As an investment advisor, how much time do you take to really get to know your clients as people?
It’s a critical question to ask because when it comes to matters of money, people are complicated. That often reveals itself when we start talking with them about finances, retirement, estate planning and investment strategies.
One factor underlies all of those conversations. People’s attitudes, or how they really feel, about money and that’s more complicated than it may appear at first glance.
Some people’s views about money have their roots in a person’s early life experiences of pain and loss. For example, an individual who experiences painful personal loss early in life— like the loss of a parent or other loved one—may grow up with a deep distrust of others, a high need for security and control, and little tolerance for risk-taking when it comes to investing.
Other peoples’ attitudes are influenced by what their parents, grandparents, or other authority figures said about money when they were growing up. Did your client grow up being encouraged to be frugal? Or, did he or she grow up without learning any critical “money management” lessons from parents or others?
Still other people’s feelings about money are shaped by whether they grew up with wealth, or achieved it for themselves. Thus leading to the popular, if somewhat simplistic, notion of wealth creators as world class penny pinchers and wealth inheritors as world class spendthrifts.
Family dynamics, personal beliefs, college professors, religious faith and philosophical convictions all can influence clients’ attitudes about money.
Thus, it’s critical that we, as wealth advisors, develop an understanding of our clients—be they individuals, couples, or families—as emotional and psychological beings, and as people who have an emotional relationship with their money.
When we delve intentionally into this domain it can help us understand the personal life experiences that have shaped a client’s feelings about finances and wealth, and that are consequently reflected in their risk-taking tolerance, investing style and the emotions they bring to the wealth management process.
Developing this appreciation of our clients may require a lot of time, experience, sensitivity, and maturity on our parts. Only by doing so can we hope to effectively advise them about their wealth management priorities and goals.
So, how does one go about doing this as an advisor?
Because it’s critical for me understand the emotional “back story” that shapes a person’s attitudes and beliefs about money (before I offer them any advice or counsel about investing and wealth management) I like to begin my work with clients by asking them to share personal stories and family histories with me. I ask respectful but probing questions, designed to help me understand what has shaped their thinking, beliefs, feelings and attitudes about money from childhood.
The questions I ask often include the following:
- What is the source of your money? How was it earned? How was it accumulated?
- What is your relationship to the person who earned the money? How would you characterize the nature of that relationship? (Close or distant? Loving or cold?)
- What messages about money did you get when you were growing up? Were there specific values communicated to you about money and its use?
- What feelings do you have about the money you possess today? For example, is there a sense of sacrifice associated with the money? If inherited, do you feel there is a “cold hand from the grave” controlling the money? Is the money in any way tainted? Is it an expression of love and caring from a parent, spouse or ancestor?
- What, from your perspective, is the purpose of your money?
- What values or priorities do you want to keep in mind as we co-create your wealth management and investment plans going forward?
- As your advisor, how can I be of greatest help in this regard?
In the course of these conversations with me clients often share cherished (and sometimes not so cherished) family memories, notable moments when they learned a seminal lesson about money and saving, or other meaningful experiences that influence their thinking about money today. People also talk fondly about relatives and loved ones now gone that played pivotal roles in their early lives, and who helped shape them into the adult they are today.
At times these conversations become emotional, in part because some people have never had such intimate discussions about money with anyone else in their life, not even their partner or spouse! Consequently, the discussions can be cathartic, sometimes moving, always insightful, and invariably beneficial to the forging of a strong client-advisor relationship.
As responsible and ethical wealth advisors, I believe it’s critical for us to educate ourselves about our clients and the emotions and experiences that drive their relationship with and decision-making about money and wealth. This is essential if we are to advise them effectively and customize client “investment solutions” based on their personalities and degree of risk tolerance.
Wealth advisors who are trained, sophisticated, and astute enough to probe and gain understanding of the emotional make-up of their clients will be able to connect with clients (be they individuals, couples, or families) in ways other advisors cannot. Indeed, they’ll be able to co-create investment strategies and plans with their clients that are custom-suited to each client’s personality, priorities, values and financial objectives.
Chris White (www.chriswhiteauthor.com) is a long-time wealth advisor and author of Working with the Emotional Investor: Financial Psychology for Wealth Managers. (Praeger, 2016)