Unpacking the emotional baggage
“I use my social work and teaching degrees so much more than I do my CFP training,” says Kelly Hokanson, owner and certified financial planner at RIA firm The Planned Approach in Kansas City, Missouri. “If a client’s behavior doesn’t support what we’re doing, investment performance doesn’t matter.”
Understanding your clients’ emotional triggers is key to being able to help them achieve financial goals. Stocks, bonds and other investments are only successful if that financial plan aligns with a client’s motivations and fears. These client conversations often become emotional, Hokanson says.
“It’s more about, ‘What’s going to happen to my people after I die?’” she says. “I have had clients literally in tears at that meeting.”
Over the years, these conversations have led to her developing client profiles, a shorthand for a client’s financial history. For example, she says her “Bag Lady” clients are women who are “really good savers, but never feel like they have enough.” Money, for them, is security. Another group is the “Emotional Spenders,” who make purchases to fill an emotional need.
Hokanson says advisors should be willing to spend enough time with clients to uncover these deeply personal experiences. “As an advisor, you have to go into the why,” she says. “It turns out that as a young adult, one of my clients broke up with her boyfriend, was upset and told her mother about it. Her mother said, ‘Daddy’s credit card is in the top drawer of the desk. Take yourself shopping.’”
Knowing that helped Hokanson understand how the client copes with stress and how that might mitigate any financial plans the two may come up with. “If I know where you’re coming from, I can remind you: You told me your goal is to XYZ,” she adds.