Managing The Rise In Clients Non-Financial Issues

Pull Up The Couch For Your Next Financial Client

According to David Dubofsky, Ph.D., CFA, and Lyle Sussman, Ph.D. in their study, “The Changing Role of the Financial Planner Part 1: From Financial Analytics to Coaching and Life Planning”, approximately 25% percent of the financial advisor’s contact with clients is devoted to non-financial issues. About 74% percent of planners estimate that the amount of time they are spending on these issues has increased over the last five years. Source

There is mounting evidence to show that financial advisors indeed have to radically change their approach to the way they relate to investors.

Money has always been a ‘touchy’ ‘emotional’ subject. Whether discussions resolve around – making it, losing it, sharing it, incorrectly quoting about it i.e. “money is the root of all evil” when the correct quote is, “For the love of money is a root of all kinds of evil.” Timothy 6:10 – the topic can become toxic.

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Why then are we surprised (as I was) to find financial therapists popping up in our world? Or why do we think that financial advisors need to know all about our life and emotional state like a doctor? Is it unlike the mechanic that inquires about our driving habits as part of diagnosing a problem, or advising if those squeaky brakes need to be changed sooner than later? In that case, we’ve surrounded ourselves with all sorts of professionals and experts, acting as doctors and therapists to help us along in meeting our daily needs and lifelong goals.

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Source Photographer: Josh Dickinson

Well, it’s actually quite simple really: the majority of us have no idea what triggers we inherently have that govern the way we manage our finances. We would be alarmed to know we have inherent behavioral biases. We would cringe at the thought of having allowed the bankruptcy our grandparents suffered to dictate the ugliness with which we now accumulate and “store” our wealth.

But take heart these triggers can be revealed, they can be managed and we can work with our financial advisors to develop plans to create wealth that line up with our life goals and values.

In his book Behaviorally Smart Financial Planning: Behavioral Finance Made Practical for Advisors’ Hugh Massie makes the following comment, “Observations and traditional risk profiles don’t get below the surface where much about investor behavior is hidden. Financial advisors should know how to uncover what is happening as investors think through’ decisions.”

The truth is financial advisors need to know how to uncover what lies below the surface of our decision making. They need to know what historical events impact our view of creating/managing wealth. So yes, they do have to approach the advisor/investor relationship a bit differently today. But here’s the good news, they don’t have to spend 8 years or so studying to become a doctor.

The right tools and training for uncovering our core natural behavior is the key. For example, DNA Behavior International has a significant discovery platform called Financial DNA that reliably discovers all dimensions of an investor’s financial personality and inherent bias for making life and financial decisions. The discovery process is fast and accurate and places vital information in the hands of financial advisors before the first meeting with their investor clients.

Investors need an advisor who can guide them towards making informed decisions, one who speaks to them in a style that’s easily relatable while mitigating emotional, kneejerk responses. Emotion plays a significant role in so many parts of our lives that having an investor to coach us through the feelings and reactions, and keep decision making on the right track is necessary.

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Source

Financial advisors must understand their clients at a deeper level. It is essential to have a practical understanding of the psychology, emotions and biases that significantly influence investor’s imperfect decision-making patterns. Furthermore, advisors should understand how to recognize and manage their own biases when working with investors.

Ultimately, it is fair to say that the role of the financial advisor has changed, and will continue to do so. But there is no doubt that with a reputable and appropriate process, advisors can be well informed in advance of a first investor meeting.

Conversations around money will always be complex. While we talk more freely about other intimate subjects, when money enters the conversation, emotion, distorted stories, ego, and even fear enter right along with it.

In conclusion, if we understand our financial behavior then we can balance our emotions and beliefs. We will act more wisely with our money. Conversely, if we lack understanding and are confused about why we make certain decisions, then the decisions will be poor, creating financial chaos and discontent. Advisors need to be fully equipped and prepared to unravel investor’s complex issues around money. Investors need to be able to trust advisors in order to reveal information.

Carol Pocklington

Carol Pocklington - Human Behavior Solutions Analyst

Carol is a member of our research and development team assisting in the development of our behavioral products.
She has worked with Hugh Massie since 2001 since the Financial DNA understanding concept was conceived.


Carol's DNA Natural Behavior Style is - Facilitator


Carol is a Facilitator. Facilitators are persistent, goal-oriented people who promote team effort in order to complete tasks. Facilitators lead by setting examples and by achieving goals. Their strong work ethic encourages others to excel and they have an excellent ability to deal calmly yet firmly with people using a facilitative style.

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