Financial psychology: Reframing the insurance conversation

Every plan needs protection. But it can be hard to start a conversation about all of the nightmares in life — death, disability and long-term care. Many consumers are uncomfortable thinking about death and having end-of-life planning discussions. This underscores the importance of the need to change the way you start your insurance conversations.

That’s where financial psychology comes in. Financial psychology explores the reasons behind our financial choices, including cognitive, social, emotional and cultural influences. It considers the thoughts and feelings that influence financial behaviors and how these factors significantly shape our financial decisions.

Uncovering the “why” behind your clients’ behaviors and decisions will help you identify what matters most to them. Instead of starting your conversations with their nightmares, you’ll be starting your conversations with their hopes and dreams — a topic they will be more receptive to. You’ll then be able to develop more tailored, values-driven solutions that are aligned with their long-term goals.

5 ways to incorporate financial psychology into your insurance conversations

1. Start with values, not products

According to eMoney research, one of the top five finpsych practices that has the greatest positive impact on a client’s overall satisfaction is “[my advisor] tries to understand my values and priorities before delivering financial advice.”

Prompts such as, “What does peace of mind look like for you?” can help you uncover your clients’ value and gain an understanding of what financial security means to them. This will help you explain insurance in a way that is relatable to them and deliver solutions tailored to their needs.

2. Ask open-ended questions

Open-ended questions invite your clients to share their thoughts and feelings openly. They help you gather more detailed information and show your clients that you are genuinely interested in them and value their input. This builds trust and rapport, which is the foundation of a successful, long-lasting client relationship.

Open-ended questions like these can help you identify gaps, discover opportunities and ensure that all aspects of your client’s financial life are properly protected:

• What would you like to have happen in the lives of your loved ones if something were to happen to you?
• Who are your dependents, and what financial responsibilities do you have toward them?
• What aspects of your life or assets do you feel need protection?

3. Practice empathetic listening

While asking questions is important, it is equally crucial to give clients space to respond without feeling rushed or interrupted. Tune into your clients’ tone, body language and any signs of hesitation. After they have responded, reflect back what you heard to validate their emotions and continue to build trust between you.

4. Acknowledge financial stress

Insurance decisions can trigger anxiety or avoidance in your clients. By recognizing the emotional challenges that accompany these discussions, you can create a supportive environment where your clients feel understood and secure. Offering reassurance and giving them space to process their emotions builds trust and encourages more open, thoughtful conversations.

5. Hone your communication skills

Another finpsych practice that has the greatest positive impact on a client’s overall satisfaction is “communicates recommendations in terms that I can understand.” Educating your clients without overwhelming them is key. Break down complex insurance concepts into relatable stories or use analogies. For example, you might say, “Life insurance is like a safety net for your loved ones.”

In addition, take the time to understand how your clients like to consume information. Do they prefer to listen, read and/or look at visuals? For clients who like visuals, financial planning software can instantly illustrate the impact that insurance — or a lack of insurance — could have on their finances.

Go from transactions to meaningful conversations

By weaving financial psychology into your day-to-day practices, you can transform your transactional client meetings into truly meaningful conversations about how your insurance solutions can help them achieve their long-term goals.

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Joe Buhrmann, CFP, CLU, ChFC, who has more than three decades of experience in the financial services industry, serves as an advisory financial planning consultant at eMoney Advisor. Contact him at [email protected].