Magazine article American Banker

VIEWPOINTS: Grasping Consumers' New 'Normal'

Magazine article American Banker

VIEWPOINTS: Grasping Consumers' New 'Normal'

Article excerpt

Byline: Larry Cohen

It doesn't take a seer to tell that people are worried, very worried. But the ways in which financial professionals approach their work conflict with how they live their lives.

Financial professionals tend to focus on one area - investments, debt, advice, checking, insurance, retirement, Gen X'ers, baby boomers, mobile applications, strategy, channels, tellers etc. In most of these areas, the leading practitioners, thought leaders and day-to-day workers would tell you that uncertainty abounds in their areas and they are worried about where things are headed.

Previous trends, experience and huge variations in current measurements lead them to be unsure what will happen in the near term - next quarter or next year - much less to be confident of projections for three to five years out, or longer. This makes tactical decisions risky and strategic ones impossible.

At the end of the day, these professionals head home and face huge uncertainties. How will they make ends meet? What has happened to the value of their homes, their investments and their retirement accounts? How will they afford to send their children to school? What will they do when their parents run out of money? How can they manage to bring their spending under control? How do they pay down their debts? How can they help their children become independent? What will they do if the car breaks down, the plumbing breaks up or they break under the pressure?

The conflict between these realms is that, at work, the financial professional focuses narrowly on the area for which he or she is responsible. At home, the professional is responsible for everything.

On the job, evaluation is based on the depth and insight demonstrated in one area, and all the deadlines are yesterday.

At home, using incomplete information, one must balance competing priorities, limited resources and divergent time lines.

Clearly, the skill set for one differs considerably from the other, though they are not unrelated.

The reality we face at home, as we all know from our own lives, is complex, dynamic and organic. Households, by necessity, see their financial situation as a unified whole, in constant flux, with incomes, outflows, short- and long-term goals and competing priorities. Any hit in one area creates a reaction, sometimes in a totally different area.As households react, adapt, reallocate resources and change priorities among financial needs, they decide using sometimes unproven rules of thumb, frequently going from the gut, but always acting with a sense of the whole.

The financial professional sees the individual action but rarely with an understanding of all the underlying factors, biases, preferences and competing priorities that shaped the decision. …

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