. 2024. Meir Statman. John Wiley & Sons.
In, More StatmanGlenn Klimek Professor of Finance at Santa Clara University and outstanding thought leader in behavioral economics, examines how financial well-being can lead to raised lives through third-generation behavioral economics.
The first generation describes people as “irrational,” while the second generation describes them as “normal.” Statman also describes people as “normal,” but broadens the financial perspective to take a look at them as whole individuals and show them in areas of well-being in life, including dating/marriage, family, friends, health, work, education, religion, and society.
Financial well-being is an important component (area) of life well-being, but it surely is life well-being that individuals ultimately want. The book combines scientific findings from scholars in various fields resembling finance, economics, medicine, psychology and sociology with practical stories that provide insights into these findings. This essential book educates financial advisors, financial planners, financial scientists and investors on the third generation of behavioral economics, which focuses on well-being as a primary need of individuals and ensures that funds are integrated into lifestyle to realize each financial and life well-being.
According to Statman, having more cash (greater financial well-being) correlates with greater life well-being, but money alone shouldn’t be the whole lot and money shouldn’t be enough once we judge people. Social status, for instance, matters for all times well-being. The primary goal of the book is to assist readers take into consideration what contributes to their life well-being, including what makes life price living, and to achieve insights into how managing financial well-being can optimize the portfolio of life decisions.
I discovered Statman’s conclusions on education, health and work highly insightful and relevant to me. Although education costs money in the shape of tuition and living expenses, it increases well-being through the sensible advantages of higher employment and better income, in addition to the expressive and emotional advantages of greater knowledge, lifelong friendships and high social status. People with high life well-being enjoy high perceived health, have little pain and low medical risks, with mental illness being the very best single predictor of low assessed well-being.
According to Statman, we derive utilitarian advantages from our work in the shape of income, but we also derive expressive and emotional advantages from our work in the shape of identity, meaning, community, dignity, and pride. Work increases well-being, and well-being improves job prospects and income. People who work longer live longer. High worker well-being results in high worker productivity, high customer loyalty, and increased profitability. Unfortunately, few individuals are fortunate enough to enjoy well-being in all areas.
One way that wealth advisors can profit from this book is because Statman suggested that in the event that they need to compete for today’s and tomorrow’s clients, they need to turn out to be feel-good advisors, as a lot of the normal services provided by financial advisors are actually more general in nature. Financial advisors provide advice on asset allocation and portfolio rebalancing, but robo-advisors do this too, albeit at a lower cost. Robo-advisors, nevertheless, cannot function feel-good advisors, which is a possible competitive advantage for financial advisors. By befriending their clients, financial advisors gain an understanding of what is occurring within the lives of their families and kids.
In summary, it is a well-thought-out and practical book that backs up a lot of Statman’s advice with research. Financial professionals can profit from his call to make finance an “afterthought” and to spend more time desirous about our well-being. Finance is just one among many areas of well-being, but it surely has a uniquely essential place since it underlies all the opposite areas, as money is required to pay for food, shelter, education, religious dues, and to take care of our health.
