Updated on: July 27, 2023

Having a basic understanding of the psychology of financial planning can help you build open, trusting, and transparent relationships that have greater impact for clients.

For many, simply setting up a financial planning consultation can be quite a feat. Hesitancy to share personal information, especially financial information, is a universal feeling. However, the success of a plan depends on its alignment with the client’s personal goals and values. For this reason, it’s essential to know how to create a safe space for clients to share what’s most important to them.

Borrowing simple financial counseling techniques can help you empathize with clients’ lived experiences, communicate more effectively, and create plans that truly meet their needs. The CFP Board’s Psychology of Financial Planning, published in May 2022, offers a great overview of everything a CERTIFIED FINANCIAL PLANNER^TM should know about financial psychology.

As a co-author of a few chapters of this book, there are a few foundational counseling techniques that I believe financial planners could leverage in their practices.

First, Ensure Transparency in Financial Planning Relationships

Building a relationship founded on transparency is essential for productive financial planning engagements.

Many times, just because a client is active in meetings or appears enthusiastic about the planning process, it is assumed they’re being completely transparent.¹ Unfortunately, this is not always the case. Clients may intentionally or unintentionally fail to disclose important financial information.

When gathering a client’s financial information, doing something as simple as asking “Is there anything else?” can go a long way. It prompts the client to review their circumstances again, potentially helping uncover any personal or financial detail they may have left out initially.

By asking the right follow-up questions and never assuming you know everything you need to know, financial planners can create a safe environment for clients to share personal details and normalize their experiences.

Then Start Building Trust with Planning Clients

A major aspect of facilitating open, honest conversations about money is creating an atmosphere of trust where the relationship can grow.

Financial planners can build trust through effective communication, active listening, and cultural awareness, all of which are skills that can be borrowed from counseling. With the right encouragement and close listening, oftentimes clients are able to formulate their own solutions under the careful guidance of the financial professional.

This is in part because once a close, trusted relationship is established, the client’s motivation is likely to shift. They’re more likely to make behavioral changes because they want to, not just because they’re supposed to.

This kind of relationship allows the financial planner to really understand the client’s whole life circumstances, values, and beliefs. And while some resistance should be expected in nearly any financial planning relationship, it’s likely because making significant, lasting change is difficult.

3 Counseling Techniques for Financial Planners to Form Deeper Relationships

Financial planning relationships go deeper, and encompass a wider range of topics, when clients feel heard, connected, and valued. As a helping profession, it’s useful for financial planners to take direction from another helping profession: counseling.

Here are three basic techniques any financial planner can use in their practice.

1. Effective Communication with Pacing and Questioning

Good communication is important for a trusting, productive financial planning relationship. Generally speaking, communication of this type can include verbal, non-verbal, and spatial arrangements.

Two essential verbal communication tactics include pacing and questioning. Pacing refers to matching the client’s communication style to build rapport. For example, if a client is talking about an anxiety-invoking topic and talking very quickly, the planner can intentionally match their pace of talking and gradually slow the conversation down.

Pacing also includes restating, which involves repeating a client’s talking points to demonstrate understanding. Reflecting is another technique that takes things further. Reflecting upon what a client has said includes stating your own analysis of a client’s circumstances to demonstrate you understand the thoughts and emotions behind what they’re saying.

The other common verbal communication tactic—questioning—primarily refers to asking open- or closed-ended questions. It’s often easier to ask closed-ended questions with a “yes” or “no” answer, but planners can learn much more with open-ended questions. Instead of asking, “Are you worried about having enough saved for retirement?” you can ask, “What are your concerns about funding your retirement?”

Financial planners can also use more subtle techniques to facilitate open conversations. Non-verbal cues like a person’s body language can indicate how they’re feeling and planners can adjust the conversation accordingly. Similarly, they can promote openness, acceptance, and interest through their own body language by making eye contact and leaning forward.

It’s essential that client’s feel comfortable during planning conversations, so in addition to non-verbal communication, planners should take time to consider their office environment. Things like wall color and seating arrangement can encourage open conversation, or they can create barriers.

2. Active Listening Through Quieting Our Inner Dialogue

Once you feel comfortable facilitating open, honest communication, it’s important to be sure you’re listening with skill. Active listening helps planners demonstrate empathy and responsivity to clients, which further encourages openness and transparency.

