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5 Things to Know About Financial Empathy for Client Relationships with Michael G. Thomas, Jr.

Michael ThomasToo 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 Dorsainvil

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.


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9 Things Advisers Can Do to Connect with Younger Clients

There’s a lot of information out here about the characteristics of millennials and Gen Z (millennials were born between 1980 and 1994, and Gen Z from the mid-1990s to the early 2000s). But, there’s not much out there on how these characteristics impact financial advisers and what advisers should do to make sure they’re well positioned for these future clients.

So, here are some characteristics of younger clients along with some (relatively easy) ideas to help financial advisers to be more relatable to younger generations.

They’ve never used a desktop computer. Imagine them walking into your office and thinking, “What are those big boxes under everyone’s desk?”

Easy fix: Have laptops and iPads. Don’t have desktop computers in your office; at least not in client meeting rooms.

They take notes on their smart phone. But, they know that older people, particularly people in positions of authority, think they’re texting.

Easy fix: During a meeting, say “…and hey… if you want to take notes on your phone, please go ahead.”

They’ve never watched cable. They didn’t “cut the cord”—they never had a cord to begin with.

Easy fix: If you’re looking to find common ground over a TV series, pick something you know is on Netflix; or just stick to “Game of Thrones”—everyone watches that.

Being an influencer or a gamer is a current or future job opportunity. And, it can be quite lucrative. There are even a few advisers already specializing in this niche. To that point, Merrill Lynch had a booth at this year’s Twitchcon.

Semi-easy fix: Know the top social platforms, gaming platforms, and games – at least by name. Here’s a link to the top streamed games on Twitch in 2019.

They have a “fight the power” mentality. I mean, look at the political environment they’re growing up in.

Easy fix: When talking about financial decisions, always have an alternative. In fact, use your preferred approach as the alternative. For example, “People your age usually go with a 60/40 portfolio, but if you really want to push the envelope, you could go with a 70/30.”

They respond to edgy campaigns.

Easy fix: Slow down on the uber-professionalism. Not so much that you’ll be perceived as fake, but maybe try something edgy like having an Instagram account. Or…have some funny memes on the wall (if you don’t know what a meme is, well, you might be too far gone).

They prefer videos.

Easy fix and not-so-easy fix: Offer to meet over FaceTime. Then, use interactive video reports in lieu of quarterly paper reports. (I suspect we’ll see a bunch more vendors popping up who specialize here very soon.)

They’re global and more diverse than ever.

Easy fix: Make sure your office looks the same. And if it doesn’t yet, at least avoid the company pictures on the website where the whole team is together on a golf course with sunblock and polos. You know what I’m talking about.

They love giving their opinion! They grew up in a world where Instagram accounts become viral influencers by having nothing other than polls. This means, younger generations are following accounts for the sole purpose of giving their opinion.

Easy fix: Ask their opinion. About everything. Often. There are affordable—or free—survey tools that you can use, like Google surveys. And, they can be sent via text.

It also wouldn’t hurt to learn some of the lingo, or else your younger clients may be sus.

Stay cool.

Dani Fava

In her role as the director of innovation at TD Ameritrade Institutional, Dani Fava oversees the development of advanced investment management and technology tools designed to help independent registered investment advisers compete and thrive in a world of accelerating change. Having managed the launch of TD Ameritrade’s award-winning iRebal on Veo portfolio rebalancing technology, Fava rolled out the award-winning Model Market Center, TD Ameritrade Institutional’s innovative approach to bringing outsourced investment management capabilities to RIAs. Fava is also responsible for implementing voice-first capabilities at TD Ameritrade, which will employ conversational AI that can communicate with advisers. Fava joined TD Ameritrade in 2012 where she puts more than 15 years of wealth management knowledge to work. She was recently named one of the top 16 Women in Wealthtech, and one of the top influencers in Fintech and AI. She loves to talk about big data, finserv start-ups, artificial intelligence, CrossFit and basketball. Follow Dani on Twitter @DaniFava_TDA, for the latest in wealth tech.


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The Science of Systems: 3 Steps to Develop a System

As a financial adviser, it can be easy to lose sight of what you are doing during the day due to constant interruptions, market fluctuations and your regular day-to-day operations. Oftentimes the day unfolds, you get busy and before you know it, hours have passed. It’s important to take a moment or two each day to track what to-dos aren’t getting regularly accomplished or obstacles you are encountering and evaluate how effective your present systems are in handling them. Ask yourself, do you run your business or does your business run you?

Most financial advisers don’t take the time to analyze what I refer to as “the science of systems,” which defines that every task you do should have a system assigned to it and that all systems need to be constantly refined in order to produce consistent positive outcomes. The vast majority of advisers use a “wing it” approach, which is a recipe for disaster. In order to obtain your goals, you need to optimize your systems and not leave your business success up to mere chance.

Author Orison Swett Marden says, “A good system shortens the road to the goal.” But, what if you don’t have a system for creating systems? If so, use the following steps to develop any system.

Step 1: Determine Point “A”

Point “A” is simply a description of what you are currently doing or where you currently are in any particular facet of your business.

When I was a rookie adviser, I wanted to branch out and try seminars as one of my primary forms of prospecting. At that time, my Point “A” (current activity) was doing about three seminars a year—maximum. As a result, I was only earning a small percentage of my new business utilizing this form of prospecting. I had heard that other advisers in the office had built successful businesses via seminars, but I didn’t know how to manage an effective seminar system on a larger scale. I did, however, know that I needed help.

Step 2: Determine Point “B”

Point “B” can be described as where you want or would prefer to be. In other words, it’s your end goal.

In this case, my Point “B” was to have 10 seminars a year. That was a lofty goal, so I decided to find out what other successful advisers—both in my direct office and the company as a whole—were doing. Surprisingly, I found a few advisers who were reducing their overhead costs by offering their services to associations and corporations as a keynote speaker at their events. This gave me new insight into how to obtain my goal.

Step 3: Re-engineer the Steps

The final step is to map out an updated system. Ironically, what I have found with any system is that it’s best to actually begin with Point “B” in mind and map out the steps, but in reverse. Let me show you what I mean.

I knew that it took, on average, about six weeks from start to finish to market, coordinate and plan to put on a seminar. So I grabbed a calendar and circled all the first Tuesdays of a month, excluding the three summer months and December. That left me with eight seminar dates. Next, I backtracked what specific items I needed to be sure had to happen in weeks five, four, three, two and one, and I put those into my contact management system. Then, I determined that on some weeks I had to work simultaneously on various steps for multiple seminars, since there was overlap with back-to-back months. In addition, I added in prospecting to associations and corporations to see if they needed a keynote speaker so that I could add at least two additional seminars during the year for free. Lastly, I set up my time to work on my seminar system to be at the same time each week so nothing slipped through the cracks. I did 10 seminars that year.

Why the Science of Systems Works

The reason why the “science of systems” works is because you have a repeatable process for attaining goals. I realize that this line of reasoning may sound simple—and in essence it is. We tend to make things harder for ourselves when simple solutions exist.

If you would like a free coaching session, email Melissa Denham, director of client servicing.

 

Dan Finley

Daniel C. Finley is the president and co-founder of Advisor Solutions, a business consulting and coaching service dedicated to helping advisers build a better business.