Mission Wealth’s INSPIREDtalk with Dr. Daniel Crosby: The Intersection of Money, Mind, and Meaning

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talk the intersection of money mind and meaning with Dr Daniel Crosby I’m Seth Streeter co-founder of mission wealth and I’ll be the moderator for today’s timely program we’ll be recording this event and we will email you top takeaways within a couple days and along with the video link Dr Crosby will present for approximately 40 minutes and that will leave us 15 to 20 minutes for Q a please do post your questions into the Q a box at the bottom of your screen the more questions that we ask the more insight we will gain please use the chat box if you need any technical support or to respond to any questions Dr Crosby gives us you’ll receive a survey at the end of the program and we do greatly appreciate your feedback now I’ll introduce Dr Daniel Crosby educated at Brigham Young and Emory University’s Dr Crosby is a psychologist and behavioral Finance expert who teaches about the intersection of the mind and markets Dr Crosby’s first book personal Benchmark integrating behavioral finance and investment management was a New York Times bestseller in 2014. his second book the laws of wealth was named the best

investment book of 2017 by Axiom Business book awards and it’s been translated into five languages his latest work the behavioral investor is a comprehensive look at the neurology physiology and psychology of sound financial decision making Dr Crosby constructed the irrationality index a sentiment measure that gauges greed and fear in the marketplace his work has appeared in The Huffington Post wealthmanagement.com and investment news he was named one of the 12 thinkers to watch by monster.com and a financial blogger you should be reading by AARP when he’s not Consulting on Market psychology Dr Crosby enjoys financially fanatically and maybe financially following the St Louis Cardinals baseball team and spending time with his wife and his three children Dr Crosby thank you so much for joining us today we look forward to helping us shed light on what we may not be aware of when it comes to our investment biases and tendencies [Music]

Seth thank you so much for the warm welcome thank you everyone for being here today uh Seth did a fantastic job of introducing me I am of course a psychologist who works in the world of wealth and it’s been a fascinating couple of years of four people like me as we have navigated some of the most complicated uh emotionally complex markets of all time so it is my pleasure to be with you here today to talk about money mind meaning and how they intersect and how you can make great decisions in times of financial uncertainty so I’m going to approach this by presenting you with two handfuls of rules for uncertain times and I certainly think that the moment that we find ourselves in qualifies as an uncertain time and we’re going to talk about rules for uncertain times and then we’re going to close out by rules for wellness how you can take all of these things the psychology of money and apply it to your life in a way that’s consistent with mission wealth’s mission you know you were lucky to work with one of the most forward-thinking life-centric person-centric organizations in the industry are are uh

our thoughts on wealth management and life management are considerably aligned and I’m excited to bring that to you so the first rule that we’re going to talk about today is that you control what matters most so what do I mean by this well when I am approached by individuals who want to know what I think of the market is going to do right when I am approached by people who want to know what the Market’s going to do the questions almost always focus on externalities what’s the FED going to do what’s President Biden going to do what’s Putin going to do what’s going to happen in Ukraine it’s all of these things that are a unknown and B more importantly external to us these are things over which we are powerless and of course worrying about things over which we are powerless can be a source of great confusion and consternation and fear and it can actually lead us to to make bad decisions so with my first rule here I want us my friends to take the power back because I want to share with you the research that shows that all of the things that most determine whether or not you live a financially successful

successful happy life that is Mission focused have to do with things that reside inside of you these are things over which you have control and I’m speaking of course of your own behavior now believe it or not the best predictor of whether or you not you cross the financial finish line is not any of these externalities it’s actually the choices you make and the behaviors you exhibit so the best example of this I know is to show you the the performance over the last 30 years of the stock market when compared to the average investor in that market over the last 30 years which has included considerable times of uncertainty it includes of course 911 it includes the great financial crisis it includes covid these are some very very dramatically uncertain scary times but in spite of those moments of fear we’ve averaged about eight and a quarter percent over the last 30 years what’s incredible is though that the average investor has kept less than half of that money they’ve cast uh just about half of that money because they have made emotionally based fear-based decisions they’ve attended to these

externalities they’ve gone in and out of markets they’ve bought speculative stocks they’ve done all of these things that lead to underperformance so the next time you are uh positioned to worry about something outside of yourself remember that you heard it here that all of the determinants of whether or not you are financially successful reside firmly within you and are within your control now we’re lucky in this respect in that we don’t have to go it alone because the research shows that Financial professionals financial advisors were actually made for moments like the uncertain moment we find ourselves in today what do I mean by this I want to present you with some really compelling research out of Canada that shows how dramatically people who work with a financial professional do relative to those who go it alone and there’s actually a very specific reason why this is the case and I want you to sort of hypothesize why we see these dramatic results and then I’ll I’ll tell you of course this Canadian value of advice report controlled for 50 socioeconomic and demographic variables so what we are doing here is an apples

