Real Money, Real Experts

DataPoints: The Psychology of Building Wealth

March 02, 2021 AFCPE® Season 1 Episode 21
Real Money, Real Experts
DataPoints: The Psychology of Building Wealth
Show Notes Transcript

In this episode of Real Money, Real Experts, we get a deeper dive into the tools and resources developed by Dr. Sarah Fallaw, Co-Author of The Next Millionaire Next Door.  Fallaw has spent her career rooted in data and furthered research based on her father's original best-selling book The Millionaire Next Door. The tools and research built by her company, DataPoints provide financial professionals with behavioral assessments to help clients understand their financial competencies. Listen along as Rebecca and Mary talk with Sarah on how to get research into practice.

Show Notes:
00:50 Sarah Intro
03:03 Sarah's Road to the Field of Finance
04:14 Understanding personalities of financial clients
08:31 Focus on research to achieve results 
13:27 Integrating tools and technology 
14:24 Meeting Oprah
17:50 Your Two Cents

Show Note Links:
DataPoints LLC: https://www.datapoints.com/

Resources:
The Next Millionaire Next Door:

The Millionaire Next Door:
https://www.amazon.com/Millionaire-Next-Door-Surprising-Americas/dp/1589795474

Influence by Robert Cialdini
: https://www.amazon.com/Influence-Psychology-Persuasion-Robert-Cialdini/dp/006124189X

AFCPE Membership:
 https://www.afcpe.org/membership/

Intro:

Welcome to Real Money, Real Experts, a podcast where leading financial counseling and coaching experts share their stories, their challenges, and their advice for helping people manage money in the real world. I'm your host, Rebecca Wiggins, executive director of the association for financial counseling and planning education or AFCPE. And I'm your cohost, Dr. Mary Bell Carlson. I'm an Accredited Financial Counselor or AFC® and the CEO of Chief Financial Mom. Every episode, we're taking a deep dive into the topics that personal finance professionals care about helping clients, building community and your professional growth. Welcome everyone to the Real Money, Real Experts podcast. I'm Rebecca and I'm Mary.

Rebecca Wiggins:

Today on the show we're talking with Sarah Fallow. Sarah is the co-author of the next millionaire next door and the founder of Data Points, LLC, which is a behavioral assessment FinTech company. Her work is focused on the psychology of wealth accumulation to help clients understand their money-related characteristics to achieve financial success. Sarah received her PhD in applied psychology from the University of Georgia in 2003, and she lives in Marietta, Georgia with her family. Sarah, there's so much synergy between your work and the work that our professionals do. So I'm really excited to have you on the podcast today to talk more about that. Thanks so much for joining us.

Sarah Fallow:

Thank you for having me,

Dr. Mary Bell Carlson:

Sarah , your father coauthored , the Seminole book, the Millionaire Next Door, and this book has helped shape countless individuals and shaped the industry in some really important ways. Can you tell us more about how your dad and his research has influenced you in your career?

Sarah Fallow:

Absolutely. He certainly started off as a marketing professor, so he was , um , really focused on studying populations within the United States, but particularly began studying affluent populations. And that's how he , a lot of the work that he did really, really started , really was he was focused on identifying different kinds of affluence in America. So of course there's always the inherited wealth and, and that was, you know , certainly a population he looked at, but what he found throughout his work was that there was a population of individuals and it was quite large and those were individuals that built wealth on their own. And that of course eventually became what was The Millionaire Next Door book. But, you know, at the time that was really transformative for folks. The book came out in 1996 and it really, really changed the way people thought about wealth for me, how that's influenced the work that I do is to really try to understand the psychology behind that. So what does it take to actually transform income into wealth? What does it take to make the right spending and saving decisions on a day-to-day basis , in order to, to achieve those goals.

Dr. Mary Bell Carlson:

And you graduated From UGA with a PhD in psychology, correct?

Sarah Fallow:

Yes.

Dr. Mary Bell Carlson:

So what drove you to that field and how are you bringing these theories and principles that you learned in psychology into your work now in personal finance?

