kind of stuff. The thing about providing truly human-centric advice, so I would distinguish, let me take a quick step back and distinguish between customer-centric advice versus client-centric advice versus human-centric advice, and this sort of tracks that long arc of the industry that I mentioned earlier, going from brokerage to investing to planning to coaching with customer-centric advice.

(31:06):

It doesn’t matter who’s across the table, you’re trying to sell a product that’s still around. It’s massive is what it is. Maybe there’s a good match between the product and what’s useful for the person, but it doesn’t matter who’s across the table. In the broad general sense, client-centric advice is great because here you get some knowledge in terms of who they are and what their preferences are and their goals and their concerns, and hey, they want to retire at age 65 with a $3 million portfolio. Okay, good, let’s plan for that. And so that’s not a bad place to be, but then there’s this next level of human-centric advice where you’re not just sort of an glorified order taker saying, oh, okay, well these are the things they said we want. I’m going to build a financial plan to achieve them. You’re actually more deeply engaged in a conversation with them about their life as it goes on.

(31:59):

There’s a great line from a social psychologist named Dan Gilbert that human beings works in progress who mistakenly think they’re finished. And so goals are very much an event at a time in the future, but those, they don’t really tap into the why. So you want to retire at age 65 with a $3 million portfolio. Why is that? It’s easy to ask. It’s hard to get a clear answer because we don’t, including me, we don’t totally understand who we are and what we’re all about, and it’s a moving target because life happens. Kids show up, they grow up, they move away, jobs change, relationships change, politics happens. The world happens. And so that adaptive mindset where you’re positioned to have a coaching style conversation, meaning that you’re in active listening mode, you’re really playing back what people are saying. You’re skilled at challenging certain ideas and thoughts and just letting other ones ride. This is a skill that needs to be built and maintained and extended over time. Human-centric advice or human first advice, it’s a skill or a craft that not that many people have that actually a lot of people are open to at least thinking about whether or not they want to do the work is another thing.

Steve Chen (33:19):

Is this taught?

Brian Portnoy (33:20):

I hope so. My entire company teaches this.

Steve Chen (33:23):

Yeah, no, no, no. But today, is there any kind of certification that people can get that they have this skill? It’s a skillset, right? I mean it’s a deep skillset.

Brian Portnoy (33:32):

Yeah, it’s a skillset and certification. I’m a little bit bearish on that. One of the guys who really motivates me in my life and my thinking and my work is Seth Godin, who in the most narrow sense is a marketing guy, but I think in a broader sense is very wise and brings so much perspective to the world, and he makes a really important distinction between education and learning, education being kind of an old school thing where an institution shares information with you and then you play it back to them. At the end of that, you get a degree or a certificate or something versus learning education sort of happens to you. Learning is something that in order to truly learn, you have to express agency. You have to go into it thinking, okay, what I’d like to know, this is how I’d like to change.

(34:22):

This is an outcome I’d like to see in the future, and you really lean into that. I think of my life’s work right now is building a learning platform, not an education platform. And some people, some financial advisors truly want to engage in that process and others don’t, and that’s totally fine. By the way. I’m not saying there’s a right and a wrong way to be, but if you’re going to deliver this sort of human-centric or human first advice, it is a skill and it’s not one that’s captured in a certification. It in of itself is a form of adaptive behavior where you’re constantly learning how to do these things. So take for example, active listening. Everyone’s like, oh yeah, I want to be an active listener. It’s like, okay, I’m looking at you through the screen now and I’m listening, and that’s fine. There’s actually a ton of nuance to what that skill of active listening is.

(35:21):

And in the same way that you would go to your CrossFit gym and move big tires or climb a rope or normal gym, you do bicep curls. Well, you’ll build muscle or stamina at the time that you do that, but if you stop going in a month or two, those muscles will have atrophied. And it’s the same thing with emotional intelligence, which is kind of a term we haven’t used, but it’s what we’re talking about. IQ is not something that we can improve upon. EQ is, and EQ has four dimensions. Each of them I think of as a CrossFit experience where you can really put some thought and time into being better, and we can talk about that, but I’ll just stipulate that emotional intelligence, it’s not a specific skill. It’s the broad toolkit that the modern human first advisor brings to the table.

Steve Chen (36:14):

It’s very true. I had a coach last year and I think we mostly executive coach, and we mostly worked on the emotional side of this work, I guess, and it made a difference. And then when we stopped working together, I would say my EQ has gotten weaker and my practices of being grateful, expressing gratitude to other people, being in a very positive frame of mind, it’s having practices that lead you to a perks the world in a great way every day have declined. And so there’s a strong argument to keep doing it, right? You go to the gym.

