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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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Anxious Clients Neglect Advice

Seeking financial advice puts a person in a vulnerable position.

Ted Klontz, associate professor and founder of Financial Psychology Institute at Creighton University, told FPA Annual Conference attendees during his education session, “Gifts from Neuroscience: Building Robust Resilient Client Relationships,” that clients are probably already stressed out when they come to your office and it’s up to you—and the environment you create in your office—to calm them down.

“Our challenge as experts is to keep that anxiety level down,” Klontz said.

Keeping those stress levels down is vital to having clients follow your advice, said Ryan Sullivan, CFP®, CLU®, ChFC®, of MoneyGuidePro, who in his Annual Conference presentation, “Measuring and Managing Stress in the Financial Planning Process,” addressed results from research by Sonya Britt-Lutter, Derek Lawson, and Camila Haselwood published in the December 2016 issue of the Journal.

“When clients are stressed they make bad decisions or don’t stick with decisions they’ve already made,” Sullivan said.

Britt-Lutter, Lawson, and Haselwood monitored the heart rates, skin conductance (sweat levels), and skin temperatures of clients working with an adviser for the first time. Essentially, they found when clients were more relaxed, they were more likely to follow your advice.

The research Sullivan presented noted stress levels decrease as the planning process progresses—peaking in the beginning and during discussions on how to improve finances while leveling out during the other phases. However, stress levels were higher for clients doing in-person meetings. Those clients started the process at high levels before leveling out to moderate levels. Stress levels among clients working with a planner virtually started out moderate and dropped to low levels or no stress at all. This may speak to the need to for planning firms to adopt virtual meeting technology or robo-solutions.

Other key findings included: women were more stressed than men going through the research process; and advisers (who were also monitored like the clients) also had high levels of stress prior to the meetings, though it leveled off further down the process.

Because clients are more stressed when meeting in person, do what you can to make your office, your demeanor, and your information-gathering process welcoming. Plus, try to keep your stress levels down; doing so will help keep your clients’ stress levels down, too.

If you missed FPA’s Annual Conference this year, register for next year’s event in Chicago, Ill., from Oct. 3-5, 2018.

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Ana Trujillo Limón is associate editor of the Journal of Financial Planning and the editor of the FPA Practice Management Blog. Email her at alimon@onefpa.org. Follow her on Twitter at @AnaT_Edits.


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The 6 Personality Traits of Successful People

Money is what makes all your clients’ priorities possible, Jean Chatzky, financial editor for the Today Show, told FPA Annual Conference attendees earlier this month.

And if they’re constantly worried and stressed about it, they’re probably going to stumble upon what seems like more than their fair share of problems. Though this might sound a little like wishful thinking Chatzky claims it’s true: more happiness will lead to more money for your clients.

Chatzky outlined the six traits of successful and wealthy people that she identified through her research. Chatzky conducted a study of 5,000 people and found that personality traits are just as important as good financial habits.

Here are the six factors Chatzky found were key to success:

Happiness or optimism. Happiness is key to success—just not too much of it. Among Chatzky’s study participants, those who were too happy (a 10 on a scale of 1 to 10, 10 being blissed out) weren’t as successful as those who were an eight. The eights were better problem solvers, they lived longer, were more successful, earned more money, had higher amounts of emergency savings and received greater evaluations from their colleagues. If your clients are too happy, perhaps find a way to make them a little more cognizant of reality; but if your clients are miserable, figure out how they can make themselves happier.

Resilience. Thomas Edison “failed” hundreds of times when inventing the lightbulb, but he didn’t see it that way. He said he succeeded in proving that hundreds of ways didn’t work. People who have resilience can overcome problems in their work, personal and financial lives more readily than people who aren’t resilient.

“The best news about resilience is that you don’t have to be born with it,” Chatzky said.

Connectedness. People who had built up a good amount of social capital—connecting with people—were more successful than people who did not have good connections. These people made time to connect with people despite their “busy” schedules. Successful people not only made time to connect with friends and family but also to forge new relationships.

Passion. Having passion about a career is what moves people from a life of financial struggle to one of financial success. The people who have passion just want it more than others. These people are not just pursing a job or even a career, they are living and doing what is their calling. Figure out what your calling is and live your passion.

Financial Habits. Successful people are habitual savers, have appropriate debt, are able to level emotions and have a long-term plan, Chatzky said. Chances are your clients have better financial habits than the average American (most of whom are terrible savers), but it’s never a bad idea to reinforce their good habits.

Gratitude. You always want more if you’re not grateful for what you already have. Chatzky said gratitude is key among successful people and as a result of them being more grateful, they are also more generous (giving to people and charitable causes), less depressed and healthier.

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Ana Trujillo Limón is associate editor of the Journal of Financial Planning and the editor of the FPA Practice Management Blog. Email her at alimon@onefpa.org. Follow her on Twitter at @AnaT_Edits.