Sarah Fallow:

I started off in psychology thinking that , um, as many people do that they wanted to help people , that perhaps, a, route a nd clinical psychology actually working one-on-one with individuals would be the way I wanted to go. I, I think what I found really early on a nd working with who became my major professor Garnett Stokes was that I really loved the measurement side. I really had a sort of a passion for understanding the psychology a nd, and again, the personality and attitudes and values that l ead to certain outcomes. And so I began really focusing on industrial organizational psychology and t hat UGA at the time, the program was named the applied psychology program, but really began looking at that area. And then of course later on when I started actually paying attention to what my dad did, right. When I became an adult, really r ealized that there was some application there for psychometrics and personality assessment within the field of personal finance and financial planning.

Rebecca Wiggins:

Awesome. And so that's one of the things that I find so fascinating about your work and sort of the synergy between what we do as well is, you know, we talk so much about the value of the AFC credential and , you know, in general to avoid this sort of one size fits all solutions. Um, and , and that's why we really want people to be highly trained. So can you just tell us a little bit more about the research into understanding people's personalities and how that helps the professional better communicate and support their clients?

Sarah Fallow:

There's a great chapter. I think it's in the client psychology book on, for example, the big five personality in terms of working with clients and things like that. But really the , the idea is if you are, if you're helping someone on a journey, whether you are again, a financial planner or you are working with them in a counseling capacity or coaching capacity, understanding their , you know, some of those unseen characteristics is essentially well is , is almost like a requirement, right? So if I'm trying to help you make better decisions in the future or educating you about why you might want to take a different path when it comes to how you're spending, I've got to understand kind of how you relate to a lot of other things as well. And that comes back to understanding your personality, which again, is made up of all those things like attitudes and values and so forth. So from a professional perspective, working one-on-one of course we have a lot of health care and mental health , um , sort of models to think about, right? So a lot of assessments are obviously used in those capacities, but when we're talking about finances, which are already very emotional to begin with , having that understanding firsthand is critical.

Dr. Mary Bell Carlson:

I'm interested to know, do you have any stories that you can share about how the work that you've done has sort of transformed this client engagement and what it's done for the client?

Sarah Fallow:

One of the ways that our assessments are used are in capacity when clients are going through transition. And so for example , we had an advisor who not only does financial planning, but it's also doing coaching that has used assessments to help the clients understand kind of where they are today and what that means for a transition. So in the example, I'm thinking of the couple had just begun or rather had a significant event where they were going to be able to have some wealth that was coming in. It was unlike anything they had before, and they recognized pretty quickly that they were spending that down. And so by understanding their financial personalities and behaviors and patterns of behaviors, the advisor was better able to help them understand what it was going to take to change that trajectory of essentially not having anything left over from this event.

Dr. Mary Bell Carlson:

So Sarah , your platform allows for financial coaches, advisors, counselors, to be able to utilize some of your research and information in a productive way with clients. Can you tell us more how your platform can be used with clients?

Sarah Fallow:

Yes. We created really a library of assessments that financial professionals use with clients , um , even with prospective clients and , really, they, it runs the gamut from kind of what I was describing before. Things like understanding their past experiences and behaviors in relation to building wealth. We have assessments that are focused primarily on investing personality as well, and then also attitude assessments. So we have , an assessment that a lot of our clients use with their clients , before really working with them. So during the onboarding stages, looking at their financial attitudes about things like budgeting and spending status and whether or not that's something that they're really focused on within their life and things like that. One of the latest assessments that we've created was primarily through the work that we've done with advisors who are working with younger clients, looking at readiness and openness to making financial changes. So we measure things like financial wellness and almost like a resiliency component. And so that's been, so that's still in sort of the beta stage, but that's one of our assessments as well.

Dr. Mary Bell Carlson:

Oh, awesome. And so a lot of these assessments factor into the research that you've done, and you've really focused on the six wealth factors and seven attitudes about how many influences financial decisions. Can you tell us a little bit more about your research?

Sarah Fallow:

Part of what, again, as a , as any good industrial psychologists would do is to look at those characteristics again, this personality factors, if you will, and they relate to outcomes. And so early on at data points, we really focused on trying to understand what was going to predict financial success and the way that we define that was through net worth. So we would, again, control for things like income and age, and really try to understand what kinds of characteristics would predict net worth. And so what we found again, as you mentioned, the six factors were things like being frugal planning and monitoring your financial life, having some level of confidence in your financial decisions, such that you weren't sort of shifting depending on the day and things like that. So found a lot of, again, support for those factors as they relate to net worth. And that's how we defined it in terms of success. We've done that also with our investing assessment. You mentioned the attitude assessment that, you know, again, that can shift and change a little bit more than, let's say some of those more static, if you will, personality characteristics, of course we can always change, which is the good thing about the work that your professionals do, but in terms of attitudes that can shift a little bit more, we measure seven different attitudes, but again, they have to do primarily with managing finances versus things like values and self-worth.