Brian Portnoy (36:49):

I think so, and there’s tactical questions as to do what exactly how frequently with what objective, but to be explicit, EQ has conventionally understood it has four dimensions or empathy, and there’s social skills or relationship skills. Those are all very much connected, but as a starting point, those are distinct things and you can be better at some versus others. So you can have a high degree of self-awareness, and that in itself is messy, but that doesn’t necessarily mean you’re a great leader, that you have remarkable relationship skills. I’ve done some executive coaching, and when you’re in the moment, it feels pretty good. You feel like you’re getting better, but to the point, way back in terms of how busy we all are, it’s like, okay, the one hour session is over. Oh, now the entire coaching engagement is over four days later. It’s like, what were we talking about?

(37:51):

I’m not saying it needs to be a daily practice, but one thing we’re just really excited about is engaging advisors on this topic of emotional intelligence. Probably the two pillars that really define how we’re engaging the world and wealth management, not just advisors, but also by extension their clients is one, positive psychology, two, emotional intelligence, positive psychology or the science of happiness is opening the door to all of these questions about wellbeing and contentment and happiness, and there’s lots of systematic ways to think about, and we articulated that four part model. So that’s one of many things. So positive psychology is one, and the second is emotional intelligence, which is this unbelievable toolkit. And again, I have this partner, Joy who’s just a unicorn. She’s amazing and learning about all of the different dimensions and engaging in this and trying to be a little bit better. When you think about the most empathetic people in the world, you might think about Oprah as this great listener and empath, or you think about Brene Brown, this magical psychologist who’s written countless books about empathy. And the thing is, I don’t go on the basketball court to try to be Michael Jordan. I try to put a little bit more lift in my jump shots so I don’t front rim the thing every time, so it’s always about me getting a little bit better as opposed to trying to be the best of the best.

Steve Chen (39:16):

Do you see differences between generations adopting this generations of advisors or generations of clients? And I’ll give a little framing here. We have all kinds of people here, but like Gen X, millennials, gen Zs working inside this business, and definitely I see these generations thinking a bit differently and maybe the younger generations a bit more openly about the importance of positive psychology and the importance of EQ. And there’s definitely differences in like you can show up as a Gen Xer, I might show up with a certain attitude about work and how to do it and the amount of grit required or something like that, and other folks might feel less the same way I do, and it’s just interesting to see, but I am learning a ton. I’ll say this, I don’t want to give a shout out to Meg Misiak, who’s our Head Sales, and she’s the one who introduced the Art of the Impossible, and she also, she introduced other books about essentialism, , helpful and the reasons, and also how to design Rachel, they think deeply about the importance of rest, and I might show up with the importance of work, and it’s interesting to, there’s reasons why you can actually probably produce better work if you show up in a more balanced way in your life.

Brian Portnoy (40:33):

Yeah, the rest issue, I couldn’t agree with more. I don’t have anything to say on that other than that I’m at the stage in my life where my mental model for physical wellbeing is from our friend Phil Perlman. I got three buckets, nutrition, movement and rest, and to me, rest is the cornerstone or the keystone. If you haven’t taken care of that, nothing else matters. On the other question, which I always find super provocative and vague in a good way are the generations different. I would distinguish between generational differences in life stages. So it’s one thing for someone to be 24 years old and not seeing the world in the same way. That’s in part because they’re 24 years old. I’m 54. There’s a decent chance that in 30 years, that 24-year-old who’s going to be grappling with aging parents and kids that are growing and leaving the house and sort of back third of your career health issues that you might find later in life, well, those are just life circumstances that you can’t experience until you experience them.

(41:40):

That sometimes gets lost in the shuffle because when we say, well, what do millennials think? What does Gen Z think? What is Gen Alpha going to think? Well, part of the answer to the question is a non-starter because it’s just a function of where they are in their lifecycle. The more interesting place to click for detail where it’s harder is, well, what truly is the difference between millennial or Gen Z, millennial, gen x, boomer, and so forth? And I think this is anecdotal, but I think some of these topics on wellbeing and flourishing, the younger you go, the more you see an openness to that. I think some Gen Z, millennial, maybe even younger Gen X, look at older Gen x boomer greatest generation and say, geez, so focused on career and making money, and there was a certain model of happiness, kind of the Mad Men TV screen like, Hey, here’s the picture of American happiness with the yellow smiley face, which was invented in 1963 by an advertising executive in New York. So there could be generational differences. And there’s another line I wish I know who said it, but that’s progress happens when funeral at a time. These things don’t go away immediately. Inertia is a more powerful force than we think about. I think broadly speaking, the focus on financial wellbeing in the context of holistic wellbeing is becoming more and more of a thing. Whether that’s a secular or a cyclical shift, you can’t really tell in the moment. I’m speculating. It’s part of a secular shift in the way that most people think about their lives.