and Apples Apples to Apples comparison of people who are in the same income brackets who are in the same wealth brackets at the beginning of this observation but what they found is that people who worked with a financial advisor for the order of five years had about one and a half times as much wealth as their same income peers who were doing it alone who were going it alone at the 10-year Mark they had twice as much money those who had worked with an advisor and at the 15-year plus Mark those who had a long-term relationship had 2.73 times the wealth of their same income peers who were managing their own money now when most people are presented with these results which have been replicated a handful of times in different contexts they go how is it that someone who makes the same income as me uh can have three times as much money as me 15 years later while this financial advisor must be putting them in hot stocks they must have a crystal ball that can see around corners and and know what’s going to happen in the market the truth is this that’s not the case that’s not what the research shows the research shows that

the greatest value that an advisor adds is helping that person manage this Behavior maintain this internal Focus this internal sense of control and to avoid two to three enormous pitfalls over the course of their investment lifetime it’s the difference between someone selling during the original covid panic and someone who stayed the course and set sat around to to realize the subsequent gains that sort of advice has an enormous compounding impact and advisors are a great asset in that in that mission but what’s true of advisors generally and what’s doubly true of mission is that advisors don’t just give us more dollars and cents they actually give us more Wellness research shows that those who work with an advisor have three times the Peace of Mind three times the retirement preparedness and twice the Readiness from or for an emergency of DIY investors so you’re buying peace of mind you’re buying happiness and you’re also getting some some pretty staggering Returns on average relative to people who are going it alone so what’s the upshot of all of this at a time of uncertainty like the one we find

ourselves in today well I would say to you that you should use your advisor for what he or she is good for and that is to be a decisional coach that is to be someone who helps you make big decisions to help you stay the course to help you maintain that internal focus and someone to keep you cool calm and collected uh in uncertain times because the rewards both psychological and financial can be tremendous the second rule here is that emotion is the enemy of good decisions we’re going to talk in a minute about some of the elevated emotions that have been brought about over the past two years this will be a surprise to literally no one but but what is the impact of emotion on the way that we think about money well for my book the behavioral investor I dug into the research around emotion and money and what I found is that the research suggests that money has the ability to tweak our emotions to make us emotional more than any other single construct out there more than talking about death or sex or any of the things that we we typically think of as hot button top topics money has an excitatory power that can lead us to

make some really bad decisions in fact I found that under stress the average investor loses 13 of their IQ now I want you to think about that because some of us don’t have an extra 13 that we’re working with I went to Public School in Alabama I need all the IQ I can get I need to hang on to that and yet that we find that in times of stress we lose 13 of our cognitive processing power so at the very moment you need all of your decision-making faculties at the very moment you need all access to all of the lessons that your advisor has taught you you have limited access to them so what does that say about how we should proceed and how we should move through the world well one thing is we should be sure to put ourselves in good environments I want to share a study with you that I find absolutely fascinating from from a gentleman called Martin Lindstrom he worked with a liquor store of all places trying to titrate the the supply the inflow and outflow of various types of booze from this liquor store and what he found was fascinating the store was having a hard time knowing how much of one type of

alcohol versus another to stock and he thought you know what I think we can alter this experimentally by changing the environment and so what he did was for alternating weeks he would play German music for a week over the PA and then the next music he would play French music over over the PA and he found that on the German music weeks people bought 50 more German beer than average and on the French music weeks people bought 75 percent more champagne than average now I want you to think about this these are gaudy numbers if you think about the impact of this environment if someone is walking out of the the front door of the liquor store with a with a case of German beer and you were to ask them hey uh you know Miss Mr and Mrs uh customer why did you buy this beer they’re going to say something like ah I don’t know it sounded good to me it just sounded and sounded nice or it’ll go with dinner or whatever what they won’t do is attribute their decision to subtle environmental cues and yet we know in study after study after study the environment in which we place ourselves has everything to do even subconsciously

with the way we make choices so what does this mean for emotional regulation well I think we’ve all or many of us I won’t I’ll speak for myself perhaps we’ve engaged in the last two years of this uh what has become known colloquially as Doom scrolling sort of looking at the worst news possible and sort of you know oh great what now you know what’s happening politically what’s happening with the virus what’s happening we we put ourselves in this very negative fear-based environment it should be no surprise then when it comes to making decisions about our money that will make negative imprudent inpatient fear-based decisions so part of hanging on to that 13 of IQ is making sure you’re putting yourself in an environment where you can make good decisions the second thing is we have to recognize the impact of the last two years on all of our energy and our mental health and uh things like our social connectedness you know using social connectedness as as a single example before covet so before covet before any of this happened I know it’s hard to even remember that world but before covid half of Americans describe