Dr. Mary Bell Carlson:

One of the things that we've talked about a lot at AFCPE is applying research into practice. And so can you tell us a little bit more about how your research and where people can go to apply your research into their practice?

Sarah Fallow:

A lot of the research we've done early on and in partnership with some of the folks at the financial planning performance lab, which is a group out of the University of Georgia, includes looking at the tasks of financial management. So managing our financial lives is extremely complex as you and all of your listeners know, and it's even more so for those that have very little experience doing it, maybe they've never seen it modeled at home. And now they're out trying to manage their financial lives. So part of our early research was looking at the tasks that someone would have to complete as the manager of their financial household. And so that work was published. We presented at a conference early on, but then it was recently published , in the financial planning review. So that's available there, it's also on our website, but, you know, that's part of just really understanding kind of the breadth of types of tasks that your clients are having to engage in in order to do this job. well. Again, as an industrial psychologist, we think about financial management as a job, not a job that you necessarily have to apply to, but a job that has to be done on the less . And so it's helpful to understand all of the components that go into that in order to better serve your clients.

Dr. Mary Bell Carlson:

And Sarah, AFCPE was really excited to start a partnership with data points mostly because, you know, we're really focused on these resources and services to our professionals to help them expand their practice and how they're working with, with clients more effectively, will you share just a little bit more about the partnership and sort of what this provides to our members? And of course I'll provide a link to the website link for the partnership right in the show notes as well, but I'd love to hear you share a little bit more, so people know how to get involved with our partnership.

Sarah Fallow:

Again, I, you know, I'm very grateful to your organization just for partnering with us. We were , n the FinTech world, we're one of those really small companies. Obviously there are a lot of players out there, but I think that our mission really closely aligns with the work that you're professionals do as well. So our partnership really is partially , just sort of knowledge sharing . So we're writing some blogs that we've done and likewise we'll have some on our website as well. Uh, we also have a discounted rate on our platform. So , that link is available, I believe, through the AFCPE website. And then the data points advisers that maybe don't know about AFCPE yet learn about that through our portal as well for our clients. So they get to learn about the resources or, you know, a couple of incentives for them to join AFCPE as well. So I think that that's been, you know, it's been really great for professionals that are in the field that don't recognize, or haven't recognized up until this point that there's a world out there that is really working to support their clients. And it's great to be able to share that.

Rebecca Wiggins:

We talk a lot about this, the importance of this integration, right between the tools and the technology and the profession. And so I really appreciate all you're doing to spread the good word too, about what we do on our side of the field and , and also bringing those resources to our professionals. I think it really helps close that loop.

Dr. Mary Bell Carlson:

Yeah. And I think you're helping, answering to some of the most difficult questions when working with clients. It's not necessarily the numbers that I think a lot of us feel very confident in what we're doing and our skillset to be able to help, but it's really that psychological side, the more behavioral side that is really the heart of what we do and , any tools then support we can get around that really helps us serve our clients better. So we appreciate everything you're doing.

Sarah Fallow:

Yeah. Thank you. And thank you for what you all do as well.

Dr. Mary Bell Carlson:

Sarah , we want to get to know you a little bit better too. I hear that you've met Oprah in 2004. Can you tell us a little bit more about that expense ?

Sarah Fallow:

That was fascinating. And it was such a really cool experience. So my father was invited to be on the Oprah for the second time. So this was his second time being on stage or, you know, with her being interviewed by her in 2004. And it was partially due to his book on Millionaire Women Next Door. So that came out, I think, around that time. And , um, yeah, I got to go in the green room, saw all the makeup. She was just so gracious, and it was just, you know, I think that sometimes you meet famous people. Again, I don't, I haven't met , met a lot of famous people, but , um, and they're not at all what they seem and she absolutely was. And it was just such a really cool experience again, having watched her for so long, but she really truly cared about the folks in the audience wanted to bring individuals that had something that was useful and practical for the folks that watch her. And I think that she really respected the people that were in her audience. And so that was just a really cool experience. I was only in one shot of the audience, but I'll take it. So it's amazing.