Steve Chen (43:29):

Yeah, no, it’s awesome. I love the framing. It’s great how deeply you’ve thought about this. I would love to dive into the future of financial advice and planning as we’ve talked about the behavioral part of it and how that’s going to change things. I think the other big thing that we riffed on as we were prepping for this is ai and what that could mean, and I think nobody knows fully yet, but what you think financial advice and planning looks like five to 10 years from now, all encompassing the behavioral side, the AI side. What do you think this looks like from your perspective?

Brian Portnoy (44:06):

Well, the AI piece is a subset of the broader trend, and the good thing is that we’ve kind of talked in various ways about the broader trend, which is toward this more all encompassing form of life advice that money fits into a broader search for a life well lived. We haven’t mentioned it, but it’s worth here that I coined a phrase in the Geometry of Wealth, which is funded contentment, page one of that book, which I’m really proud of. I make a distinction between being rich and being wealthy. By the way I wrote the book for my kids, none of who have read it, but it’s there for them because I’m thinking, okay, how can dad be a little bit helpful and not annoying? And so far I haven’t achieved that, but someday, maybe

Steve Chen (44:56):

When you’re 84, your kids will fully appreciate the Mark Twain quote about at 18, when I was 18, my father was a complete idiot, but then magically when I would turned 21, he had somehow gotten decades worth of experience and wisdom.

Brian Portnoy (45:10):

I know, let’s hope. Let’s hope. But I do like to make just a foundational distinction between being rich and being wealthy and rich is the search for more. And what we know based on extensive research, but also kind of common sense is that the search for more just leads to the want for even more. One of my favorite shows Mad Men, Don Draper, said, happiness is that feeling right before you want more happiness, we’re on that treadmill and social psychologists literally call it the hedonic treadmill. You strive towards something and then you get there and then you say, great, okay, well what’s next? And you keep going. So there’s nothing wrong with rich, and there’s nothing wrong with having more money. Money does solve problems. Money does buy happiness in very specific ways, probably beyond the scope of today’s call, but nothing wrong with accumulating more money.

(45:58):

But if we’re looking for a certain positive emotional state in the future, having a bigger balance sheet isn’t necessarily the cure. So the fork in the road is toward wealthy, and to me, wealthy is the ability to underwrite a life that’s meaningful to you, however you choose to define that, and however you revise that over time through life’s unpredictable ups and downs, and the term funded contentment captures that. And if you use that as a tool, I have friends and friends who are couples who kind of use that term as a framework to have conversations about their finances and money. And so you start with contentment and you ask yourself, well, what’s driving happiness for me? What’s really meaningful for me? And not sort of in the moment, Hey, I just had a hot fudge Sunday and I feel fantastic more deeply, my connection to family, my passion for my job, my connection to faith and things like that.

(46:55):

And then once you have a sense of what those are, then ask the question, well, how do I need to structure my financial life in a way to support afford underwrite those things that are meaningful to me and hopefully in a flexible way so that when life takes its unpredictable twists and turns, I can continue to stay on that beat? I think that the future of the industry is increasingly going to be on advisors, helping clients achieve funded contentment. They might not use that term, but really situating money within the context of a life well lived and making good efficient decisions that produce durable low to no stress outcomes. That’s where it’s at so that you can focus on the things that matter. I think the less you talk to your financial advisor about money, the better the relationship is going. And then on the AI piece, I’ll just stipulate that a lot of the things that financial advisors do right now can be commoditized, can be subject to technological innovation.

(47:58):

Certainly on the investment side, my view is that investing is a problem that’s been solved. Most people most of the time need a relatively simple balanced portfolio that’s tuned to their circumstances. Computers can do that with three lines of code, but beyond just the investing piece, whether it’s budgeting, whether it’s optimizing your tax situation, building the right estate plan, AI is so ridiculously powerful. I should say generative AI is so ridiculously powerful already. It’s unimaginable that it won’t displace almost all of those mechanical functions rendering the financial advisor mostly in a situation or a position of being a guide or a coach or a leader or an advisor, whatever the term someone chooses to use. I don’t believe that even though AI will be able to come across as empathetic, we’ve seen the technology, it’s already eerie the way that it operates. The fact is that most people, most of the time for many years are going to want to deal with what they perceive to be a real person. And so in that sense, the modern financial advisors never been more powerful. They could be more than human. They can use the AI for certain types of functions, and then they could focus on the emotional intelligence, on the focus on wellbeing, on decision-making process, things like that.

