Find Out How Your Clients Really Feel about Money

Find Out How Your Clients Really Feel about Money

The experiences people have early in life often shape attitudes toward money, and these attitudes influence how people look at risk, investing and wealth planning.

Successful advisors know that it’s important to dig deeply and ask clients questions that will reveal deep-seated attitudes. Human beings are complicated creatures, and this is particularly true when it comes to money.

Early life experiences involving pain and loss can have a strong impact on attitudes toward money.  For example, a person who loses a loved one during childhood may develop a strong need for security and control. They may be distrustful of others, and these feelings will influence how they react to risk. Such individuals are often quite risk averse.

Parents, grandparents and other figures of authority also figure strongly in the attitude toward money. Some people may have been encouraged to be frugal, while others may have suffered the consequences of a parent’s financial irresponsibility. Still others may have had no guidance about managing money.  How people have acquired their money is also significant. Inheritors may be much more conservative, as they have no confidence in being able to earn back any money lost. Self-made people, on the other hand, usually have more confidence in their ability to earn and may be much more willing to take risk.

Since there are so many factors at play, it’s important for advisors to develop a strategy for understanding their clients. Most of all, advisors must be cognizant of the fact that money is a very emotional topic. It can require a great deal of time, experience and sensitivity for an advisor to uncover a client’s attitudes. At the beginning of a client relationship, advisors need to delve into the “emotional back story.” Ask clients to share a bit of their family history.

There are a number of important questions to ask, and one of the first is asking the source of a client’s money. As mentioned above, how they came by their money will have a great bearing on how they approach risk and investing.  If they didn’t earn the money themselves, ask about their relationship with the person who did earn it. What messages did they get about money growing up? What values are attached to money? What feelings are attached to the money today? Another important thing to find out is what a client considers to be the purpose of their money.

Conversations like these can be very emotional, and clients may share important memories about loved ones and the lessons they learned from them. Sometimes, they may share memories that are very painful. Bear in mind that your clients may never have had such an intimate discussion about money.  Your talks may be moving, or cathartic. Whatever the case, this is a conversation that can help you build intimacy and your relationship with the client.

Responsible advisors know that it is essential to develop a deep understanding of the values and emotions that drive client behavior. This is integral to the ability to offer effective advice and bespoke solutions that meet individual client needs.

For more information, please read:
How Do Your Clients Really Feel About Money? | Wealth Management

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