Planners should be aware of clients’ emotions during major life transitions

By Susan Yellin | February 13 2017 07:00AM

Photo: Freepik

Financial planners know how to handle the technical side of money, but what they do need to learn more about is how money can affect clients’ self-esteem, cause stress and bring out other personality traits during a major life-altering event, a U.S.-based author has told financial planners.

Susan Bradley, author of Sudden Money: Managing a Financial Windfall, told the November CFP symposium put on by the Financial Planning Standards Council (FPSC), that times of transition are particularly difficult for clients and how they handle their financial affairs.

“When money changes, life changes and when life changes, money changes. And change and the transitions that come [are what] drive our business,” said Bradley.

No one is trained to manage change, a situation that can mean great opportunity for the financial planning profession, said Bradley, who was a CFP in the 1990s.

Relationship-based skills

Cary List, president and CEO of the FPSC, said financial planners need to rework their value propositions to include more personal, relationship-based skills to help clients during times of financial stress.

List said financial services professionals will have to focus more on developing skills that technology can’t handle, including managing relationships, demonstrating empathy and helping clients to come up with the decisions that will best suit them.

In her speech, Bradley noted that 70% of people who hire a CFP do so because of a life event. On the other hand, 70% of widows and divorced women tend to leave their financial planner within two years of the event. Money “is the primary reason that you’re hired and the primary reason why you’re fired.”

Clients know that they should be going to a financial planner for advice when they are in the midst of a major life event. But it’s up to financial planners to ensure they also look after clients’ emotional side, she said. This will entail dealing with a number of personality factors, including stress, fear, hopes and dreams.

Transition stages

Just as there are well-known stages in a person’s recovery from the death of a loved one, there are also transition stages in other major life events. Some of these stages can last for years, said Bradley.

It’s during these times that Bradley said financial planners need to be able to read red flags and take issues one at a time with clients, rather than all at once. Perhaps adding simple drawings clients can carry around in their pockets and look at whenever they want will help soothe jittery feelings. “These [suggestions] are not highly sophisticated but they’re effective.”

Of key importance is that financial planners need to be able to avoid the “amygdala hijack” – a time when emotions cloud clients’ brains and suddenly overreact to an event.

Bradley suggested a number of tools to help clients in transition and to increase business:

  • Clients are afraid of the unknown and what transition will mean for them. So the first thing an advisor should do for clients in transition is tell them that the process of moving through different stages is normal and will be important and useful for them. Advisors may want to create some scenario planning and show clients how their financial status can vary given changing interest rates and assumptions on returns and savings. Bradley said this takes time but it will help clients envision change for themselves.
  • Engage in financial triage. If clients are about to make decisions and choices that get in the way of their own well-being, advisors need to listen to them, make a list of their issues and then prioritize those issues for them.
  • Take that list and put a non-descript timeline on how quickly the subjects need to be discussed. Using ambiguous timelines like “now, soon or later,” soothes clients by telling them that they don’t have to do everything at once.
  • Find a tool that helps you determine clients’ communication styles and work with it.

“We are in uncertain times. But when we have uncertainty, creativity, innovation and reinvention happen. It can be really wonderful,” said Bradley.

“Your clients have uncertainty when they go through transition – it’s a reason for them to hire you. So I would say: applaud this time. Remember transitions will drive your business.”

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