Advisors who can get clients to talk openly more likely to get their finances back on track
Stuck in a debt cycle? Societal stigmas have been revealed to be a major contributing factor.
Nevertheless, a recent study from Western University in London, Ontario, suggests that people who seek peer-supported counselling and are transparent about their debt levels are more likely to get their finances under control.
The study, Helping Those That Hide: Anticipated Stigmatization Drives Concealment and a Destructive Cycle of Debt, was released in the Journal of Public Policy and Marketing.
According to the study, social support can assist people in overcoming stigma and breaking the debt cycle.
"We have this tendency, as a society, to avoid talking about our finances, and especially about debt," said Miranda Goode, an associate professor of marketing at Western's Ivey Business School and author of the study. "And if you look at it through the lens of stigma — that fear of judgment — you find that there is a group of people who are really anxious about what others will think, and that influences how transparent they are and how far they'll go to keep it a secret."
Furthermore, researchers discovered that one in five survey participants expressed "moderate to substantial" worry about stigmatization. Middle-class participants in field studies conducted by researchers from Wilfrid Laurier University and Ivey received financial education either in-person or through private online sessions.
The participants had an average family income of $86,000 and a $36,000 average debt. Those in the control group did not get any financial counselling. The results of the study revealed that participants in the community groups paid off over $4,300 more than those who received no counselling, as opposed to those who had private sessions, who paid off just over $3,500.
The study indicated that individuals who participated in a group context found the desire to discuss their debt and alter their financial behaviour, but those who engaged in private settings continued to conceal their level of debt.
"The course gives them a bit of a cathartic release because they see there are other people like them, who feel the same way, and so they can talk about it," Goode said. "They have a common base of experiences, and they're not being judged, which makes them even more motivated."
Many Canadians are under financial difficulty as a result of rising prices and interest rates. According to Sun Life advisor, James Bilcox, it's crucial to talk to an expert if debt is an issue for you. “They can help you make a plan to manage your debt and get you back on track.”
Bilcox suggests that an advisor works with a client to first create a clear picture of the debt.
They will then assist you in understanding your debt-reduction and cash flow goals. In addition to helping you come up with a plan for repaying your debt, a qualified financial advisor can assist you in creating a detailed financial plan.
“This puts the debt strategy in context to other priorities you have. This will build awareness and confidence, and ultimately empower the Client,” shares Bilcox.
