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A few years ago I took on a new client, a woman whose husband had recently died from an illness at age 60. Before his death, the widow told me, he had received a large government pension that supported both of their lifestyles. The husband had taken care of the finances and investing in the marriage and had assured his wife she would never need to worry.
But after his death the woman learned he hadn’t elected a joint and survivor pension—so his pension income went completely away. Even worse, the wife had been under the false impression that she would receive both his and her Social Security benefits rather than only the higher of the two. Overnight, she went from receiving $200,000 a year in income to struggling to apply for a Social Security benefit—all while grieving for her husband of many years. During that first meeting, it would have been tempting to criticize her husband’s foolishness or jump straight into addressing how she would now have to live on a reduced income and one IRA account.
But I decided to take a different approach. Instead, I listened. I empathized. I made it clear to her that we could find a new path to financial security without making hasty or panicked decisions.
Money is a deeply personal, deeply emotional subject. It is also, according to the American Psychological Association, the top cause of stress in the U.S. Yet, despite this, many financial advisors haven’t used empathy as an invaluable tool that can be leveraged for the good of their clients, especially in moments of high stress or emotion.
Everyone has a story that affects their relationship with money. By taking the time to uncover that story, financial advisors can glean insights into how clients think about money, how they want that money cared for, and what their ultimate investment and financial goals are. The advisor-client relationship is built on trust and honesty, and ensuring that you’re approaching meetings with understanding and collaboration is crucial.
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Part of building that trust is asking questions. Another essential part is active listening. When I sat down with my newly widowed client, I asked a few relevant questions to tease out the needed information—but that’s where my probing ended. For the majority of that first meeting, I sat back and listened. I took notes and paid attention to what she was saying and how she said it and took stock of her financial needs along with her worries, anxieties, and concerns.
A joint venture. Although that sounds pretty simple, it’s often surprising how much easier it is for both parties when the financial advisor does most of the talking. For many clients, talking about money is stress or anxiety inducing to the point where they’re willing to just nod, smile, and let you take the lead. Drawing them out requires active listening—reflecting their responses to your questions back at them to show you’ve heard them without judgment—and exploring topics of interest even when they may not be directly linked to solving an immediate financial need.
If you’re meeting with a couple, getting responses from both parties is vital. As with my widowed client, many couples I work with are used to only one half of the partnership making the financial decisions. I’ve grown to be unafraid of asking the quieter party for their thoughts or opinions, and I always kindly but firmly underscore to both parties that finances are a joint venture.
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The return on the investment of empathy is a great one; clients who feel heard and valued are also more forgiving—of the markets, of delays in client services, and of the inevitable “I don’t know” answers. By demonstrating that you’re committed to an open, empathetic conversation about finances, goals, and limitations, clients will feel that you’re honest, fair, and committed to finding solutions for them.
Plus, advisors can enjoy a more exciting career—every client has a unique story to tell, and the more stories we hear and engage with, the better advice we can offer clients in the future.
All of the above leads to one crucial point: Personability and empathy are as crucial to advisors as financial acumen. If clients feel welcomed and heard, they are more likely to work with their advisors to design a financial plan that truly supports them. By approaching your partnership with empathy and compassion, you become not just a money manager or number-cruncher but a trusted advisor with whom clients are willing and ready to share their lives.
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Lea Ann Knight, CFP, is a co-owner and managing partner of financial planning for Better Money Decisions (B$D). With an extensive background in investing and financial planning, she enjoys working closely with clients to design and implement customized financial plans. Before joining Better Money Decisions, Lea Ann was a partner and director of wealth management for North American Management, a Boston-based RIA firm.
Write to advisor.editors@barrons.com
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