IQ Financial Advisor – Content Page

Financial planning is not just about crunching numbers and making projections, like a book published by the Board of Certified Financial Planners Standards seeks to highlight the importance of psychology to the profession.

The CFP Board published “The Psychology of Financial Planning” in April, which explores what Joseph Maugerigeneral manager of business relations, described as identifying and responding to attitudes, behaviors, and situations that impact financial decision-making, the relationship with the client planner, and the client’s financial well-being.

“It’s broader than behavioral finance, which has been around for decades,” Maugeri said.

It is a mixture of communication concepts, advice and learning with customers and application tools, he added.

In general, the training process for new advisors has remained consistent, with requirements tending to lean toward exams, generating clients and assets, and working with clients, according to Maugeri.

“So the problem with this model is that when the counselor takes all of that knowledge and skills that they have acquired, along with their initial training, and are now dealing with real human beings, they are confronting reality,” did he declare. “They discover that not all clients have the same beliefs about money, risks, caring for loved ones, and how to make good financial decisions.”

Working with emotional clients requires counselors to build skills “over years and decades,” according to Maugeri. “[B]But we think it could be taught, and we think it’s an essential skill and will improve client outcomes.

As explained in the book, Maugeri says counselors need to learn their clients’ financial beliefs, or “scripts,” by exploring how money was defined for them growing up and seeing if their opinions match those of their spouses. .

Counselors also need to learn empathy, according to Maugeri. “[M]at any time, advisors simply revert to long-term market returns. They will pull out a chart and show the S&P 500,” he said. “But there are emotional issues when clients watch their money lose value, and advisors need to reframe how they view the events that invariably occur over a client’s lifetime and put them in the right place. perspective.”

Desires and hopes for the future

And it’s not just the CFP Board that is embracing the use of psychology in financial planning.

According Commonwealth Financial Network.

To begin, advisors should clearly define the client’s goals, taking into account their attitudes toward retirement as well as their “desires and hopes for the future,” Commonwealth says in a guide for advisers.

Given this information, advisers should take stock of their clients’ assets and liabilities, including assets held elsewhere, according to the report. Advisors should also ask more questions to understand the extent of potential healthcare costs, taking into account that clients typically underestimate these costs, Commonwealth says.

Practical Uses of Psychology in Consultative Relationships

Using psychology is a way to build trust, according to Bill SeyfarthVice President and Head of Relations at Keebeck Wealth Management.

“If the client doesn’t trust you, it’s very difficult to get certain financial planning initiatives on the other side of the table and get them to buy into a certain solution,” he said.

Chicago-based Keebeck fosters that trust through a continuous flow of information to customers, facilitated by proprietary software that enables 24/7 communication, according to Seyfarth.

“It’s just about creating avenues where they feel comfortable that their advisor is always watching the markets, always has their best interests in mind,” he said.

Asking questions about a client’s family, career and background helps counselors uncover and assess a client’s beliefs about money, according to Patrick SwiftVice President of Wealth Planning at Blue Bell, Pennsylvania Amplius Wealth Advisors.

This knowledge will help advisers “train” them out of “preconceived notions or biases” they may have developed over the past 20 to 40 years “about investing or how their taxes should be paid,” said Swift.

Using psychology can make the difference between financial plans, depending on Mike Levertyfounder of Hudson, Wisconsin Leverty Financial Group.

“What we see is that often two financial plans can look very similar on paper, yet each situation is unique, and really digging into the decisions behind the plan, as opposed to just the calculations,” is key to the success, Leverty said.

Back To Top