themselves as very lonely that’s before we got shut down before it got harder to see our friends and loved ones and the impact of something like social isolation and loneliness is dramatic it has the health equivalent of of smoking 15 cigarettes a day it’s twice as damaging to our physical health as obesity so all of us uh you know to a greater or lesser extent have lived through a period of years where we have been isolated we’ve been lonely we’ve been uncertain we’ve been scared uh we’ve been cut off from our normal routines all of that has potentially a damaging impact on the way we make decisions about everything including our money so I think we have to honor the strangeness and the uniqueness of what we’ve been through and recognize that we may be in an unusually emotional state so I’m going to borrow an acronym as we wrap up our conversation about emotion I’m going to borrow an acronym from the addiction literature from the 12-step programs which is halt h-a-l-t so you learn in addiction literature to never make a decision when you are hungry angry lonely or tired and I would

extrapolate that even further to financial decisions to say if you are excited about a financial idea it’s probably a bad idea good investing is boring investing if you’re fearful about your Investments it’s probably imprudent if you’re super excited about something it may well be imprudent good investing is largely emotionless and we are living through a time of great emotionality and need to be careful about our self-care and the environments in which we we put ourselves the next rule for uncertain times is to to do less than you think you should now I live in the Deep South I grew up in Alabama I live in Atlanta currently and believe it or not while this is mostly a football part of the world Atlanta has a really deep and and abiding passion for soccer and one of the most fun things about living in Atlanta has been taking part in the Atlanta United fan base and as part of that I ran across a study of European soccer goalies which which found the following if you think about a shot on goal and you think about like Premier League soccer like the best soccer players in the world when there’s a shot

on gold 96 of the time the goalie Dives dramatically to the left or to the right now only about four percent of the time do they say roughly in the middle but the researchers found that they stopped the preponderance of balls the shots on goal that four percent of the time when they did nothing because shots on goal were uh divided roughly a third a third a third left right center and so the four percent of the time when the goalies just did nothing they actually had an outsized impact but it was hard for them to do because we as a human race have an Impulse toward dramatic action in the face of fear or uncertainty because so many places in life this is the right thing to do if you want to get stronger you lift more weight if you want to get smarter you read more books so it’s counterintuitive that in markets the thing that we should almost always do is nothing so Nobel Prize winner William sharp found that you needed to get it right 82 percent of your time 82 percent of the time you needed to make correct buy and sell decisions perfectly timed buy and sell decisions in order to match doing

nothing very hard to do uh we also know that the vast preponderance of Market moves happen a small majority of the time so if you happen to be sitting in cash or uninvested during this time you stand to lose out rather dramatically but if you’re unconvinced I want to share with you one of my favorite studies which I which I first became acquainted with in in Jim o’shaughnessy’s excellent book what works on Wall Street and this was a Fidelity study that looked at the highest performing accounts and found that their highest performing accounts had had two things in common they were that the people in question had either died or that they had forgotten that they had accounts I want you to think about this we ascribe so much wisdom to sort of like making correct timing calls and you know hedge fund Geniuses and and the sophistication surrounding great Market moves but in this study the best predictor of success was deaf and forgetfulness so we really need to take a lesson from these goalies and in the face of fear in the face of uncertainty we don’t need to flail about to the right and to the left we need to stand

our ground stay tuned into our mission and stay centered the next rule for uncertain times is that if Trouble Comes uh it tends to be opportunity and this should be very easy to drive home after the last two years that we have just lived through you know John Templeton has this quote Warren Buffett has a similar quote about being greedy when others are fearful and fearful when others are greedy well it turns out that the numbers back that up that when we look back at Market history the average Market return for a given year over long periods of time is somewhere in the eight nine ten percent a year uh range and so sure enough if the market is flat to down five percent the average next year’s return is quite average 8.3 percent if the market is down dramatically 35 to 40 percent the average next year’s return is very elevated relative to history at 14 and if the market is down big big 50 or better the average next year’s return is right back 53 percent so we have to sort of condition ourselves as investors to engage in this sort of schadenfoida where if the market is down we start to get excited we

