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How the Principles of Counseling Can Strengthen Client Relationships
Many factors influence how clients make decisions about their finances. To better navigate the myriad factors at play and develop stronger bonds with clients, financial advisors will benefit from an understanding of the principles of counseling.
Important financial decisions are rarely made in a vacuum, and emotions and anxieties can color those decisions.
In 2021, CFP Board updated the CFP® certification requirements with a new Principal Knowledge Domain — the Psychology of Financial Planning — which is now part of the CFP® certification curriculum, assessed on the CFP® exam and accepted for continuing education (CE) credit. CFP Board’s new book, The Psychology of Financial Planning, covers all of the topics in the that domain, including the principles of counseling.
CFP Board’s recent “Consumer Sentiment Survey — Cost of Living” found that 9 in 10 Americans are concerned about the current cost of living in the United States. With these elevated economic anxieties, alongside the personal and professional challenges people may face, it’s not hard to see why American investors often struggle to make logical decisions about money.
CFP® professionals need the right set of tools to help their clients stay on track to reach their goals — to help them overcome anxieties and navigate their unique beliefs and biases around money.
The principles of counseling are one tool that can help CFP® professionals do that. CFP® professionals, much like therapists or counselors, rely on a close connection with their clients to cultivate a relationship that helps clients meet their goals. To provide advice that a client will understand and implement, it is helpful for financial planners to understand and learn how to manage their client’s unique history, beliefs and biases around financial decisions.
An understanding of the principles of counseling — including effective communication, active listening and cultural awareness — can help CFP® professionals gain a deeper understanding of their clients, guide their clients to better decisions, and strengthen their client relationships.
How Do the Principles of Counseling Connect to the Role of a CFP® Professional?
The principles of counseling emphasize the importance of building a strong relationship with clients by actively listening to clients’ concerns and creating a safe and supportive environment to explore their thoughts and feelings. The same principles apply to CFP® professionals, who must quickly build trust with clients as they listen to their financial concerns and long-term goals.
The holistic financial planning service provided by a CFP® professional is an inherently emotional process for clients. Clients, who may be anxious or even ashamed about sharing their financial past, will be reluctant to share their financial past with a financial advisor they do not know well or feel comfortable with. Creating a supportive environment where clients do not feel as if they are being judged by their CFP® professionals is key to quickly gain trust with new clients.
“The number one thing that clients fear when meeting with a CFP® professional is that they are going to be judged,” said John Loper, CFP®, MBA, Managing Director of Professional Practice at CFP Board. “I used to say to clients that this is a no-judgment zone. We can’t change what happened yesterday, but the fact that we are meeting today allows us to talk about where you are and where we’re going in the future.”
Ensuring that clients are comfortable with the premise of the meeting is harder than it may sound for CFP® professionals. To ensure that both clients and planners are comfortable, CFP® professionals should first ask how both parties can be more present in the conversation, according to Saundra D. Davis, MSFP, APFC®, FBS®, contributor to The Psychology of Financial Planning.
“The first thing I might ask a new client is: is this is still a good time?” said Davis. “I want clients to know that they are still in control — that this is a choice they’ve made and that they can choose something different if this is no longer a good time.”
In the event that something comes up in conversation with a client that raises concern, a CFP® professional should feel comfortable referring their clients to receive outside help as appropriate. “Just as you would refer your client to a CPA for help with taxes, it’s important to ask clients if they need to talk to someone else about the larger issues in their life,” said Loper.
How Can the Principles of Counseling Bridge the Gap With Hesitant Clients?
Just as principles of counseling can help CFP® professionals to quickly build relationships with new clients, these principles can also be applied to help advisors break through with those who are more hesitant.
CFP® professionals looking to reach and connect with hesitant clients can start by asking a series of leading questions that should help explore biases and beliefs about money. Clients don’t often realize that they hold implicit views that are holding them back from reaching their financial goals. This presents an important opportunity for CFP® professionals “to help clients explore the things that they think about money that they consider obstacles,” said Davis.
These obstacles range from the simple — the client not realizing they qualify for a tax deduction — to the complex — a lack of understanding about their monthly cash flow and spending. Regardless of the obstacle, this discussion presents a valuable opportunity for CFP® professionals to work with clients to create strategies that move them toward their goals.
Body language is another key factor CFP® professionals can use to determine how their message is being received by clients. While body language sometimes can be difficult to interpret, Loper notes that simply asking to hear a client’s perspective on the topic at hand can help to open up a reserved client to further conversation by letting them know they have a say in their financial future.
How Can the Principles of Counseling Help Forge Trusting Relationships?
Clients are more likely to follow recommendations when they perceive their advisor as trustworthy. Building trust with a client can be a challenging feat, and once trust is broken, it can be nearly impossible to repair.
It is important for financial planners to build client trust that is both credible and benevolent — that is, a client’s belief that their advisor is acting in their best interest. CFP Board’s Code of Ethics for CFP® professionals provides a framework of elements that can foster trust, with its requirements that CFP® professionals act in the client’s best interest, with honesty, integrity, competence and diligence.
It is also important that the financial planner be perceived as caring about what matters to the client, rather than about the planner’s own priorities. Active listening and empathy can demonstrate that caring. Demonstrating curiosity about your clients’ history and elements of their identity and culture can lead to insights for both the planner and client. And explicitly connecting recommendations to the client’s own goals and priorities can help reinforce to the client that the planner understands them.
Davis notes that she always approaches the relationship between a client and CFP® professional as a partnership, where CFP® professionals are responsible for helping clients to create a vision for their future.
For any financial plan to succeed, “CFP® professionals have to understand that they are the partner and holder of the process,” said Davis. “However, the client ultimately has to take the steps and action to execute the plan.”
A CFP® professional with an understanding of the principles of counseling can help give their clients confidence in their decisions and ability to take actions that bring them close to their goals.
The principles of counseling are not about turning CFP® professionals into therapists. Rather, the principles outlined in The Psychology of Financial Planning aim “to make CFP® professionals better listeners in service of client needs,” said Loper.
GET YOUR COPY OF THE PSYCHOLOGY OF FINANCIAL PLANNING BOOK
The Psychology of Financial Planning is a useful resource not only for experienced CFP® professionals and other financial advisors, but also for undergraduate and graduate students enrolled in CFP Board Registered Programs, and those planning to take the CFP® exam.
Chapter 11 addresses the application of the principles of counseling to the financial planning process, and Chapter 12 addresses forging trusting relationships, and all chapters provide case studies and extensive references for further learning.