With the CFP Board implementing the new Psychology of Financial Planning Principle Financial knowledge topic, the financial services industry is increasingly focused on the components of financial psychology and emotional intelligence.<\/p>\n
Emotional intelligence, or EQ, is a part of the interpersonal cluster of the\u00a0CFP Board’s Financial Planning Competency Framework<\/a>. In the context of financial planning, EQ is the ability to establish trust with clients by demonstrating empathy, sensitivity, and commitment to client well-being. EQ is an examination of our own emotions, and when we know our own emotions better, we can then help others understand theirs.<\/p>\n We know that even as far back as 2009, financial advisors spend at least 25 percent (or more) of their time dealing with clients’ emotions during client meetings.1<\/sup>\u00a0Since then, planning has only gotten more personal and more holistic in nature. Engaging with clients on a deeper level is therefore gaining importance.<\/p>\n Practicing EQ skills can help you learn more about your emotions and the emotions of your clients for closer, more productive planning relationships.<\/p>\n At the broadest level, EQ is about how you handle yourself and others. There are five primary components:<\/p>\n Having higher EQ can enhance your family and relationship dynamics, and your physical and emotional health. It can also help you find and define your purpose, as well as lead to higher levels of success in many aspects of your life.<\/p>\n To get more comfortable with others’ emotions, you first must become aware of your own. This step of learning and applying EQ may feel uncomfortable, but it’s an investment in yourself, your business, and your clients’ experiences with your firm.<\/p>\n Advisors can start with an emotional intelligence assessment and bring recognition to your current level of EQ. Once you know your EQ level, you can learn new tools and techniques to help increase your proficiency in each of the five core areas of EQ.<\/p>\n Increasing your own EQ may involve reading books, blog posts, research journal articles, and listening to podcasts dedicated to helping people advance their EQ. There are also tons of dynamic speakers in the field, hitting on all the five key areas.<\/p>\n To increase your firm’s EQ, review monthly or quarterly case studies examining client emotions during a meeting. Being able to discuss how an advisor could handle that emotion can increase the EQ of all advisors involved.<\/p>\n A firm-wide focus on improving EQ can enhance the level of service you offer clients and contribute to more successful client outcomes.<\/p>\n Client connections are vital to the work of financial advisors. When engaging with clients who are stressed and anxious, or who even seem unwilling to adopt your financial plans, consider learning more about how they were raised and socialized around money.<\/p>\n Ask them about their first money memory, or even the first financial mistake they learned from. Using questions like these can be ice breakers to begin facilitating more personal conversations about money beliefs because oftentimes, there are deeply held financial attitudes that impact financial planning.<\/p>\n For example, parents are considered to be the first influencers on what ideas and beliefs we have around money, effectively acting as our first financial coaches. Research shows that if your advisor recommendations conflict with your client’s parental recommendations, your client may ignore your suggestions.2<\/sup><\/p>\n By knowing your client’s background, you may increase the likelihood of planning success and build long-term planning relationships.<\/p>\n Creating a stronger bond between client and advisor is always important, but even more so now as the ongoing pandemic increases financial stress and anxiety.<\/p>\nIncreasing EQ for Yourself and Firm<\/h1>\n
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Creating Deeper Connections with Clients<\/h1>\n
EQ Can Take Financial Planning to the Next Level<\/h1>\n