understand that great businesses are on sale and we understand that every time in history trouble has always meant future opportunity was around the corner the next rule is to ignore the doomsayers for whatever reason humankind is wired to tune in to the negative uh to tune into the catastrophic to tune in to the exceptional and the unusual and there are people who make it their trade to try and doomsay and be negative and try and maintain an audience on the back of this and this is never more prevalent than in uncertain times like the ones we’ve lived through in the recent past and and perhaps the one we find ourselves in today but the next time you hear one of these sort of Market profits of Doom I want you to remember the following research this is research that was done by Dr Philip tetbach at UCLA and it was on sort of expert judgment uh expert quote-unquote expert judgment around these um big prognostications about what was to come next and this should be uh scrupulously differentiated from Deep research analysis thoughtful research uh that that all firms Mission my firm all other firms engage in quite sensibly

this is sort of big uh the writings on the wall sort of prophecies tavock found that the more famous the expert the less likely they were to be correct I want you to think about that the more famous the expert the less likely they were to be correct we saw that with the big short I’m sure many of you saw The Big Short movie it was fantastic it was a great book it was a great movie but what you saw in The Big Short was individuals who got exceedingly wealthy getting one big BET right but they have tended to be wrong ever since and have been beaten and outpaced handily by thoughtful well-diversified mom-and-pop investors like the kind who were on this call the follow-on finding from tetlock was the boulder the Past prediction the worse the future prediction tended to be so at times like this you start to see these things uh you start to see articles like this surface um this uh you know this Market genius called the great financial crisis hear what he has to say now and when you see something like this I want you to remember that the Bolder the Past prediction the worse the future prediction tended to be

because the future is on average pretty average and so people who are making exceptional claims outsized claims tend to be wrong and then the final thing they found tetlock found about these two doomsayers was that learning they were wrong did nothing uh to diminish their confidence in their own abilities so want wamp so why is it then that we want this expert advice why do we find it so alluring well there’s a research that’s done when individuals watch Cable financial news Okay so think about being hooked up to an fmri machine that measures your brain activity while watching your favorite Cable financial news program so I won’t name names but you know that many of these experts yell and scream and pound the table and are quite emphatic so you would think that this would have an excitatory power on the brain but what they actually found was that listening to these people yell and scream and pound the table on Cable financial news put the part of their brain associated with critical thinking and decision making to sleep now how is it that a talking head yelling and screaming at us can have a

calming effect on our decision-making faculties well what it does is it says that the thinking has been done for us our brains weigh two to three percent of our body weight and yet they account for about a quarter of our caloric expenditure in a given day so our brains have this sort of outsized caloric spend and so we’re always looking for ways to sort of draft off of the opinion of someone else and that’s what we do when we tune into a Cable financial news expert now these quote unquote experts have a horrible track record and so what we need to do is to get the same benefits get the same calming benefit but get it through true expert advice from an individual who knows us knows our mission knows our goals knows our family knows our risk appetite and can give us one-on-one individualized recommendations and not scream into the void right we want this we want we want to worry less but we just want to get the right kind of experts on board this is the shortest rule that I’ll talk about and I’ll pick on guys a little bit but I feel like that’s fair when you see the research the next rule is that the

rules apply it has been a singular couple of years it has been a weird couple of years a topsy-turvy couple of years and and in such uncertain times it can become easy for us to say look the old rules don’t apply I know I’m supposed to buy and hold I know I’m supposed to be patient I know I’m supposed to stay focused on my goals but things have gotten weird so the rules don’t apply anymore and a lot of this is based on the psychological construct called overconfidence which is effectively saying yeah that works for other people but I’m different now men and women are both overconfident but men tend to be a little bit more overconfident so in in a spirit of Good Humor I’m going to pick on the fellas here for a minute a research I did for my book the laws of wealth a study of 700 men found that 95 percent of these men thought that they were funnier than average 100 of the men thought that they were friendlier than average and 94 of the men thought that they were better looking and more athletic than average now my dudes my guys this is not how averages work right we can’t all be friendly and look like Brad Pitt and be

hilarious right and women are usually in the 70 to 80 percentile but again same sort of effect dramatically overstating their own skill we do this as a human race and it helps get us out of bed in the morning we think we’re luckier than average we think we’re smarter than average we think our stocks are going to go up while everyone else’s are going down this is something we do and we have to overcome it so all of the rules apply it may have been a weird two years but the rules of good money management Remain the rules of good money management and we have to stick with them in good times and bad now the next one is is probably my favorite and it and is absolutely with consistent with the mission of of mission right and this is about remembering your why or putting your values and your goals at the center of how you make financial decisions so from 2007 to 2011 obviously some very rough years in the market there so when we look at Equity flows so this is a a technical term for how much money is is entering or exiting an asset class the so the flows to to most stock funds over this time were were decided to be

