Change the Nature of the Conversation


Being a financial advisor is tough business. Not only are there the financial, mathematical and analytical rigors of the profession, but these are compounded by the emotional and relationship factors that always come into play in developing and maintaining human relationships. What an advantage it would be if universities in our country offered degrees in Finance based on a curriculum of rigorous analytical discipline and core emotional intelligence. These two skill sets are desperately needed in most interactions between financial advisors and investors.

Let’s focus on emotional intelligence and how that discipline could apply to our profession. As a side note, investors who may read this article should note that the suggestions apply not only to financial advisors but also to investors themselves.

First, what is emotional intelligence? John Mayer of the University of New Hampshire and Peter Salovey of Yale University wrote an article titled, “Emotional Intelligence: Theory, Findings, and Implications,” that defines emotional intelligence as the ability to recognize the meanings of emotion and to reason and problem-solve on the basis of emotional feedback. According to Mayer, “Emotional intelligence is involved in the capacity to perceive emotions, assimilate emotion-related feelings, understand the information of those emotions and manage them.”1

From a financial advisor’s perspective , this means we must treat our interactions with clients not on the basis of listening to ourselves talking to them, but on focusing intently on their reactions (both verbal and nonverbal) to what we are saying and how we are saying it. This is closely akin to tactical portfolio management. Just as scrupulously as we examine the markets for inefficiencies and valuation metrics to fine tune our portfolios for optimal risk/return probabilities, we should consider taking the same care in our approach to the emotional signals of our clients.

Thus, there become four primary branches of emotional intelligence: (1) Perception, (2) Processing, (3) Understanding and (4) Management. From a systematic perspective, one follows the other and this becomes a useful tool for improving our emotional intelligence.

Step one entails acute perception of our clients’ emotional signals, as well as our own. This should be one of the primary goals of any client meeting. Both our presentation data and our conversational talking points are deeply ingrained. This allows you to actively look for emotional cues while your natural conversation flows.

Step two is dynamically processing your clients’ emotional reactions—while NOT responding emotionally to them yourself. Client emotions must be examined through the prism of intellectual data, just as you would evaluate market data.

Step three is honestly assessing client signal. This means acknowledging them for what they are, not what we want them to be. At end of the day, our responses are just variations within the fear/greed spectrum. Understanding which emotional dynamic the client is in—and operating appropriately within it—is critical to understanding how to manage it.

Step four is actively managing client emotions and carefully guiding them toward a positive and productive decision. This means that emotions are the real energy for decision-making and if we are actively managing them, both our own and those of our clients, then we are simultaneously empathetic and connected. Feeling client emotions but reacting with intellectual discipline creates a path that can be navigated together.

Interactions move along an up-and-down corridor. Our job is to not allow the client (or ourselves) to give emotion the upper hand, but we must channel their emotional energy so that action is taken.

Wouldn’t this educational insight be beneficial at our universities and colleges? What if we had more professionals who were just as emotionally competent as they were analytically competent? In the end, I believe investors would be better served by this approach.

1John D. Mayer, Peter Salovey and David R. Caruso, “Emotional Intelligence: Theory, Findings, and Implications,” Psychological Inquiry, 2004. Vol. 15, No. 3, pgs. 197–215.

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Frank Muller

As CEO of Provasi Capital Partners, Frank Muller brings nearly 30 years of experience in building and managing multi-channel distribution services. Frank has been a featured contributor in numerous industry publications, bringing his unique insights and perspectives to relevant issues impacting financial advisors and their clients.

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Frank Muller