At the core of adopting a coaching approach to working with your clients is the idea that you focus on the person rather than their money. In other words, your client is a person. Their money is not your client. Yet many financial advisors I work with feel more comfortable to focus on the money. On the thing they are qualified to advise on. After all, most financial advisors have not been trained in counselling or coaching skills.
But this is changing. In South Africa over the past three years, I have worked with over 300 financial advisors who are consciously developing these skills. In Canada, training in these skills is compulsory to qualify as a CFP® Professional and I’m sure in time this will become a requirement in many parts of the world.
I recently worked with a financial advisor who tells his clients upfront that in their interactions, he will deal with their personal lives, but at the start the journey will focus on money matters only. It is great that the financial advisor is willing to go there and engage his clients on their personal lives. But it is back-to-front. I would argue that it is critical to start talking to the client about their life first, as money is something that goes to the core of our being. It is not something that can be managed dispassionately at a distance – as much as we all wish it could be.
Money is also a means to an end. It allows us to buy things. It is very useful. And this is where much financial advice focuses. How can your client use their money most effectively? But money evokes emotion in so many ways. It can provide a person with self-worth. If I have a lot of money I am worth something. Or if I don’t have a lot money, does it mean I’m worthless? I can use money to express myself. I want to be seen driving a smart car, because smart cars represent success. I want to be seen as successful, money helps me do that. Money can be a source of pride, or pain. Money is not simply a piece of paper or a coin. Cryptocurrency is highlighting that for us!
Relationships are by their nature emotional and money itself is an emotive influence on our lives.
We all have a money story for our life that sits deep in our emotional programming. In fact, money is the thing with which we have the longest relationship of any thing or person in our lives. We are born into a family that has a money story. Not only do our parents have their own financial circumstances at the time of our birth, but they have their own individual money stories into which we are born. After we die, our money story continues with our legacy. Did we manage to leave money to anyone or anything? Or did we use it all up before our last breath?
The first step in the internationally accepted Six Steps of Financial Planning process is to “establish the relationship” with the client. But little guidance is given in conventional financial advisor training on how to do this on an interpersonal basis. The focus tends to be more on the legal relationship between advisor and client.
A relationship by its nature is meant to be mutually beneficial, so the first step in the six-step process requires the financial advisor to make some disclosures about themselves and find out information from the client. As a financial advisor, the six-step process requires you to disclose upfront to the client what you can do for them, how you will do it, and what you will charge for it. The advisor is also obligated to find out information about the client. The standard ways to get to know a client include tools like a financial needs analysis; a “discovery” interview; or some form of risk profile or personality questionnaire.
One of the biggest mistakes I think financial advisors make is to follow the required regulatory protocols when establishing a relationship with their client, but not to connect with their client emotionally. Relationships are by their nature emotional and money itself is an emotive influence on our lives. Most advisors will have a “getting to know you” process, but this is usually not based on understanding the implications of your client being a human being, and all the emotional and relational complexity that goes with that. Having a full understanding of your client as a human being is key to establishing a meaningful relationship with them, which is the foundation for great advice.
Having a full understanding of your client as a human being is key to establishing a meaningful relationship with them, which is the foundation for great advice.
For example, let us assume you have a client who has just won the lottery and asks you to help them invest their R20-million winnings. Once the regulatory niceties are done with, the focus of the conversation could shift straight to the money and what to do with it. Alternatively, the conversation could begin with how the client is feeling about their newfound fortune. It could then explore what aspects of their life will be affected by it.
Which other people close to them will be impacted? Who may now seek financial support from the client? What are the implications of the win for the client’s own work-life approach? You may even want to explore the reality that most lottery winners end up broke, and what is that about? What could the client do to avoid a similar fate? As you can see, the R20-million easily fades into the background when the focus is on the client. And the more the focus is on the client, the more likely the advice that ultimately is given, will be appropriate and effective.
At its core, a relationship is about emotional connection. Without a genuine emotional connection, you are unlikely to be able to serve your client optimally. And you are unlikely to build the trust that is so critical for clients of financial advisors. Often, I hear financial advisors complain about the fact their client is dividing their assets up to be looked after by different financial or investment advisors. Or they keep getting “quotes” from other advisors. Clients who do this are either acting out of some level of mistrust, or just not feeling a genuine connection with their advisor.
At its core, a relationship is about emotional connection. Without a genuine emotional connection, you are unlikely to be able to serve your client optimally.
There is much research in the therapeutic professions to suggest that the outcome for clients of counsellors, psychologists and psychiatrists is less to do with their skills, training, or modality they adopt, and more to do with the quality of the relationship they have with the client. In other words, it’s more about focussing on the person, rather than their problem. In the context of financial advice, it’s about focussing on the client, not their money.
Connection is the fuel that drives the engine of your financial advice. And that is what makes you different from a Robo Advisor. Many advisors I have worked with initially viewed connection as a chemistry thing, “Something that happens, or not”. But there are real skills and techniques you can use to facilitate connection. I will consider these in my next article.
About the Author
Rob Macdonald is Head of Strategic Advisory Services at Fundhouse.
Rob has held several senior executive positions in the investment industry. His primary areas of focus at Fundhouse are on Adviser Consulting and Adviser Programmes. He has written and spoken widely on a range of topics related to leadership, coaching, investments, practice management and financial planning.