As financial planners, the ability to exhibit empathy during planning conversations can significantly enhance how we connect with our clients throughout the business cycle and improve client outcomes. However, in order to have these empathetic exchanges, we must first cultivate empathy within ourselves and then for others.

Why Empathy Matters in Financial Planning

In financial planning, the power of empathy cannot be overstated. Empathy plays a crucial role in the effectiveness of financial planners by helping them build trust, personalize solutions, reduce anxiety, and support client retention.

Empathy can be broken down into three primary types: emotional empathy, cognitive empathy, and empathetic concern. Cognitive empathy, which is the ability to understand someone’s feelings and perspective, is the most effective type for most financial planning conversations. It allows you to understand what your clients are feeling and relate to your clients’ experience while maintaining professional clarity.

Empathy Can Be Learned and Improved Upon

Empathy is a social skill that can be developed and honed. Even if you are already empathetic, you can still actively work on enhancing and improving these skills in client interactions. It starts with self-empathy and then extends to others. This is essential for fostering meaningful and effective financial planning relationships.

How do you know if you are empathetic? Try taking a self-assessment or a questionnaire. Avoid using tools such as these to define you and instead use them to get a sense of how empathy is measured and how others might see your actions.

• Evaluate your reactions to people who are different from you. Empathy involves understanding people’s feelings even when their experiences or background differ from your own.
• Ask a trusted friend or colleague how they see you and listen to what they say without judgment.

Recognizing the need to enhance your ability to empathize requires introspection, which can be challenging. It involves acknowledging areas where you may struggle, such as dealing with emotional clients.

For example, if you find that you automatically hand a tissue to a crying client and then quickly move on to the next point without addressing their emotional state, it might indicate an area for improvement. Genuine empathy would involve attending to the client’s emotional needs in that moment, providing comfort, and then carefully navigating the conversation to address their concerns.

What Are Empathetic Exchanges?

An empathetic exchange is a type of interaction or communication characterized by the capacity to understand and share the feelings and experiences of another, fostering a deep sense of connection and mutual understanding. Exchanges of this type come easier to financial planners who prioritize empathy in their practice.

There are as many variations on empathetic exchanges as there are clients and circumstances.

Here are just a few actions that are indicative of an empathetic exchange:

• Compassionate language: Using words and tones that convey care, concern, and warmth, while creating a safe space for open dialogue are common indications of an empathetic exchange.
• Authentic curiosity: Taking an interest in learning about other’s lives and goals is often a display of empathy in conversation.
• Shared experiences: Having conversations revolving around the common struggles and joys of life can be indications of an empathetic exchange.

Overcoming Hesitancy and Cultivating Empathetic Exchanges

For many of us, empathy often begins with those closest to us—our family and friends. Establishing empathetic connections in these personal spheres can create a foundation for extending that same compassion and understanding to our clients.

Research indicates that we’re less likely to engage empathetically with those we don’t know well, mainly due to a fear of misunderstanding or misinterpreting their feelings.¹ This type of hesitation can find us shying away from fostering deeper connections.

Why do we hesitate to show empathy at times? Here are three potential reasons:

• Fear of vulnerability: Some may worry that opening up emotionally could lead to discomfort or rejection.
• Past experiences: If someone has had bad experiences in the past, where they felt judged or misunderstood, it may make them cautious.
• Lack of knowledge or experience: Others might lack understanding or confidence in how to respond appropriately, fearing that their attempts at empathy could be perceived as insincere or inadequate.

Key Components of an Empathetic Exchange

In addition to becoming more empathetic, you can learn or improve your ability to integrate empathy into planning conversations with clients. The key to doing so is to understand the foundation of an empathetic exchange—and why these are important:

Active listening:  At the top of the list is active listening because it shows that you are fully present and engaged in the conversation. This makes the speaker feel heard and valued, which is essential for building trust and connection.

Emotional validation:  It allows the person to feel that their feelings are legitimate and worthy of acknowledgment. This is important because it reduces feelings of isolation and encourages openness, creating a space for more genuine communication.

Non-judgmental understanding: When you respond without judgment, the speaker feels safe to share openly, knowing they won’t be criticized. This fosters an environment where emotions and experiences can be expressed freely.

Compassionate language: The words and tone used convey empathy and care, which helps the speaker feel supported emotionally. Compassionate language also makes the exchange more positive, reducing the chance of misunderstanding or emotional harm.

Reflective listening: By restating and asking for clarity on what the speaker has said, you ensure that you truly understand their perspective.

Seizing Opportunities for an Empathetic Exchange

When engaging with a client, it is always best to lead with empathy. Financial decisions are deeply personal, and many clients may feel vulnerable discussing their financial struggles or goals. Leading with empathy helps create a safe environment where clients feel heard and understood, fostering trust.

Opportunities to insert an empathetic exchange are often most helpful when a client is frustrated, upset, or feeling embarrassed.

Leading with empathy can usually be more impactful in these moments. Here are 10 examples of opportunities to have an empathetic exchange to help the client move forward:

1. Overcoming financial shame

Client: “I’ve made so many bad financial decisions. I feel like I’ll never recover.”