Steve Chen (49:21):

When we’re recording this, one of the thoughts I’ve had is both of us have done a fair amount of media stuff, YouTube and audio, and there’s already language models that will ingest your audio and mimic your voice, and we’ve seen the power of these things to also generate content and questions. So to me, it feels like we could each train our own ais to look like ourselves and talk like ourselves to some degree. I mean, the question is would they have the innovation and the accuracy that we have as humans, but do you see a point in 10 years or less where it’s like this podcast could be done by two AI avatars at each of us and they could have a dialogue and ask questions and hopefully create more value by talking to each other?

Brian Portnoy (50:03):

The answer is no, because I could see it happening in three years, in two years. I mean, we’re building ai, which we haven’t revealed yet. We’re going to have our first big launch sometime in Q1. We’re building, I think the first and by definition, most powerful behavioral finance AI engine, which will very much empower financial advisors to go deeper on the behavioral front, not replace them, enhance them. And part of that is setting up the well-tuned conversation agents that we’re working on behind the scenes so that the advisor can ask better questions so that they can show up more self-aware, more empathetic, more whole, that can only have a positive benefit for the client who’s going to feel more seen, more heard, more remembered. I think it’s pretty darn exciting. There’s going to be a version of it. There already sort of is where Brian Portnoy, you can just talk to me.

(51:00):

We’ve uploaded more than a million words of our writing, me and Joy and Neil, my two partners into our system. And over time, based on an analysis of that and some pretty funky quirky voice technology, you’re going to be able to come to our platform at two in the morning and you’re sitting in Singapore, it’s two in the morning, and you’re just like, Hey, I’m thinking about this, and you’re going to have a dropdown. Who do you want to talk to, Brian, Joy or Neil? We don’t know. We just don’t know where this is going to go, but I find it really exciting, but I like breaking things.

Steve Chen (51:37):

The world has been headed to the place of the super empowered individual. We’re seeing that even in stuff like this where you can be, Hey, I’m not a podcaster or whatever. I guess I’m a podcaster now, but I was like, yeah, we’ll try podcasting. And now I’ve had 700,000 downloads of this podcast and we’re just rolling in their garage. And that’s nothing compared to these people who’d throw out TikTok videos and they get millions of views or whatever. But the value is aggregating to people that are experts and the best trained and I guess sustain the best trained. I can go take a course at MIT or from Google to get educated. So why, if I’m going to take a course on ai, I would want to go take it from the leading brand in that space, and that’s infinitely scalable when it’s software. And so if we can infinitely scale the delivery of guidance and advice, that’s where it’s going to get really strange. And I think for the world, it’s like as technology progresses, it’s about the rate of change. So the Luddites were like, Hey, industrial Revolution is coming and it’s going to endanger my work, and so I fight against it, but then the change is slow enough, people get retrained, and historically that’s what’s happened, probably will happen again. Although I think this time we’ll see if it depends on how fast.

Brian Portnoy (52:54):

I just keyed some big conference that was more in the employment, employee benefits and retirement space. Oh, I saw you there and I gave the keynote on work meaning and identity in this context. And yeah, it’s a huge jump ball.

Steve Chen (53:09):

Brian, appreciate all the context. We are going to have to cut this one short. We’re going to have to come back and do a whole other section on what’s happening with ai, but this has been an incredible conversation. We’re clearly both thinking about this stuff in deep and somewhat parallel ways. I love what you’re doing. Any last couple thoughts you want to share with our audience before I wrap it up?

Brian Portnoy (53:27):

I just plant the big flag, which is that wealth is a mindset, and if we start there, instead of thinking of wealth as a number or money in strictly quantitative terms, it’s just sort of opens the door to just a fantastic set of not only conversations with ourselves, with our partners, with our advisors, but it creates the opportunity for really good things in our lives.

Steve Chen (53:51):

Well, thanks for joining us, everybody. As we wrap up today’s episode. A big thanks to Brian Portnoy for sharing his insights and the story behind Shaping Wealth. We really appreciate your perspective on behavioral finance and just the arc of evolution of financial planning and the influence of AI. For our listeners, we appreciate your engagement. This conversation has hopefully been helpful and provided a deeper understanding of the evolution of financial planning and where it’s going, and the human side of planning and wealth. Don’t forget to check out Shaping Wealth and Brian’s book, the Geometry of Wealth will have links to that and his other books in the show notes. And then we welcome all shares and reviews of this podcast on our platform. If you’d like to see our platform offered via your workplace or your financial advisor, feel free to suggest NewRetirement to them, see if they’ll offer it via their own business lines. With that, thanks for joining us and look forward to chatting with you next time. Take care.

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