negative right people were pulling money out of the market the market was crashing people were scared and of course in March of 2009 the market turned and and bottomed in March of 2009 but this study went from you know 07 to 11 A Couple of bad years couple of good years and what we found was that from 07 to 11 people were pulling money out of stocks in every vehicle but one every investment vehicle but one they’re pulling money out of stocks they’re taking risk off the table and frankly missing some dramatic gains as a result the one vehicle in which people were able to remain invested was their kids college fonts so how is it that people were able to be brave and to make the Right Moves and to maintain their their sense of rules-based investing in the face of all this fear they had a yes that they loved that was bigger than the no of Their Fear and this is Central to missions uh go to market this is essential to missions philosophy and it’s essential to making great financial decisions now here is my why that’s my family now they’re a little bigger this is pre-coped they’re a little bigger now

after all the sourdough we’ve been baking but this is my wife and my three kids and and they are my why and I’ll use them to illustrate a powerful concept the powerful concept is this there was a fantastic study in fact it’s my favorite Financial study of all time because it demonstrates the power of putting your values and your mission at the center of how you think about and act with money it compared uh it was done on a group of low-income wage earners this is people working fast food and other restaurant other sort of low-wage employment where they’re literally just scraping by they do not have a lot of excess money and they were trying to help these folks get to a savings goal trying to help them create a rainy day fund and it’s legitimately very hard because they’re making eight or nine bucks an hour it’s very very tough right so they try everything try Rewards try punishment none of this stuff works finally they try the following they were using a an online bank account the researchers were to to monitor the inflow and outflow of the money and sort of uh measure measure what was going on

experimentally and they programmed it so that when these folks logged into their bank account a picture of their family or their kids flashed up on the screen for five seconds before they were able to transact business okay so for five seconds you gotta look at a picture of your kids or your wife or your husband or whatever before you’re able to do uh anything with your money right very simple free but what we found was that what the researchers found was that people who looked at a picture of their children for five seconds before making a financial decision saved more than 200 percent more than a control group they remembered why they were doing this whole thing right they had a yes burning inside of them that was bigger than that no and it allowed them to make the right decision so as I begin to close up here I want to present you with one final framework we talked at the outset about what a tough couple of years it’s been how hard it’s been to find footing and you’ve also heard today me talk about how things like uh excessive emotionality and stress and fear and even the way you eat

and the exercise you’re getting can lead you to make really good or really bad financial decisions and I want to close out by presenting you with a a five-part system for thinking about your own Wellness right and this is going to help you in life and it’s also going to help you make great financial decisions so when Psychology was this nascent uh you know baby discipline all we did was was study uh negativity we studied lack we studied mental illness we studied sadness and depression and anxiety and it’s only in the past 30 or so years that psychology has said Hey in addition to studying what makes people sick we should probably also study what what makes people well you know what makes people happy what makes people thrive what makes them great leaders and a gentleman by the name of Dr Martin Seligman has been at the Forefront of This research and he created what he found uh his his findings are summarized in this Perma model which is a five-step model for human thriving so there at home I’d like you to write down these five the p-e-r-m-a and I’d like you to rate just sort of there for

yourself personally how you’re doing sort of one to ten on each of these as I explain them the the first of these is positive experiences this is just fun right this is like uh going to a movie eating ice cream going to Disney World where like whatever playing guitar whatever fun looks like for you it’s just the kind of light-hearted stuff that makes you smile so how are you doing are you getting enough positivity enough fun enough light-heartedness in your life now the second one that one’s really intuitive we all know that of course sort of fun stuff leads to happiness the second one I think is a little less intuitive and it’s around deep work the second one is around engagement which is deep meaningful work this doesn’t have to be paid work this could be woodworking or guitar or volunteering or a hundred other things right but do you have an engagement in your life that makes you work hard that makes you lose track of time because while many of us has this sort of concept of sitting on a beach with a good book as being sort of the key to the good life that’s fun for a couple of days but if we want

lasting joy and Lasting happiness research shows that we need this deep work this this deep meaningful engagement so how are you doing one to ten on engagement the third one is relationships if you just had to look at one variable that predicted someone’s overall psychological Wellness it would be the strength of their relationships and candidly it’s been a rough couple of years for relationships uh things are you know I think hopefully knock on wood starting to normalize a bit we’re starting to gather in ways that were tough I think earlier on uh in in the last couple of years but it’s been a time of strained relationships tough decisions and social isolation in many respects so how are your relationships doing are you nurturing those relationships the fourth one is meaning this is working for something bigger than ourselves this is back to that mission again are we working for something bigger than ourselves this could be volunteering this could be service philanthropy religion spirituality yoga meditation this could be a hundred things watching the grandkids this could be a hundred things but are you working