Dr. Mary Bell Carlson:

Yeah. Well, I have to ask then, what is your favorite personal finance resource That you use today?

Sarah Fallow:

Yeah, so I mean, I think the easy answer would be the millionaire next door because the stories are so just timeless. The situations that the individuals are in that, that my father wrote about are , are certainly timeless. Even if the numbers have changed, but I'll say I'll also, I , I really do recommend the book Influence by Robert Cialdini. And I recommend that because I think of, again, the importance of how we're influenced into decisions influenced in ways we don't even recognize. And I think particularly with the advent of social media, we were just not even aware of how our opinions are being shaped and how our choices are being manipulated. And so I'd have to say right now, my favorite resources that, and I recommend it to the advisors that work with us and the professionals that work with us as well as to friends and family.

Rebecca Wiggins:

Sarah , I'm curious too , just through your work and especially coming from the psychology field and sort of applying that to personal finance, can you pinpoint any one or two things that you feel like your work has changed your outlook on how you manage your money?

Sarah Fallow:

Absolutely. I would say I would be a really great client for one of your professionals. So, you know, I I'm, I'm thankful that I have a husband who is , very into the details. He was an accounting major , uh, at, also at the university of Georgia has a tax background. So thankfully he under, you know, can manage a lot of, the financial side of our household, but I absolutely the work that I've done has highlighted for me. And I see it daily, the influence, for example, that others have on the decisions that I'm trying to make. So one of the factors that we measure on the building wealth assessment, it's called social indifference, and that sounds really harsh. It sounds almost mean, right. You know, that you're indifferent to other people, but essentially what it's measuring is how influenced you are by the trends and the things that other people are doing when it comes to financial behaviors. And I have definitely had a mirror held up to some of the things that I've done in the past, through the research that I've done, particularly in that area. And I think that's why I recommend the influence book so often.

Rebecca Wiggins:

Yeah, that's amazing. I think sometimes that's the key, right? Just understanding like what the habits are that you have, or your perspective on these things. And then you can apply it really to all aspects of your life, but particularly your money management. That's, that's really helpful. Okay. So at the end of each interview, we like to get the guests two cents or your biggest takeaways for the listeners. If you had just one piece of advice to offer other financial professionals, what would it be?

Sarah Fallow:

I think that one of the reasons a lot of folks don't reach out or don't maybe seek out help from a financial professional is often because they think they're going to get a spreadsheet back or that they're only focused on investments, right? That's the, those are the advertisements that we see, right? We don't see advertisements that that say, Hey, I'm going to be here for you and we're going to get through this together. And so, you know, I think that there's a lot of room for professionals to really be out there, whether that's in the media, social media, or even just in the community, helping to build the value for the work that they're doing that way as well, that it's not just a spreadsheet function. And this is, this is the whole person we're talking about. And it's a different experience than just thinking you're going to get a big chart and a graph, which is not really helpful, especially if you're going through a crisis in terms of the kind of advice I would have loved to have had, especially, you know , if you could share with your clients to not make decisions during times of upheaval in their life. Certainly I think that, you know , that's probably part of the work that you guys do anyway and part of the training that you received. But I think for me in particular , um, after my father died and the accident that he was involved in, I made some decisions about our business and about some , some financial decisions, quite frankly, we made as a, as a couple. But , um, certainly I don't think that, that I , I'm not sure I made the best decisions. And, you know, I think that if your client is going through a time of stress and grief, you know, just helping them understand that their decision making can be affected by that stress and grief and emotion and to, to hold off on those kinds of decisions. I think that, you know, again, there's , a re all kinds of things that could be stressful, but certainly if you can delay that decision or get some additional advice, that would be my, my advice to the professionals providing the advice.

Dr. Mary Bell Carlson:

Sarah, let me ask you too , because of that experience that you've gone through, are there any good resources that you would encourage financial counselors and coaches to utilize of clients going through difficult situations?

