Financial Focus

Mental Health & The Financial Advice Relationship

Beyond diet & exercise financial planning contributes to positive mental health

A new report from Bridgehouse Asset Managers reveals that the more financial planning activities you do, the better your sense of security, control, ability to bounce-back from life’s challenges and positive mindset. Access the complete report here.

Feb. 21, 2024 /CNW/ – Bridgehouse Asset Managers (Bridgehouse) released new research today confirming a direct link between planning your finances and positive mental well-being. The research concluded: the more financial planning activities you do, the better your sense of security, control, ability to bounce-back from life’s challenges and positive mindset. Further, having a financial plan – regardless of your investment dollars – makes you less anxious about today’s financial issues, such as cost of living, debt levels and saving enough to retire. Developed in partnership with the Canadian Mental Health Association (CMHA) Toronto and an advisory panel including mental health, legal and financial advisor experts from across the country, the national research project included focus groups and an online survey. Bridgehouse undertook the research as part of its eight-year mental health research and education initiative (Mental Health & The Financial Advice Relationship) investigating the impact of mental health and illnesses on financial decision-making.

“We have a national mental health crisis in Canada, and a key way Canadian investors can improve their mental well-being is by planning their finances,” says Carol Lynde, President & CEO of Bridgehouse Asset Managers. “It’s not about how much money you have, it’s about taking action and creating a plan for the future that leads to hope and mental well-being. Financial planning should be right up there with diet, exercise and other recommendations for promoting positive mental health.”

“CMHA Toronto is pleased to contribute our expertise to researching the link between financial health and mental health,” says Michael Anhorn, CEO of the Canadian Mental Health Association (Toronto). “We know income security is a key determinant to health outcomes, and this research shows the parallel benefit of financial planning to mental health.”

“There’s a compounding effect: the more financial planning you do, the better your mental health,” says Lynde. The survey asked participants how many of ten financial planning activities they had completed and compared it to their self-assessed mental state. The research found the more activities respondents completed, the better their sense of security, control, ability to bounce-back and positive mindset. (Financial planning activities included: calculating retirement requirements, calculating net worth, determining short-term goals, determining long-term goals, determining insurance requirements, establishing an emergency fund, creating a debt management plan, creating a budget, actively finding day-to-day savings online and scheduling regular meetings with an advisor.)

Of respondents who did seven or more financial activities:

  • 73 per cent expressed a sense of security about their financial situation;
  • 73 per cent felt in control of their financial situation;
  • 79 per cent felt an ability to bounce-back if life throws them tough challenges;
  • 79 per cent reported a positive mindset.

Of respondents who did only one-to-three financial activities:

  • 52 per cent reported a sense of security;
  • 54 per cent reported a sense of control;
  • 73 per cent felt an ability to bounce-back;
  • 71 per cent reported a positive mindset.

To determine which activities impact mental well-being, a driver (regression) analysis was undertaken. This type of analysis uncovers the extent to which specific financial planning activities predict or contribute to a sense of positive mental well-being.

The financial planning activities that contributed most to mental well-being and an ability to sleep at night were:

  • Establishing/maintaining an emergency fund
  • Scheduling regular meetings with an advisor
  • Calculating net worth

Having a written financial plan strongly contributes to positive well-being by reducing stress and providing hope for the future. “Research participants with an actual financial plan said they were less anxious about today’s financial challenges, such as cost of living and debt levels, and also worried less about having enough to retire,” says Lynde. Focus group participants considered their financial plan a road map or a path to a better future that gave them clarity, hope, options and a sense of control and security.

  • 92 per cent of investors with a financial plan describe their mental well-being as excellent, very good or good.
Financial planning should be right up there with diet, exercise and other recommendations for promoting positive mental health...

Driver (regression) analysis also revealed the greatest contribution advisors can make to improving the mental well-being of their clients is by giving them:

  • Hope about their financial future
  • A sense of security about their financial situation
  • Confidence that their long-term financial goals can be achieved

“With our clients, we work together to identify their goals and support them with a plan and resources to reach them,” says Jennifer Bertram, Program Manager, Promotion & Training at CMHA Toronto. “We were surprised to discover that the financial planning process follows the same goal-oriented philosophy that we use with our clients. The research concluded that working with someone to create a plan was a trust-building and supportive exercise, which is often what we see when working with our clients facing mental health challenges. In line with the research, we know that financial planning is important to mental health and well-being.”

“We in the financial industry believe we offer products and services that lead to better financial outcomes, but this research tells us we’re involved deeply in Canadians’ mental health,” says Lynde. “How do we deliver better on this? One idea might be shifting our focus beyond the Know Your Client compliance requirement to financial plans. The research said that financial plans are extremely important to people’s sense of security and hope. Yet only 33% of Canadian investors have a financial plan.”

“As one of our advisory panel experts said, ‘filling out forms doesn’t result in knowing more about the client, it results in filling out the forms.’ Know Your Client should be considered a form to structure conversations to learn more about a client, but the real aim should be encouraging the creation of financial plans that foster the mental well-being that Canadians need,” says Lynde.

“Another way might be to encourage people to act and learn by doing. The industry has spent millions on financial literacy, but the research indicates that engagement and doing is important to Canadian investors. How do we encourage people to take the first step and to keep going?” says Lynde.

“We knew from our prior research that mental health challenges have a negative impact on financial decision-making. We now know that taking financial action has a powerful influence on improving mental health, and that’s a positive message to shout from the rooftops,” says Lynde.

 

 

 

About Bridgehouse Asset Managers
Bridgehouse Asset Managers (Bridgehouse), a trade name for Brandes Investment Partners & Co., is the manager of the Bridgehouse Funds. Bridgehouse is a Canadian independent investment platform featuring Brandes Investment Partners, LP, GQG Partners LLC, Lazard Asset Management (Canada), Inc., Nuveen Asset Management, LLC, Sionna Investment Managers Inc. and T. Rowe Price (Canada) Inc. Bridgehouse Asset Managers worked with the Canadian Mental Health Association-Toronto (CMHA) and Bridgehouse Asset Managers commissioned On Strategy Research to undertake qualitative and quantitative research. On Strategy Research conducted interviews for qualitative research and then quantitative research with investors across the country. In collaboration with CMHA, Bridgehouse Asset Managers assembled an Advisory Panel of financial advisors, to speak about specific cases and issues they were encountering, and professionals who work in mental health, in order to obtain background and insight. The experts included a psychiatrist, a lawyer (specializing in health/privacy law and mental capacity, vulnerable investors and estate law) and a mental health expert from the Canadian Mental Health Association. The information has been gathered from sources believed to be reliable; however, Bridgehouse is not responsible for any errors or omissions contained herein. Bridgehouse assumes no liability for any loss or damage suffered as a result of the use, misuse or reliance on the information and content herein. This material is not intended to provide legal, financial, medical or other advice, and may not reflect the thoughts and opinions of Bridgehouse. Information provided is not a substitute for professional advice. If you feel that you may need medical advice, please consult a qualified health care professional. Permission must be obtained if the material is to be reproduced in whole or in part. For more about Bridgehouse, visit bridgehousecanada.com. Connect with Bridgehouse on LinkedIn.
About Canadian Mental Health Association Toronto Branch (CMHA Toronto)
CMHA Toronto is the city’s leading community mental health agency. CMHA Toronto provides accessible, quality care for people in Toronto through programs, research and advocacy. From supporting individuals experiencing a mental health crisis to providing tools that support day-to-day mental health, when people need support in Toronto, CMHA is here to help create belonging and hope. Learn more at cmhato.org.