More than a decade ago, I had the opportunity to work on a fascinating research project that was co-sponsored by the FPA and partially funded by the CFP Board. The study examined a large number of communication variables and surveyed both planners and clients. The goal was to identify specific elements of communication that influence higher levels of client trust and commitment as well as other important indicators of highly successful client relationships such as client retention and referrals.
After reviewing the findings, one area in particular, “comfort with emotion,” struck me as being a serious communication challenge for most financial planners. Specifically, 55 percent of FPA members who participated in the study either “agreed” or “strongly agreed” with the statement, “I am very uncomfortable when my clients express strong emotion (for example, cry or get angry).” In addition, responses to the planner survey failed to demonstrate statistically significant correlations between “comfort with emotion” and the perceived development of client trust and client commitment.
In stark contrast to the planners’ perspective, client responses indicated a direct and positive relationship between higher levels of planner comfort with emotion and higher levels of client trust and client commitment. In addition, client responses also revealed statistically significant correlations between planner comfort with client emotions and higher levels of these five “business case” variables:
- Client retention
- Cooperation with financial planning recommendations
- Openness in disclosing financial information
- Openness to sharing personal goals, needs, and priorities
- Client referrals
As the lead researcher on this study, my conclusion was that a majority of financial planners underestimate the value clients place on having a planner who is comfortable and skillful in dealing with emotionally charged and sensitive issues. Planners also tend to underestimate the potential rewards in terms of developing more successful and mutually satisfying long-term client relationships....emotions are an inevitable component of long-term client relationships Click To Tweet
More recently, a 2018 Boston Private study, “The Why of Investing,” also shed light on the need for financial advisors to pay more attention to the emotional factors that underlie their clients’ relationships with wealth. Commenting on the results of the survey, David Murphy, Head of Wealth Advisory at Boston Private, wrote the following:
… a huge part of how individuals view their wealth is not practical, but rather psychological, and for advisors to truly serve their clients they must also have the “emotional intelligence” to understand how their clients truly feel and perceive their wealth.
He explained that for advisors to be indispensable to their clients, they must not only advise on ways to grow their wealth, but—more importantly—offer that advice in the context of their clients’ values, priorities, and larger life goals.
To be sure, it’s not always easy to apply emotional intelligence in our work, as the demands on investment performance can be all consuming. But as returns become ever more predictable and achievable as aided by technology, it’s the non-numerical insight that will grow in value.
Murphy concluded, “Getting a client to be both financially and emotionally aligned with their portfolios can be a covetable ability.” Therefore, with these powerful incentives in mind, how does a financial advisor go about building his/her level of comfort with client emotions?
The first step is to simply accept the fact that money and emotion are inextricably intertwined—it is simply unavoidable. It is also important to accept displays of emotion as being “normal” and rarely a symptom of dysfunction. In fact, emotions are an inevitable component of long-term client relationships. In Lighting the Torch, authors George Kinder and Susan Galvan explained:
We all experience grief over losses, anger and frustration, fear and anxiety as part of our ongoing life experience. Emotions are not pathological; they are in fact essential to healthy human functioning.
The second step to broadening your “emotional comfort zone” is to increase your aptitude and knowledge in this important area of client communications. In your personal and professional development pursuits, seek out books and conference sessions that focus on developing successful client relationships and understanding clients’ emotional needs. In addition, organizations such as Money Quotient, Kinder Institute, and Sudden Money Institute provide in-depth training opportunities focused on navigating the emotional terrain of client relationships.
Always remember that as you address the financial implications of major life transitions—such as relocation, job loss, death of a loved one, and divorce—your clients will undoubtedly experience strong feelings such as fear, anger, anxiety, sadness, and even profound grief. Therefore, it only makes sense to be prepared to handle these situations with confidence and grace.