Sarah Fallow:

I think that the way that I got through that experience was primarily through my faith. So I don't have, you know, a clear resource to point to, but , but I will say that , um, you know, having a community of people that are caring about you is important. And so again, thinking about the work that your professionals are doing is, you know, during those times of crises , I think that the inclination of a lot of us is to sort of clam up to not tell people we need help to maybe retreat. And it's important to ensure that, you know, you're continuing to , to reach out and make connections and have that community. So I don't have a specific recommendation, but that would be my, my 2 cents there too.

Rebecca Wiggins:

That's a really important point actually, is that sometimes I think we are looking for the quick fix maybe, or the resource that's going to help people get through it from that, you know, what we think about being a tool or a resource, but what you're saying really reminds me of the value of the connection and the relationship and , and really the, the importance of the professionals. Because if you can create a community, whether it's a faith community or reaching out to a trusted financial counselor who can guide you through some of those things in a really caring, empathetic way, because it takes obviously longer than just one exercise and then you're over it. So I think actually you make a really great point about what, what we mean when we say resource and that that can be human connection and having people walk alongside you through that grief.

Sarah Fallow:

Absolutely. Thanks for having me,

Rebecca Wiggins:

Mary, I love talking with Sarah today. You know, for me, it went a lot deeper than even my understanding of her tools and the resources that I think are going to be really beneficial and have been beneficial to our professionals, just in kind of closing that , that loop of , you know, the technology and co and collecting data and really helping clients understand themselves in a deeper way. Um, but I really loved what she said about, you know, that the reason why people don't reach out often is because of this, you know, they're afraid they're going to get back a spreadsheet, or they're afraid of, you know, all of the things that they're going to have to prepare seemingly for the meeting in the first place and, and just the extra sort of mental load that, that creates for people. And just, how do we get the word out in a better way about the value of, you know, particularly our professionals who, who really are there to come alongside people and walk through it with them. And I think that's the beauty of what we do. And it just , um, I think re-energized me around that as being sort of the , the central key to the value of our profession.

Dr. Mary Bell Carlson:

Absolutely. And I think that's where AFCPE just stands out so much to be able to connect people professionals, and not only help them feel like they're connected in an association, but really a community and have friends. I know I go back every year to these symposiums and it's full of hugs and people excited to see each other because we truly care about one another. And I , that's one of my favorite things about AFPE I too am so glad to have Sarah on the show. Her father has left such a legacy with his books and his research. If you have not read The Millionaire Next Door, I strongly encourage you to read it. It's an enjoyable read it's got, especially for us that are financial nerds as we like to call ourselves. Uh, it's just really fun. It's not just about numbers and research. He just really give some great stories and you'll be able to relate or know someone that could relate , uh , with it. So I even recommend this book to clients. It's just a tried and true book that has lasted the generations. The other thing that I really like about Sarah, and this is something we talk about a lot at AFCPE is we have a lot of research, but how do we get research into practice? And that has just been an ongoing conversation for many years. And I think Sarah has done that with data points. That's really what it's doing is it's taking top-notch psychological research and garnering it in a usable format where you can use that with your clients through assessment. So if you know nothing about research, but you're a practitioner and want to utilize it, you have those opportunities at your fingertips and you don't have to have a PhD to be able to understand and garner the research, be agreeable to utilize it within your practice and really enhance your clients and your client database, as well as your own skillset , uh , when working with clients. So I just think she's really a powerhouse in the profession and is helping to continue to enhance it with the research and with the tools that she's bringing to financial counselors and coaches and planners.

Rebecca Wiggins:

I just want to remind everybody of the partnership. We're going to include a link in the show notes, but as an AFCPE member, you do get a discounted rate to be able to access a lot of the tools that we talked about today and, you know, focusing on financial psychology and, you know , personality characteristics with your clients. Um, and so I would encourage you to check that out. And I know that there's also a way to get a free 14 day trial and then get your, your AFCPE member discount. So if you haven't already joined membership, it's a great opportunity to do that. And you'll see on your membership dashboard, a slew of other discounts and benefits to you. So we encourage you to check that all out and thanks for joining

Dr. Mary Bell Carlson:

Enjoyed the show today. Please give us a rating and review and be sure to share it with a friend ,Real money, Real Experts is available wherever you listen to your podcasts. And if you want to continue the conversation, consider joining the AFCPE membership community as an AMCP member, you gain access to resources, networking opportunities, and professional development that supports your work and your career. Learn more at our website, AFC pe.org.