Most financial planners pride themselves on their in-depth understanding of investment vehicles, retirement planning and other money-centric issues. What they are often less knowledgeable about is how what’s occurring in someone’s life is going to affect the financial decisions they make—but this is something very important to recognize.
Transitions are typically at the center of life events, which include getting engaged, married, or divorced; having children; sending kids off to college; and dealing with empty nest syndrome, illness, and death. What makes things especially tricky is that everyone responds to these changes in a different way. For instance, couples may have wildly dissimilar reactions when their last child leaves home; one parent may be ecstatic and celebrating while the other is miserable and mourning.
As a financial planner, it’s important to understand the complex interaction between life events and clients’ financial decisions, to be aware of how emotions shape immediate financial needs and concerns and affect long-term financial goals. Guiding clients to develop their hardiness—the ability to remain in control, focused and committed when faced with challenging circumstances—is one way to add value for your clients, and you can foster the appropriate skills by learning how to:
- Recognize and help clients tolerate their anxiety
- Encourage behavioral action in spite of negative feelings
- Identify irrational thinking and diffuse it with alternative rational statements
- Set goals and establish priorities
- Project into the future and try to anticipate the impact of current choices
- Discriminate and help clients make choices consistent with their goals and values
Financial planners should never to assume what a client’s state of mind is going to be during or following a life event. It’s usually true that the further along people are in their lives and maturity, the more they are likely to “get it” and be effective in their financial behavior. It’s also the case that people’s confidence and money history will determine their level of hardiness and ability to function effectively in the face of change.
In more general terms, here are a few things financial planners can do to work more successfully with clients:
- Understand the unique meaning money has for them
- Learn about their money history
- Help them identify their irrational financial beliefs
- Help shift their thinking by asking possibility questions
- Establish clear financial goals
- Provide guidance without judgment
- Ask relevant questions
- Be an empathetic and diagnostic listener
This advice is applicable whether or not life events are in play. When the opportunity exists to help clients through a significant change, it should be seen as a chance to explore their values and help them grow.