While we view all of the above emotional competencies as being critical to an advisor’s success, we want to spotlight the competency of empathy here. We do this for the simple reason that if we don’t begin to see the world through the eyes of our clients, then they will move to someone else who is willing and able. Empathy is perhaps the most critical cornerstone in the process of building client trust.
If we are not connecting with our clients’ frustrations and hopes, how will they ever feel comfortable turning over their psychologically laden assets to us? Those assets, in many respects, are representative of who they are, where they’ve been, and where they hope to go. “Get 3 / Necessary Skills for the New Partnership 27
a handle on who I am before you try to get a handle on my money”
is the ultimatum playing out in the psyche of today’s client.
Empathy helps to forge essential connections on three levels in the client-advisor relationship. First, clients want the advisor to un- derstand where they have been, where they are, and where they want to go. They want you to truly understand the people and goals most important to them and the concerns they have pertaining to these life priorities. They want an advisor to connect with their mission and to work with them in the context of that mission. Second, each client, depending on personality, will want their advisor to play a slightly different role. Some want a deferential, supportive role, and others want a more assertive, leadership role. It is up to the advisor to read between the lines and figure out exactly what role each client needs the advisor to play. This task requires the competence of em- pathy. Third, the client wants to connect with an advisor who views financial products and strategies from the client’s own perspective rather than from the perspective of the firm vending those products.
To illustrate in practical terms the role that empathy plays in viewing financial products through the client’s eyes, we have pre- pared the charts in Figure 3.2 that illustrate the gulf of perception di- viding the advisor’s and client’s views of the same investment issues.
The first chart presents financial planning issues that an advisor will ultimately address from an advisor’s perspective. The second chart simply restates the financial products and services in terms of the client’s life.
After contrasting these two views of the financial products and services, we cannot help but notice that the client’s view of financial planning is largely emotional in nature. This is one fact of financial life planning that advisors must fix their sights on and not let out of their crosshairs. Money arouses emotion. Money is tied to deeply held hopes and dreams that were obtained with profoundly emo- tional toil and stress—or perhaps dashed hopes and dreams. Money can result from unhappy circumstances such as a divorce settlement, an inheritance that is accompanied with profound guilt or grief, or an early retirement package that shoved a worker out the door ear- lier than expected or desired. To form a partnership with our clients, we need to start seeing their money through the same lens that they see it. This is empathy. As we set out to perform simple transactions regarding estate, education, retirement, or taxes, we must bear in mind that each step has an emotional connection in our clients’
minds. While we may be advising them for purely rational reasons,
3 / Necessary Skills for the New Partnership 29
FIGURE 3.2 Advisor’s View versus Client’s View Advisor’s View
Tax Estate Investment Family Business
Revenue Life Asset Education Business
deferral insurance manage- savings investment ment
Income Wills IRAs, Savings Succession
splitting 401(k) accounts planning
pension plans,
Tax Trusts RRSPs Mortgages Disability
sheltering
Tax Heirs Personal Loans Business
efficiency investments insurance
Planned Real estate Revolving giving/ debt
charitable remainder
Client’s View
IRS / After I Long-term My family My Revenue am gone money and life business Tax Protect my Protect Assist Money to refunds loved ones savings children finance
dreams Pay less Pass on Look after Assist Pass on taxes my assets retirement parents assets Contri- Gift loved Give me Family Protect butions to ones lifestyle home family 401(k), money
IRA, 403(b) (U.S.), RRSP (Canada)
Give to Make big Lifestyle Protect charity purchases money business Don’t give Make my Desired
to IRS money lifestyle
grow money
they are motivated to follow through for reasons that are emotional in nature.
When we talk about funding their children’s education, they may be thinking about the competing financial needs of aging parents.
When we talk about life insurance, our clients may be thinking about individual and specific concerns such as the exceptional long-term needs of a disabled child. We may discourage revolving debt, but our clients may be thinking about what they need in order to make them feel successful. When we talk about retirement savings, our clients may be thinking of starting that business they always dreamed of or of telling their megalomaniacal boss good riddance. Clients have emotional reasons for doing what they do. If emotion isn’t involved, there is no personal connection and, therefore, little motivation to follow through. Empathetic advisors study and query their clients until they are fully aware of their clients’ motivations.