Do you know how your clients feel about money? If not, find out.

By Adam T. Rex

Have you ever considered your client’s feelings about money? In the same way that people may have different opinions of movies or music, everyone reacts differently to the money they have (and the money they don’t).

Throughout my career, I’ve found the best way to elevate relationships with clients is to understand their relationship with money and use it to guide their decision making. To achieve this, I tap into emotional intelligence.

Emotional intelligence refers to the understanding of both your own emotions and those around you. In the case of financial advisors, this refers to the way we listen for underlying feelings in conversations with clients.

For instance, many of us can agree that a person’s experiences paint the way they view the world, including how they save and invest their money. Let’s say a client grew up in a home where money was tight. It’s common for them as adults to be afraid of ending up in that situation, so they are extremely frugal and tend to save as much as possible. It’s also common for someone to take financial freedom too far and spend without hesitation. Either way, using emotional intelligence can help discern the “why” behind your client’s relationship to their money.

Regardless of the age of your client, starting with a candid conversation that elicits their relationship with money will streamline the financial planning process. Listen to the way they speak of money as they recount their experiences – are they sharing more worries and fears or excitement for the future?

Discovery is a basic element of financial planning; all advisors know how crucial it is to understand all parts of the client’s financial situation. By implementing emotional intelligence as a part of this discovery process, you are better able to help establish goals that fit not just their current finances, but also address their fears or joys.

The best way to learn more about your client is to ask smarter questions that open the door for deeper answers, rather than finite responses. For example, asking “Why are you looking to plan for retirement? What do you plan to do?” is much better than only asking “How much do you need in retirement?” Asking these questions can help the client open-up and showcase their emotional relationship with their finances.

What about risk tolerance?

As you get comfortable using emotional intelligence to guide your conversations, you can also apply it to other areas such as risk tolerance. A traditional risk tolerance questionnaire may be the most convenient way to do this, however it does not truly determine the “why” behind some of their answers.

For example, gold has always been a good defensive investment – so when a client says they want to invest in gold, you can discern that they have a tendency towards the defensive. It’s never the goal to move someone from a zero to 100 on the risk scale. Instead, using the information gained through behavioral finance and gauging their feelings on finance, provide options that match their conservative risk.

You can start low with something like gold and gradually build as they become more confident. This ultimately builds trust in you as the advisor and allows the client to find what is best for them.

To best serve your client base, it’s more than filling out forms and gathering information. Get into the heart and psyche of the client to understand what is reasonable for them. Leveraging behavioral finance learnings and emotional intelligence will help you achieve that, but it takes practice.

Whatever the case, you can establish a financial plan that best suits any client by taking these steps. The trust garnered by these candid conversations will lead to a successful planning process and a satisfied long-term client.

About the Author
Adam T. Rex, CFP, CLTC, AIF is a 13-year qualifying MDRT member with two Top of the Table honors. Adam graduated from James Madison University with a BBA in Information Systems, then worked for Ernst & Young outside of Washington D.C. before joining the family business in 2008. Adam is a recipient of Inside Business’ “Top 40 under 40”, and member of the Financial Services Institute, and a former member of the executive board for the United Way’s Young Leaders Society. In addition, Adam serves in several philanthropic and church-based organizations.

Securities offered through Registered Representatives of Cambridge Investment Research, Inc. a broker-dealer, member FINRA/SIPC. Advisory services offered through Cambridge Investment Research Advisors, Inc. a Registered Investment Adviser. Cornerstone Financial Services and Cambridge are not affiliated.