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Investing is often framed as a numbers game—returns, percentages, and market performance. Yet beneath these calculations, a powerful but often overlooked force influences financial decision-making: money trauma.
In a recent episode of Upside & Impact: Investing for Change, hosted by VegTech Invest’s CEO Elysabeth Alfano, guest Ali Motroni, Client Experience Director at Align Impact, shed light on how financial advisors, including those in the impact investing space, frequently encounter clients—across all wealth levels—grappling with financial fears rooted in deep-seated personal narratives.
What is Money Trauma?
Money trauma is the ingrained emotional response to financial experiences, often developed in childhood, that shapes how individuals view scarcity, abundance, and wealth management. Motroni illustrated this by pointing out that even ultra-high-net-worth families can experience a scarcity mindset, despite their financial security.
“Many of us go to therapy to explore how our past relationships influence our current ones,” Motroni explained. “Money works the same way. If we don’t address our financial narratives, we can’t make objective choices about our portfolios.”
By understanding what is driving each client’s money trauma, the Advisor can begin to help the client build a portfolio that works within the parameters or breaks free from them, depending on the client’s desire.
Motroni explains this further in a clip from the interview here: https://www.youtube.com/watch?v=omlyirUFRpA
How Money Trauma Influences Investment Behavior
The implications for investors—whether they are individuals or institutions—are profound. Fear-based decision-making can lead to overly conservative investment strategies, a reluctance to shift toward more innovative or sustainable portfolios, or an inability to take long-term risks. Even when faced with clear data showing that sustainable and impact investing can drive strong financial returns, some investors remain hesitant because of subconscious fears tied to financial loss.
Alfano notes that at VegTech™ Invest, this is seen firsthand in the sustainable investing space. Many investors, even those committed to values-aligned portfolios, struggle with breaking away from traditional investment models or a herd mentality, even when there is doubt about the motivations or long-term viability of the direction of the herd.
The push toward food innovation and climate-forward solutions is not just an economic shift but also a psychological one—one that requires investors to reframe their relationship with money, perceived risk, inevitable societal change and a group mentality.
The Future of Financial Advising: Wealth Coaches, Not Just Managers
The rise of AI and robo-advisors is reshaping the financial industry, but as Motroni pointed out, the most valuable financial advisors of the future will be those who act as “wealth coaches.” Beyond just number-crunching, advisors will need to guide clients through the emotional and psychological aspects of investing, their personal relationship to that trauma story, and the pace of financial change and persistent volatility.
Integrating values into investment strategies isn’t just about selecting the right funds—it’s about understanding why investors make decisions or feel comfortable with certain investments over others. This requires financial professionals to engage in deeper conversations about motivations, fears, and long-term goals amidst a changing societal landscape.
The good news is that this is a window of opportunity for the Advisor, allowing for conversational alpha.
Conversational Alpha with Clients
Since most Advisors aren’t therapists, one way that Financial Advisors are bridging this gap with clients is to offer educational webinars on topics that can impact portfolios and/or society. Alfano has seen an uptick in advisors asking for her webinars on global food systems transformation, and its impact on the environment, national security, and investment portfolios.
“This gives the Advisors conversational alpha; a way of breaking the ice by educating clients on global trends that could impact portfolios, letting the clients decide at their own pace what is of interest and intrigue,” Alfano says. “It has been a powerful tool to keep Advisors front and center with their clients without the Advisor having to take a stand. They are simply offering compelling, educational investment content.”
“Most importantly, they are offering a here-and-now topic of conversation that can lead to a stronger client-Advisor relationship.”
Breaking Free from Financial Fear
Investors who recognize the impact of money trauma and the genesis of their own trauma, often triggered by investment volatility in an increasingly unstable world, can begin to shift their perspective and make decisions rooted in logic rather than fear. By understanding that financial security does not necessarily erase financial anxiety, investors can take steps toward more balanced and values-driven portfolios.
For those looking to align their investments with sustainability and innovation, the challenge isn’t just about finding the right opportunities—it’s about overcoming psychological barriers to embracing change.
By addressing money trauma head-on, Advisors can help clients unlock greater opportunities for growth, impact, and long-term prosperity.
Listen to the full audio podcast here. Watch the full video here. For a webinar on food systems transformation and the investment opportunities therein, reach out to Elysabeth Alfano here.
Related: Diversification + Why Investors Are Turning To Food Systems