for something outside of yourself that’s bigger than you and bigger than money and then the last one is advancement are you learning new things every day are you better today than you were yesterday are you making progress toward your goals these five things taken together determine your level of thriving your level of meaning right your level of happiness and they’re a great shorthand just to check in with yourself for how you’re doing and oh yeah because I work in finance they’re also going to lead you to make thoughtful patient long-term financial decisions all of this has a salutatory effect all of this has sort of a positive cycle if we can get our minds right if we can get our hearts right we can also get our wallets right so finally I want to frame I I want to leave you with one sort of soap boxy moment if you will um it’s been as I’ve said many times a strange couple of years it has absolutely been a strange couple of years and it’s been an interesting time to be an investor you know we’ve had the the quickest uh bear Market of all time then we’ve had a Raging Bull Market you

know more recently we’ve had some some choppiness and some uncertainty but for me the thing that keeps me on the course is that investing is fundamentally a belief that Humanity will will move onward and upward in the years to come that’s what investing is in a nutshell investing planning all of these things are a bet on an optimistic future and uh through illness through Wars through heartache humankind has won out again and again I think we can never bet against humanity and at the end of the day being a long-term investor is the ultimate put your money where your mouth is form of optimism and I think it’s something that the world could use a lot more of so thank you all I hope you’ve learned a little bit more about your mind about your money and how to create meaning in a way that will enrich you uh enrich both your heart and your wallet it’s been a real pleasure to be here and I thank you so much thank you so much Dr Crosby we have a number of questions that have come in so I’m excited to have us kind of jump into those and if you have any questions please do Post those into the Q a button

at the bottom of your screen so Dr Crosby let me just jump in here are there certain personalities or professions that tend to do better when dealing with biases over others and not the people who’ve died and not the people who are forgetful but are there certain types of people that tend to be better at handling biases absolutely so um I would point you to the most valid and reliable measure of human personality as something called the big five and I’ll I’ll run through it very quickly uh it’s it’s far better than the Myers-Briggs and some of these others that people love which I love too by the way but this one’s far more valid and reliable so the big five spells out ocean so we have openness to experience which is how much do you like to try new things versus sort of rely on tradition we’ve got conscientiousness which is effectively sort of like how uh how structured and planful are you we have extroversion which is of course sort of the extroversion introversion scale we have agreeableness which is uh How likely are you to rock the boat right like and then we have neuroticism which

is effectively your your level of anxiety now a lot of this stuff doesn’t matter right like whether or not your extroverted or introverted who cares doesn’t have anything to do with with good financial decision making the two that really matter are neuroticism or or sort of anxiety levels uh and conscientiousness so people who are highly people who are high on conscientiousness and low on neuroticism tend to be the best investors but you know I’ll I’ll be honest um I I like this is TMI like I’m super high on neuroticism right like nobody nobody goes into psychology because they’re well adjusted so the whole reason and the whole reason I I went into the field of mental health is to try and understand my own worry and it’s why I work with an advisor right like I’ve written three books on all the things we talk about today I um I’ve passed all the exams to be a financial advisor and yet I pay someone who I’ll be honest probably knows less about markets than I do to to manage my money because I know it’s not about their market knowledge it’s about their ability to keep me in my seat and keep

me calm and so that’s a long answer but go check out the big five it’s fascinating it’ll help you see your friends and family in a new light and yourself so it’s a great it’s a great model for for thinking about human behavior right how can I convince my spouse who doesn’t have a relationship with our advisor that they are trustworthy so how do we get both spouses on board if only one has really been engaged with the advisor yeah Seth probably knows better than I do how to answer this question uh but I think there’s you know I think there’s a couple of things that you can do and I think one of the most powerful things that they can do is uh is to have a relationship outside of work to try and connect outside of work so when when I work with some of the best advisors in the business and I’d say about 80 percent of them spend considerable time with clients outside of work especially where there there could be sort of a trust rupture like that you know we are not um we are not thinking beings with emotions we are emotional beings who happen to think now and then so it’s never going to be enough to sort of like

lay out the spreadsheet and like look honey look at the returns look how good they’ve been for us it’s really going to be about that human connection at the end of the day so I’d say stop you know stop trying to reason through it if that’s what’s happening and instead focus on relationship building great how can I teach my kids in a way that they won’t inherit my biases I know that actions speak louder than words but I don’t want them to worry about money like I have um yeah so this this is tough right because when we think about the nature and the nurture uh your kids probably genetically got your predisposition toward worry and then they probably observed your predisposition toward worry so it is it is hard to teach our kids to be uh something that we’re not but one of the things that I would say is just about awareness and identification so one thing that I believe about family systems and money is that no one knows what normal is objectively and so people just assume whatever they grew up with is the normal money attitude and then you only become aware of differences in thinking about money when you say get

