Too often, financial professionals find themselves in a position where they’re judging how their clients want to spend. The truth is that not every client is alike, and not every client has the same money mindset. It may take several meetings to dig down to the core of why they feel the way they do about money—and the stories that are driving their decisions. When planners and financial counselors are able to take a step back and listen, they’re better able to understand the culture and background of the client they’re working with.
Michael G. Thomas Jr., an Accredited Financial Counselor (AFC®) and Ph.D. candidate in financial planning at the University of Georgia, recently joined me on my podcast 2050 TrailBlazers to discuss how financial empathy can improve financial services.
Thomas is passionate about understanding the story behind money decisions, and how financial counselors and planners can better balance their response to people’s financial goals and decisions.
1.) You’re a lecturer at the University of Georgia and a Ph.D. candidate. You work with students in a way that is called active learning. Tell us about that. How is that different and how are they learning about working with clients in an empathetic way?
There may be instances where, as a financial counselor and doing financial coaching, we make recommendations, but we’re not always mindful of the barriers. And then we aren’t helping individuals think through the barriers and how to overcome those as they’re working towards their financial goals. So, I’m very barriers focused because it’s easier to create a linear path between do this and get here and it doesn’t always work out that way.
So in my active learning class it never does work out that way. We have learning scenarios in class. For instance, we tell people all the time, you know, just set up a Vanguard account or just set up a Charles Schwab account. And I was like, you know what? I could tell you that yes, that is an optimal strategy to have a diversified portfolio. But one of the things that I’m leaving out is that I know that as soon as you go to that website, you’re going to be absolutely lost. You’re not going to understand the language. And even if you find the different portfolios in which you can invest in, you’re going to be like, what’s a VTFX?
So I want students to see it, to struggle with it. I want you to go through this process. And then I want us to come back and have a conversation about it. Was it as easy as I made it seem? And the vast majority of my students will say, no, it wasn’t.
2.) You mentioned when we focus on the numbers we miss out on the story that’s driving it. In your TEDxUGA talk, you share the example of a woman who was getting her taxes done by a volunteer, tax prep person and mentioned that she was going to buy a big flat screen TV with her refund. What was the story driving that decision and what can planners learn from that?
She lived in an urban neighborhood where the crime rates were fairly high, and her children were getting older. Generally, as kids get older they want to leave the nest and do more. For her [the television] was a way to help protect her children. By having the flat screen television, she thought rather than her kids wanting to go out and over to other people’s houses, they could just come over to her house—watch movies and play games. She was trying to protect her children and even her children’s friends from the environment in which they were living. We never place these things in this type of context, but she was purchasing insurance. That [television] was an insurance policy to protect her children.
When you frame it in that way, any person, I don’t care what background you come from, can say, “Oh, I completely get that.”
3.) What were some personal experiences that sparked your interest in the topic of financial empathy and what can planners learn from them?
I struggled significantly in school growing up, to the point where my parents were constantly called in by the principal or my teacher. And I would be standing there and the teacher would look dead at me and say, “If he doesn’t get this information, he’s not moving on.” It had gotten so bad to where I would go to class and just put my head down and the teacher would not care.
I’m the type of person where it takes me a little time to process things. I’ve always been that way. And it’s something that I accept now. It’s not a deficiency, it’s just a part of who I am.
Now, I always think about myself when I’m working with clients. What if someone got a chance to really know that maybe the way that I’m teaching something doesn’t work with this particular child’s learning style? Let me think of a more creative way to educate this person. To have that type of mindset means that you believe that the person can grow. And what happens a lot of times—especially as professionals—we know so much to where we don’t really hear our clients and we’re just trying to work toward what our objective is.
I always think of the best learning experiences and those who really got me over the hump—the type of people who were always searching for more and to find what could help me get there as opposed to just being incredibly rigid and thinking that there’s only one way to get there. And I’ve benefited from that. I’m here now pursuing a Ph.D. But I also treat my clients with that type of empathy. And even sometimes I’ll feel as if maybe I’m not the right person for a client, but I never feel as if that client can’t grow.
If you’re a financial planner, you should find what I call the need behind the need because there’s always a reason why someone is doing something. Why is it important that we find out the story behind client behavior?
If clients don’t do what we’re encouraging them to do, it’s not that they don’t want to grow, they don’t want to do better, to have financial well-being, to retire—but that’s the narrative that we play. In doing that, it takes the responsibility off of us and it puts it on the client. But the client came to see us so that we could help them navigate this process. And in creating and implementing a plan that’s taken these things into consideration and when a client sees it, they’ll say, you know what? I feel heard.
4.) Empathy does not equal complacency. Listening to clients’ stories doesn’t mean that we’re accepting excuses. Not every client has the same upbringing when it comes to money. Why does that matter?
What we’re talking about is financial socialization. Financial socialization happens in so many ways. The systems in which you exist impact socialization. I have two boys and we talk about money all the time. We try to have fun with it. Obviously, this is what I do and we have these conversations, but I don’t need to. And until I have established and demonstrated trust with them, how could they ever trust a 401(k) growing into this substantial amount of money into the future?
If you grew up in a household where promises are consistently broken, where someone says, “I’m going to do this,” and they never do it, or “I’m going to give you this,” and you never get it, or “We’re going to go there,” and we never go. Those become deeply seated and ingrained in such a way where it becomes difficult to trust the financial process. That’s something that takes a lot of time to work through with clients, to get them to stick with something long enough to experience the benefits. But if we don’t establish trust or there’s no trust in a household, I completely understand why somebody won’t be banked or why someone doesn’t trust investing in a market.
In discovery meetings, really discover not just what a person thinks, but the context around their thinking.
Rianka R. Dorsainvil, CFP® professional is the founder and president of Your Greatest Contribution (YGC), a virtual, fee-only comprehensive financial planning firm dedicated to serving entrepreneurs, first-generation wealth builders and thriving professionals in their late 20s, 30s and 40s. She also hosts 2050 TrailBlazers, a podcast aimed to address the lack of diversity in the financial planning profession by engaging industry experts and leaders in conversation.