As advisors, we spend our time trying to master the Tax Code, as well as sophisticated trusts and investment strategies. But all that technical expertise doesn’t matter if we don’t really know our clients on a personal level.
I bring this up because a new paper published in the Financial Planning Review of the Certified Financial Planner Board of Standards identified a correlation between a client’s personality traits and their likelihood of following a particular giving strategy. For instance, researchers found that clients who exhibited “agreeableness” and/or “extroversion” are more likely than other clients to engage in sophisticated legacy planning. Meanwhile, researchers found that clients who are introverted are more likely than other clients to divide their estate equally among many heirs.
I’m glad to see solid research being done about planned giving and the human side of money. Both areas are greatly misunderstood by advisors. But I had to chuckle at the suggestion that there’s a surprising link between personality traits and estate planning. Of course, there is—it’s about understanding the client’s complete picture. The FPR paper also suggests personality traits carry “predictive power” when it comes to which retirement planning and legacy planning approach to use with them.
With all due respect to the survey authors, why rely on the “predictive power” of a client’s personality traits when you can spend more time getting to know each client and understanding why they follow (or don’t follow) your advice? Again, it’s about understanding the entirety of the client’s situation.
For instance, a client may tell you: “I’m selling X, so my capital gains is Y. Can you fix that?” Unless you know the full context of the client’s situation, you’re not likely to have a successful outcome. You might be recommending a brilliant solution on paper, but it could be completely inappropriate for that client in the real world.
Real World Example
I had a couple in my office the other day. When I asked if they were planning a gift to their daughter’s university, the husband said, “heck no,” and the wife said, “absolutely.” You must figure out where that disconnect came from, and if they finally decide they want to give, how much is appropriate. Very often it goes back to the different money messages each spouse received growing up. There are so many layers of having a meaningful relationship with a client before they trust you enough to implement the plans you’re putting in front of them.
If you want to be a good financial advisor, you need to know more than the technical aspects of investments, tax, wealth protection and wealth transfer. Computers are handling more and more of the technical side. Your role as an advisor is to get better at the people side of the equation. Get really good at listening to clients and eliciting from them what they’re trying to accomplish in their lives. It’s equally important to understand what’s preventing them from achieving their goals, because the issue often has roots in psychology.
So, when I hear about using the “predictive power” of a client’s personality traits as a basis for making planned philanthropic recommendations, it sounds to me like humans are trying to mimic what computers are doing. It should be the reverse. Machines are getting better and better at handling the technical aspects of advisors’ jobs. But they’ll never be able to relate to another human being like people do. Machines can’t show empathy.
Rather than asking clients what’s keeping them up at night and proposing a standard solution from your playbook, you should be asking: “In a perfect world, what would be your best outcome?” Then you have to probe into what the client is sharing with you so you can understand what success looks like to them. No two clients see success the same way. You must be attuned to those differences.
What Computers Can’t Do
Again, computers can’t replace relationships. That’s how we as advisors set ourselves apart. Clients will reveal themselves if you let them. You just need to have patience and realize that bigger, more complex cases take longer to develop because there’s more at stake.
If you think you’re going to win people over because you’re a better money manager or have a better insurance policy or tax saving device, I’m sorry, but it doesn’t work like that. It’s all about your relationship skills. Wealthy people can always tell when you’re trying to manipulate them and sell them something.
According to the FPR survey authors, a little psychological insight can go a long way when helping clients with setting lifestyle expectations in retirement or deciding how to divide their wealth as part of a legacy plan. I agree. Just don’t let a few random variables such as a client’s personality traits be a shortcut to understanding the full extent of a client’s motivation, values and goals.
Listen Carefully
Being good with the numbers and having technical skills are important, but to be a successful advisor you really have to know how to relate to people. You must be able to listen well, ask good questions and really hear what people have to say. Maybe that’s why we were born with two ears and only one mouth.
Randy A. Fox, CFP, AEP , is the founder of Two Hawks Consulting LLC. He is a nationally known wealth strategist, philanthropic estate planner, educator and speaker.