married or live with someone and you go oh you know look my my partner sees the world differently than I do so I think I I would highlight look you know Mom Mom and Dad were we we worry about this more than we ought to and we don’t like it and I also think where there’s education there’s empowerment there’s going to be less worry I think a lot of folks worry about it um because they they don’t feel like they can get their hands on it so I think a combination of calling out uh the specific biases and the specific sort of elevated worry that you experience and and telling them that you wish something different for them and pairing that with sort of deep knowledge and financial education is is a powerful one-two punch got it what would you say are the most detrimental biases for the average investors yeah there’s no question that it’s overconfidence right because over I’m I’m overconfident that it’s overconfidence because there’s uh overconfidence is sort of the granddaddy of all biases because it’s the bias that emboldens every other bias it’s it’s only when you see that like hey the rules do apply to me and maybe I’m not

that great and maybe I’m not special and not different that you’re able to have a sufficient level of humility uh to do things like Outsource and do things like automate that that are the Hallmarks of great investing Behavior so um in my book in my book the behavioral investor there’s this universe some of you have probably seen this codex I think it’s called the Codex of of cognitive biases and it’s this picture of the brain with like a jillion different biases around it there’s over 200 now but what I did in my book the behavioral investor was I took these 200 biases and said look they’re not all they don’t all have unique explanatory power there’s basically four that sort of underpin everything it’s ego which is overconfidence in its many forms there’s emotionality there’s a tension which is sort of our tendency to confuse things with loud uh with things that are likely and then there’s conservatism which is our our being status quo prone are being risk-averse are being scared and so these four things cover basically the Waterfront uh but but ego is is the most Insidious of them all

thank you are there recent studies that have measured the increase in financial stress Americans are experiencing since covid and for those who are experiencing this increased stress what suggestions do you have for them other than work with an advisor yeah so um the Americans like I’m so I’m 42 the American Psychological Association for about my lifetime I believe it started the year I was born uh has studied the number one stressors in the lives of Americans and would you believe that every single year money is the number one stressor so uh we know that that ticked up during covid we know that calls to suicide hotlines tripled in 2020 we know that um anxiety and depression Rose to stratospheric levels as people lost their ability to plan they lost their social support networks and lost their jobs in many cases and so yes there is research to suggest that a stress is always bad it’s always you know Financial stress is always the biggest stressor every year since we’ve started measuring it and things have gotten worse since then so there’s three things that I would tell you um you know there’s three things that I

would tell you to do um one is work with an advisor so that’s been that’s been ruled out the second thing is I would go back to that Perma model to look at those one through ten and find where you’re deficient you know find where you’re you’re not as strong as you’d like to be do you need to introduce more light-heartedness into your life do you need to strengthen your relationships do you need to do a better job of tracking your goals like all of these things are powerful and that’s kind of the DIY approach and then I would say go to therapy I mean uh the the outcomes literature on therapy is staggering um therapy is enormously effective you know therapy talk therapy is more effective for curing depression and anxiety than like cholesterol drugs are for for you know writing cholesterol levels it’s enormously effective so uh you know it’s a big part of my mission to even though I work in finance now to to destigmatize mental health and so work with an advisor is powerful using this Perma model to make adjustments to your own life is powerful but but don’t be afraid to go work with a professional

because all of the research shows that it works thank you another question here with spouses how can you navigate working with spouses when one is more trusting in the process while the other is stuck in the minutia and constantly worrying changing your thoughts on investing and trying to beat the market um so we have something uh we have something coming out something I’ve developed that I’ll uh I’ll put in front of Seth as soon as it’s out probably middle of this year and it’s something we call the money 20. so the money 20 is 20 questions that get at the heart of of couples uh Financial disagreements we effectively studied what do people fight about when they when they fight about money and we found that the biggest thing that people fight about is whether money was best used to secure to secure tomorrow or enjoy today uh the second most prevalent concern that people had was is this money for for us uh you know me and you or is this to sort of bless the larger family or the community right like do we help Grandma out if she needs you know money for the old folks home whatever like do

we help our kids go to college so there were these five different categories that were communication differences you know sort of conceptual differences and the thing that I will say is the thing that’s powerful about the money 20. is when we don’t illuminate these differences uh it can be easy to look at our partner and go there being a pain in the butt or they’re you know they’re being obstinate when really a lot of times what they’re doing is acting out a money script from their childhood often that that serve them in a different time and place and so what we do like I mean think about this number one issue you know is money best used to uh seize the day or sort of secure the future the answer is of course both right I mean both both are important and either taken to extremes is detrimental like it can’t all be you know eat drink and be merry and it can’t all be asceticism and so you know this is sort of a a this is sort of a weak answer but I’ll say that that once you begin to understand to ask why nobody gets out of bed in the morning to to frustrate you or to be intentionally obstinate

