FFC Behavioral Finance and Coaching Techniques 4 — Questions and Answers
Question 1: Which of the following is a hallmark of a 'money script' as defined in financial therapy?
- A formal budget plan agreed upon with a financial planner
- A subconscious belief about money formed in childhood that drives adult behavior (Correct answer)
- A scripted sales pitch used by financial advisors
- A legally binding financial contract
Correct answer: A subconscious belief about money formed in childhood that drives adult behavior
Money scripts are core beliefs about money, often formed in childhood, that operate below conscious awareness and shape financial behaviors.
Question 2: A client who grew up poor now earns six figures but still feels financially insecure and hoards cash. A behavioral finance coach would most likely address this through:
- Increasing the client's investment risk tolerance score
- Exploring money scripts and reframing scarcity beliefs (Correct answer)
- Reducing discretionary spending further
- Recommending a financial planner instead
Correct answer: Exploring money scripts and reframing scarcity beliefs
This pattern suggests a scarcity money script rooted in childhood experience, which coaching can address through exploration and cognitive reframing.
Question 3: What coaching technique involves asking a client to imagine their life five years in the future if they successfully achieve their financial goals?
- Miracle question
- Scaling question
- Futuring or visualization (Correct answer)
- SMART goal setting
Correct answer: Futuring or visualization
Futuring or visualization helps clients connect emotionally to their goals by vividly imagining a successful future, increasing motivation.
Question 4: The 'endowment effect' would most likely cause a client to:
- Overvalue an asset they already own compared to its market price (Correct answer)
- Underestimate the cost of purchasing a new home
- Prefer index funds over actively managed funds
- Save more money when given a bonus
Correct answer: Overvalue an asset they already own compared to its market price
The endowment effect causes people to assign higher value to things they own simply because they own them, making it hard to sell or part with assets.
Question 5: In motivational interviewing, 'rolling with resistance' means:
- Pushing back strongly when a client resists financial advice
- Avoiding argument by acknowledging resistance and redirecting without confrontation (Correct answer)
- Documenting client objections for review at the next session
- Referring resistant clients to a therapist
Correct answer: Avoiding argument by acknowledging resistance and redirecting without confrontation
Rolling with resistance involves accepting the client's pushback without arguing, which paradoxically reduces defensiveness and opens the door to change.
Question 6: Which behavioral concept explains why a client ignores a 50% chance of losing $1,000 but overweights a 1% chance of winning $10,000?
- Loss aversion
- Overconfidence bias
- Probability weighting (Correct answer)
- Framing effect
Correct answer: Probability weighting
Probability weighting describes the tendency to underweight moderate and high probabilities while overweighting very low or very high probabilities.
Question 7: A financial coach is working with a couple where one partner is a saver and one is a spender. The MOST effective coaching approach is:
- Side with the saver since saving is objectively better
- Help each partner articulate their money values and find shared financial goals (Correct answer)
- Assign a standardized budget to override both patterns
- Refer the couple to couples therapy before proceeding
Correct answer: Help each partner articulate their money values and find shared financial goals
Effective couples financial coaching helps each partner express their values and find common ground, rather than imposing one financial style over another.
FFC Behavioral Finance and Coaching Techniques 4
Which of the following is a hallmark of a 'money script' as defined in financial therapy?