Why do we need to be aware of and talk about money feelings and history with clients?
Even if we agree that money and emotions are integrally connected, the question still remains as to why we need to go there. You could very understandably argue that an advisor isn't a therapist. And isn't it intrusive and perhaps risky to open up emotional topics that may be too much to handle? Couldn't raising these topics lead to upsetting and potentially losing a client? Furthermore, like most of us, who wants to bring up conflict-laden and difficult topics? Finally, these conversations can be time-consuming, and who has the time?
Here's why you DO want to discuss money emotions and money history
When you don't make a personal and emotional connection in financial advising, clients tend to leave. Research has found that clients leave advisors most often not due to transactional problems, but due to issues in the relationship, i.e., not feeling connected and emotionally tended to. David Bach, author of Smart Women Finish Rich, says 70% of women leave advisors within one year of their hus band's death. Investment Data News reports that 66% of adult children fire their parents' financial advisor after they receive their inheritance. The number one reason both wives and adult children cited in changing advisors was lack of relationship.1 Finally, the primary factor clients cite for choosing advisors is that s/he is "honest and trustworthy"; only one of the top reasons for leaving advisors involved financial performance.2
And if you don't discuss how clients feel about their lives, financial plans or a particular financial decision, clients often agree with you in the moment, but then end up not following through, doing something else or avoiding it completely. Or avoiding you.
The more you know about your client's emotional and financial life, and the more you understand both, the more likely it is that clients will stay and follow your advice. Research has found, across a myriad of industries including financial advising, that leaders, financial advisors and sales people who attend to emotions in planning and in the client relationship have much higher rates of client retention and financial success than advisors who focused exclusively on transactions and selling products.3 Tending to the whole client, meaning his or her money and emotions, can lead to success — and for the right reasons, too.
How do you integrate emotions into your advising?
First, consider a shift in mindset. Take pride in the fact that most of your clients will welcome and appreciate you expanding the conversation to include their personal, emotional experience related to money. They will appreciate your interest and caring, and could feel relieved to be a whole person in these stressful topics, not just dealing on a transactional level. Second, consider each and every interaction you have with a client as personal, not just transactional. Your clients can be greatly influenced by how you connect with them personally and emotionally, perhaps even more so than what you do for them.
Specific questions to ask your clients
How does your mother think and feel about, and deal with money? Your father? Your grandparents? How do you know? What impact does it have on you?
How did your parents talk about money between themselves and in the bigger family? Was it easy to talk about, or a secret or conflict? What was the tone and feeling? Were there fights? How has this affected you?
What are your earliest memories of money in your family? What feelings come up for you around this?
Was money viewed as good, bad, scary, dirty, neutral?
How do you get your money? What does your family feel about sav ing, spending and sharing? Who earns money? Who is in charge of spending? Saving? Sharing?
Do siblings treat money differently? Did gender and birth order affect how siblings were treated around money?
What class did you grow up in? Where are you now? What classes were your parents and grandparents from? How has this affected you? How has this affected you?