oftentimes these attitudes are rooted in patterns that have worked historically and so rather than judging or getting upset about those attitudes which I really do believe in in everyone’s case is almost always well intended seeking to understand them it doesn’t mean they’re right right I mean doesn’t mean they’re adaptive or they’re right but it’s only once you understand where someone’s coming from and have empathy for for why they feel that way that you’re sort of able to have that further conversation around like you know hey how is this serving you how is all the jumping in and out serving you and is it working you know because all the research I presented today says it doesn’t and so the the thing I would say is all behavior is rational when you dig deep enough it doesn’t mean it’s serving you well right it doesn’t mean you should keep doing it but there’s a reason like nobody’s just doing this to be obnoxious there’s a reason they’re doing it and once you understand that and can empathize with it you can then move on to a larger discussion about how it’s serving them thank you

do you feel any media when it comes to the markets is productive to follow um so [Music] I’ll go back to my my phds in Clinical Psychology and I cut my teeth working with women with eating disorders I got into the industry to to help folks with eating disorders and the first thing that we would do when I worked at this inpatient eating disorder clinic was we would train the women on how to be thoughtful consumers of media because especially in the case of women uh women in the popular media have been uh um you know airbrushed and objectified and sort of painted in a way that has a very specific end in mind it’s to whatever sell purses or makeup or whatever the case may be and we we sort of made them educated Ambassador excuse me educated consumers of media so that they get sort of pushed back on the popular conceptions of women’s Beauty and the media and embrace a more realistic um thing the last time I wrote a book so three whatever three or four years ago when I wrote the behavioral investor I was appearing on a large financial news show and I’m there and like I’m wearing Tweed and like tortoise shell

glasses because I’m a psychologist and I gotta look the part and I have the little ear piece in where they’re counting me down and the producer goes you know five four three don’t be a nerd give us something good 2-1 and then I’m on and I’m just like shocked but that tells you everything you need to know about Financial media you know they didn’t say give us thoughtful well-reasoned uh intellectually supported arguments they said don’t be a nerd give us something good and so there’s there’s an incentive problem most Financial media has an incentive to sell ads and get clicks and eyeballs and so just the same way as I educated these uh you know these these folks with eating disorders about how to properly consume media you need to be an informed consumer of financial media they’re not there to help you reach your financial goals they’re there to drive clicks and eyeballs and when you understand that I think and you understand the incentives you become a more informed consumer so is it all useless no um but but once you understand sort of the profit motive and the way that these folks get compensated you become a more

Savvy consumer of of that media absolutely okay one final question here and then we’ll close uh what are your thoughts on ESG based investment strategies in in particular the E the Environmental yeah so uh I I have a podcast and I’ve had a number of ESG sets coming on my podcast soon and we’ve had a number of ESG experts on so um I think ESG is is powerful for for a couple of reasons um first of all there’s the what gets measured gets done reason you know we learned a few years ago that that uh corporations that have equal female representation on their boards dramatically outperform um organizations that don’t have adequate female representation on their boards and so once we knew that and we started measuring it we started getting greater a greater gender equity on corporate boards so in the sense that we started to pay attention we started to measure it good stuff happened I think there’s also just these sort of nuts and bolts benefits especially of shareholder ESG especially just voting your shares in a way that’s consistent with the world you want to live in and then the last thing that I’ll say is

there’s a behavioral benefit to investing with ESG you know you think about um you think about the the picture of my family study right the the study about focusing on your values when you think about uh aligning your investing life in your financial life with a way that’s personally meaningful to you it becomes far stickier than just some sort of video game pinging up and down um and you trying to time it so I’m a big proponent of it not only to help the Earth but also to sort of measure things that matter and try and shape the world that way and then finally and most significantly for for my world to drive good behavior right and engagement they tend to be more engaged when they’re aligning their Investments with their values well Dr Crosby thank you so much for sharing these valuable insights and here’s to all of our increased awareness when it comes to some of our unconscious choices around money and investing so thank you again I would love to invite everyone to join us for our next inspired Living Program a wisdom share virtual event reimagining your New Year on February 10th in this program Mission Wealth

Advisors and clients like yourselves will share our best ideas for making 2022 a positive year so if you’ve ever wondered what works best for your peers when it comes to having fun staying healthy feeling balanced or those different factors that Dr Crosby spoke about relationships meaning this is a great opportunity to hear crowdsourced ideas and make this the best year ever so thank you again for joining us today you’ll be getting a survey as soon as we close and we really appreciate your feedback we love your ideas for what type of future topics and speakers you would enjoy this will enjoy during our meeting today have a wonderful day