Research shows that almost everyone has a persistent inner dialogue that prevents them from truly hearing what another person is saying.² To understand what clients are trying to communicate, it’s essential to quiet this inner dialogue.

A useful acronym for doing so is “WAIT” or “Why Am I Talking.” This doesn’t mean you need to be quiet the entire conversation—it means you should be sure that when you do speak, it’s moving the conversation forward and encouraging the client to elaborate on what they’re saying.³

To make sure you’re actively listening to clients:⁴

• Talk less and listen more
• Slow down to focus on the client’s message instead of preparing a response
• Encourage clients with “what if” questions or other ways of helping them elaborate
• Allow for some silence to facilitate a back and forth

Once you can quiet your inner dialogue, you’re taking what’s called a “not-knowing stance” in therapy.

You’re listening not only for the client’s overt message but the underlying meaning and context of their message. It’s key at this stage to refrain from judgement and use the communication skills outlined above to keep clients talking to uncover their deeper motivations, desires, and values.

3. Cultural Humility to Improve Empathy and Connection

One last counseling skill that planners can use is a concept called cultural humility. The National Institutes of Health (NIH) defines cultural humility as “a lifelong process of self­-reflection and self­-critique whereby the individual not only learns about another’s culture, but one starts with an examination of her/his own beliefs and cultural identities.”

The idea of cultural humility doesn’t just apply when a client doesn’t share your cultural identity. It’s important not to make assumptions about any client. There are three proven ways to improve your cultural humility.

The first way is to become familiar with your own cultural identity. The ADDRESSING strategy offers a good framework for breaking down the different aspects of cultural identity:⁵

• Age and Generation
• Developmental Disability
• Disability (Acquired)
• Religion
• Ethnicity and Race
• Socioeconomic Status
• Sexual Orientation
• National Origin and Language
• Gender

If you feel that you haven’t thought much about any of these particular aspects of identity, it’s a good sign that you belong to the dominant group, which means you’ve experienced some form of privilege as a result of being in this group, societal “norms” are set based on your experience, and you likely haven’t experienced the difficulty others have had in achieving success in the same endeavors.

The second way of improving your cultural humility is by understanding the historical realities of oppression and structural racism.⁶ This will help you better empathize with your clients’ circumstances and thereby serve them more effectively. This is especially true for those who may have an inherent distrust of the financial industry—as you help these individuals get financial advice, you’re also helping the entire industry become equal and inclusive.

The final way to improve your cultural humility is to expand your cultural knowledge. The best way to do this is to proactively seek opportunities to learn about others. Watch films and documentaries about groups outside of your own cultural identity. Expand your horizons by connecting with marginalized groups in your community or even by attending local events or festivals. If you’re committed to learning more, there’s no shortage of ways to get involved and educate yourself.

Financial Counseling Techniques Making Financial Planning More Personal

The practice of financial counseling must be undertaken by trained professionals, but there are techniques that financial planners can use in their practice to build closer relationships with clients and help them overcome barriers to financial peace of mind.

Engaging clients in deeper conversations that involve tough emotions and behaviors makes the planning process more impactful. To continue learning, read our recent eBook Tapping into the Emotional Side of Planning to hear more on the intersection of financial psychology and financial planning.

Sources:

¹ Koochel, E. E., Markham, M. S., Crawford, C. and Archuleta, K. L. (2020). Financial transparency scale: Development and potential uses. Journal of Financial Counseling and Planning, 31(1), 14 – 27. doi: 10.1891/JFCP­18­0009

² Klontz, B. and Klontz, T. (2016). 7 steps to facilitate exquisite listening. Journal of Financial Planning, 29(11), 24­26.

³ Bryant, A. (n.d). How to be a better listener. nytimes.com/guides/smarterliving/be­a­better­listener.

⁴ Archuleta, K. L., Asebedo, S. D., Durband, D. B., Fife, S., Ford, M. R., Gray, B. T., Lurtz, M. R., McCoy, M., Pickens, J. C. and Sheridan, G. (2021). Facilitating virtual client meetings for money conversations: A multidisciplinary perspective on skills and strategies for financial planners. Journal of Financial Planning, 34(4), 82­101.

⁵ Hays, P., Klontz, B. T. and Kemnitz, R. (2015). Seven steps to culturally responsive financial therapy. In Financial Therapy (pp. 87­99). Springer.

⁶ Suferin, J. (2019). 3 things to know about cultural humility. hogg.utexas.edu/3­things­to­know­cultural­humility.

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