Planner: “I completely understand why you feel that way, and I want to reassure you that you’re not alone. Many people have been in your shoes and found a way forward. The fact that you’re here means you’re taking control, and we’ll tackle this one step at a time together.”

2. Struggling with budgeting

Client: “I’m fed up with trying to save for college. I don’t know what to do.”

Planner: “It sounds incredibly frustrating. I’m here for you, and we can work through this together. Let’s break it down into manageable steps and see where we can make adjustments.”

3. Dealing with unexpected medical bills

Client: “My medical bills are overwhelming, and I can’t see a way out.”

Planner: “I’m so sorry you’re dealing with this. Let’s take a closer look at your options and see if we can find a plan that eases this burden.”

4. Job loss anxiety

Client: “I’ve lost my job, and I’m scared about what this means for my finances.”

Planner: “I can’t imagine how challenging this must be for you. Let’s focus on immediate steps to stabilize your situation and explore new opportunities.”

5. Estate planning fear

Client: “The thought of planning my will is overwhelming.”

Planner: “I understand this is stressful and can be uncomfortable. I’m here to guide you through this process and ensure everything is in place for your peace of mind.”

6. Anxiety about retirement savings

Client: “I’m worried I haven’t saved enough for retirement.”

Planner: “I understand, and I want to help you. It’s a common concern and I want to help you through this. Let’s review your current savings and develop a strategy to help you feel more secure about your retirement.”

7. Upset from market volatility

Client: “The recent market changes have me very worried about my investments.”

Planner: “Market volatility can be very worrying. Let’s go over your portfolio and discuss any adjustments needed to align with your long-term goals.”

8. Grieving financial loss

Client: “I’ve lost a substantial amount of money, and it feels like the end of the road.”

Planner: “I hear you, and I can imagine how painful that is. Let’s look at where we stand now and how we can rebuild together.”

9. Confusion about financial products

Client: “There are so many financial products, and I don’t know which to choose.”

Planner: “It’s understandable to feel overwhelmed. Let’s simplify the options and find the ones that suit your needs the best.”

10. Burnout from debt repayment

Client: “I’m exhausted from trying to pay off my debt.”

Planner: “Debt repayment can feel incredibly draining. I’m here to support you, and together we can explore ways to make this process more manageable.”

Avoiding Pitfalls

Sometimes it is not easy to know what to say in a particularly difficult exchange with a client who is feeling frustrated or upset about their situation. If nothing else, it is also fine to pause for a moment and sit with a client to acknowledge their feelings. Most importantly, keep these three behaviors in mind to avoid undermining your efforts at empathy:

1. Acknowledge and validate their feelings. Clients who do not feel heard are not easy to build trust with.
2. Take the time to stop and genuinely address their concerns. Offering a tissue is just the start—stay focused on how you can help them get past the difficulties.
3. Allow the client a moment to sit with their emotions and provide support. Rushing to get to the next topic only carries the emotions to the next topic of conversation.

It is better to say less than to say something that may escalate the client’s feelings. Here are some examples of what to say (and what to avoid saying) in a specific scenario.

Client going through a challenging divorce:

• Try: “This must be a challenging time for you. How can I support you through this transition?”
• Instead of: “What happened?

Client experiencing a job loss:

• Try: “I’m sorry to hear about your job loss. How are you coping with it, and how can we adjust your financial plan?”
• Instead of: “Why did you get fired?”

Client going through a healthcare crisis:

• Try: “Health issues can be very stressful. What options have we explored for covering these costs?”
• Instead of: “Why didn’t you have insurance?”

Clients experiencing investing fears:

• Try: “It’s normal to be cautious about investments. What specific concerns do you have, and how can we address them?”
• Instead of: “Why are you so afraid of investing?”

Clients having difficulty saving:

• Try: “It sounds like saving for your child’s education is important to you. What barriers have you encountered, and how can we work around them?”
• Instead of: “Why haven’t you started saving yet?”

Being an empathetic planner is not just about having the right answers; it’s about being present and showing you care. This approach not only helps in resolving financial matters but also builds lasting relationships with your clients.

By prioritizing empathy in your interactions, you can use empathetic exchanges to create a trusting environment where clients feel understood and supported.

For more ideas on what you can do to support clients experiencing stress during the planning process, check out our blog Financial Advisors Help Clients Cope During Times of Financial Stress.

Sources:

¹ Yuki Motomura, Akira Takeshita, Yuka Egashira, Takayuki Nishimura, Yeon-kyu Kim, Shigeki Watanuki, “Interaction between valence of empathy and familiarity: is it difficult to empathize with the positive events of a stranger?” National Library of Medicine, 2015

DISCLAIMER: The eMoney Advisor Blog is meant as an educational and informative resource for financial professionals and individuals alike. It is not meant to be, and should not be taken as financial, legal, tax or other professional advice. Those seeking professional advice may do so by consulting with a professional advisor. eMoney Advisor will not be liable for any actions you may take based on the content of this blog.

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