The link between Wealth and Happiness

 The link between Wealth and Happiness 1

September 6, 2011 by Chris Nöthling

Two weeks ago I had the good fortune to attend the WB Financial Annual Conference at the Sheraton Mirage at the Gold Coast, QLD. One of the key note speakers was the CEO of the Association of Financial Advisers (AFA) – Mr Richard Klipin – who commented about the value of financial planning in the life of people. He stressed that good advice changes people’s lives and that there is a nobility to the financial planning profession that is missed by the impending FOFA legislation. Mr Klipin made reference to the AFA’s Back to Basics research carried out in 2010, which highlights that consumers who were involved in an advice relationship were better planned, happier with their investments and had greater peace of mind. The concern, however, is that with 2 in 10 Consumers in an advice relationship, Australians are under-advised, underinsured and under-saved. Mr Klipin spoke about AFA’s “Make a Plan” campaign which had a simple mission: “Make more Australians happier.”

His comments resonated for me and reminded me of the work done by the Gallup Organization on the relationship between happiness and wealth. During 2005-2009 researchers at the Gallup World Poll surveyed more than 136 000 people in 155 countries to measure their level of well-being. The concept of well being was defined as a function of a number of criteria including how well-rested they felt, how respected they felt, how free of pain they felt, and how intellectually engaged they felt.

The results were presented in a paper written by Gallup Senior Scientist Ed Diener and Gallup Chief Researcher Jim Harter, and appeared in the Journal of Personality and Social Psychology in September 2008. The paper reveals what makes certain people and communities thrive while others struggle and suffer, and is accompanied by a table of “the world’s happiest countries.”

The resulting list of world’s “happiest countries” was compared to the table of world’s richest countries as defined by average per capita income. It may not be such a surprise but for the most part there is a strong correlation between life satisfaction and wealth.

According to the survey the five “happiest” countries in the world (Denmark, Finland, Norway, Sweden, and Netherlands) are all clustered in the same region, and all enjoy high levels of prosperity. Respondents in these nations reported that they were thriving: not just economically, but in how they felt about their daily life. Denmark, the world’s happiest country, had a per-capita GDP of $36,000 in 2009, according to the Central Intelligence Agency. That’s higher than 196 of the 227 countries for which the CIA collects statistics.

At the other end of the scale, the five least satisfied countries were Togo, Burundi, Comoros, Cambodia, and Sierra Leone. All five experienced wealth levels in the bottom 10% of the richest countries list.

The researchers concluded that money does matter. By and large, people in rich countries are happier than those in poor countries. “Money is an object that many or most people desire, and pursue during the majority of their waking hours,” researchers wrote in the report. “It would be surprising if success at this pursuit had no influence whatsoever when people were asked to evaluate their lives.”

 

It is true that there were some exceptions in the report. Costa Rica, for example was rated the sixth-happiest country in the world, and the happiest country in the Americas. It beat out richer countries like the United States. The discrepancy is explained as a sociological function of the fact that social networks in Costa Rica are tight, allowing individuals to feel happy with their lot, regardless of financial success. Costa Rica ranks high on social and psychological prosperity due to a higher focus and value being placed on better relationships.

https://chrisnothlingdotcom.files.wordpress.com/2011/09/world-hapiness-table.pdf

If the Gallupresearch findings can be accepted at face value then it has some implications for the role of financial planners. It places the AFA campaign to market financial planning as a noble profession into context that is valid and relevant. We do far more than “shift” products on behalf of the product manufacturer. What we do lies at the heart of creating a sense of well being for our clients. That being the case we should value the work of financial planning for its intrinsic nobility. I think we should also reject the notion of being paid by the product provider according to their schedule. If our client’s value a sense of well being and we do a good job of delivering it then they should be prepared to pay us directly and handsomely for the valuable service we provide.

To see the full table of world’s happiest countries as per the gallup World Poll click on the link: World happiness table