InProfile: Dr. Dan Geller

Money Anxiety

by Carolyn Ellis

Ms. Ellis is Features Editor for Advisor Magazine. Connect with her by e-mail:

Dr. Dan Geller is an expert in behavioral finance and the author of the popular and insightful book Money Anxiety. He frequently speaks to business and academic audiences on how money anxiety affects consumers’ personal finances. We talked with Dr. Geller about how financial professionals can improve sales and be more responsive to clients by understanding money anxiety and the Money Anxiety Index.

L&HA: Why is the concept of money anxiety important?
DG: Knowing how people really make financial decisions will guide financial professionals to the right product at the right time so you can help your clients solve their problems.

My book Money Anxiety explains the research and factors of what we call Behavioralogy, a matrix of predictable consumer financial behaviors. In Money Anxiety I cover the six financial behaviors we all exhibit and what’s appropriate to do in each one of them.

L&HA: What, really, is money anxiety?
DG: Money anxiety is a biological survival mechanism. True money anxiety originates in the reptilian or earliest part of the brain. Our ancestors, when there was uncertainty due to the elements, behaved with food and wood the same way that we behave today with money. There are people who suffer from general anxiety disorder which can include money, but that’s not money anxiety.

L&HA: How prevalent is money anxiety?
DG: The latest study from the American Psychological Association confirms that money anxiety is common and normal. Their study issued in February 2015 shows that 7 out of 10 people reported money as their highest concern and highest factor for stress and anxiety. In the social sciences, anytime you get 70 percent or 7 out of 10 people, that’s a normal level.

L&HA: We know money anxiety exits but how do you measure it?
DG: In statistics money anxiety is what we call a latent variable. With advanced statistics there are ways to measure it indirectly by measuring the impact that money anxiety has on behaviors like saving and spending. We use the same principle used by physicists to measure behavior of sub-atomic particles. Our model is also predictive, so we can know in advance where spending and savings are headed.

L&HA: Your work uses scientific methods to account for instinctive behaviors.
DG: We have developed the Money Anxiety Index to demonstrate and predict how the level of money anxiety affects consumers’ financial behavior. We have data for the Money Anxiety Index going back 50 years. Companies in the financial sector license this data to do statistical analyses.

Money Anxiety Index is the only index that is objective. Indices like consumer sentiment and financial confidence rely on questionnaire-based surveys and are subjective. People are asked, “How do you feel about the economy?” The Money Anxiety Index relies on what people do with their money. We monitor financial activity, not what people say. It’s much more reliable.

7 out of 10 people reported money as their highest concern and highest factor for stress and anxiety. In the social sciences, anytime you get 70 percent or 7 out of 10 people, that’s a normal level

L&HA: How can agents and advisors use this information to provide the right products and services?
DG: Products that are more attractive to consumers at an elevated level of money anxiety have less risk and are more liquid. Let’s say someone has an insurance policy on the house or other assets with a deductible of $10,000. When money anxiety goes up, sensitivity to this potential loss gets greater. There is an opportunity to approach clients to lower their risk by paying a higher premium to lower the deductible.

Agents and advisors can learn more on our website, It includes the Money Anxiety Index for the current month and the last 12 months.

L&HA: Is the Money Anxiety Index applicable to all clients?
DG: The Money Anxiety Index is universal. In developing the Money Anxiety Index, we measured the financial behavior of people, regardless of demographics or psychographics. Everyone cuts spending when money anxiety increases, and they increase their savings. The proportions can be different in different sub-groups. People of means might cut spending by buying a $50,000 car instead of a $100,000 car.

L&HA: Are insurance carriers working with your data?
DG: We license the Money Anxiety Index data throughout the financial sector including to banks, brokerage firms and research companies for analysis. They are very interested in how consumer financial behavior and money anxiety impact the industry and products. For example, a good time to promote life insurance is when money anxiety is elevated. Life insurance provides for the survival of the family unit. Also when money anxiety is elevated, people tend to prefer liquid assets. Life insurance with cash value that the policyholder can use if needed is even more attractive. The Money Anxiety Index is a proven predictor of financial confidence.

L&HA: Looking back on 2015, how you would describe the year?
DG: The trend shows that people are less financially anxious now than they were in early 2015. However, in the last few months the Money Anxiety Index has been flat. That shows consumers are confused. In first quarter 2015 GDP was almost zero. Second quarter growth was tremendous, at close to 4 percent. The third quarter was somewhere in between. With volatility like this people are sitting on the fence.

L&HA: Are there other factors like the upcoming presidential election that have an impact?
DG: Money anxiety is really all about money. Yes, elections and politics might have some impact but economic factors like employment and wages are the real drivers.

L&HA: What are your expectations for 2016?
DG: I think we are headed into an improved economy here in the U.S. I don’t predict a tremendous jump; I foresee slow and gradual improvement. Globally, it’s a different picture.

L&HA: Can financial planners help their clients overcome money anxiety?
DG: Yes they can, by alleviating some of their clients’ financial concerns. Remember, money anxiety is not a clinical condition. Having insurance and knowing that even if something were to happen the exposure is minimal will help to alleviate money anxiety. Having savings is helpful, too. When the Money Anxiety Index is elevated, it’s good to advise clients to stay more conservative. Our research has proven the people hate to lose more than they love to win. They spend when they feel safe and save when they are scared. ◊