Financial Advisors and Emotional Intelligence: Psychology plays a crucial role in financial advising. Whether you’re capturing new leads through empathic marketing techniques or easing the generational anxieties a client has around their personal finances, there is a mental game you need to get comfortable with in order to succeed.
I’ve spent my career developing strong “soft skills” in this area that I teach through my financial advisor business coaching, financial industry career coaching, and leadership coaching programs. However, I wanted to take some time out and discuss something many financial advisors overlook in their daily activities – emotional intelligence.
You need this skill to develop a strong trust between you and your clients. It is a bridge for cultivating empathy with their needs, sensitivity to their goals, and a commitment to their overall financial well-being. Let’s review how you can implement EQ into your financial advising practice.
What is Emotional Intelligence?
EQ refers to the facility you have in recognizing, understanding, and managing your own emotions as well as the unique emotions of those your with whom you’re interacting. Many of the best negotiators and advisors may seem like they have some special skill that sets them apart from the rest, and they do. It is emotional intelligence.
When you have a better understanding of the emotions coming from you and being received by the client, you naturally navigate social interactions with significantly more ease. This allows you to cultivate relationships, improve communication, and deal with stress.
Around 25% of your time spent with a client is focused on non-financial concerns and these tend to be emotionally charged with mentions of family, history, worries, and fear. A good portion of your role as a financial advisor is easing the client’s fear of the unknown.
When you cultivate strong EQ at all levels of your firm, you begin to enjoy many rewards through higher client engagement and goal productivity. Emotional intelligence consists of:
- Self-Awareness: Knowing your own emotions and how they impact your decisions.
- Self-Regulating: Managing the motions you feel so they are aligned with your goals.
- Motivation: Driving to achieve and improve a scenario, often by understanding the reasons or incentives behind a feeling.
- Empathy: The ability to recognize the emotions in other people.
- Social Skills: Improving your interactions with others and building strong relationships.
As you explore how to improve your emotional intelligence and bring those skills to the rest of your firm’s team, you will see better relationships, more empathetic meetings, and an overall boost in trust around your business. These same skills will bleed into your personal life as well. The stronger your emotional intelligence as a financial advisor, the more you are willing to listen to other loved ones and friends, equally benefiting those relationships.
Why Emotional Intelligence Matters to Financial Advisors
Let’s put EQ in context with financial advising. As you may have guessed already, you want stronger relationships with your clients. Not only does this ensure you are meeting their expectations, but now you can anticipate their needs with products and services they will appreciate.
All of these insights come from how you interact together. Clients who may be anxious or stressed about adopting new financial plans require a softer touch. You may have to go the extra mile to learn how they were raised and what socialization around financial matters lead them to have such anxiety.
For example, ask them about their first memory surrounding money. Was is a positive experience? Did they learn a valuable lesson? Or is there some challenging issue that happened due to the way their parents, friends, or coworkers feared the use or application of money?
There was amazing research supported by BYU discussing the relationship between learning financial matters early and how it positively improved romantic relationships later in life. The theory is that children taught how to navigate financial matters from a young age don’t bring in fear, uncertainty, or poor management into their romantic lives.
Unfortunately, the opposite is also true. People raised in an environment where money was scarce or you are offering advance directly contradicting how they understand money will have a much harder time adopting some new financial plan. You have to have the emotional intelligence to recognize, listen, and communicate in ways to overcome these complex feelings.
Leveraging EQ for Financial Advising
The good news is you can boost your ability to deliver strong service though leveraging emotional intelligence. Stress and anxiety are going to be present with some clients. Even the most well-adjusted person with a full book of financial assets probably has some financial skeletons hidden in their closets.
Sometimes these fears come from:
- Lacking the physical or digital assets to make significant financial decisions.
- Dealing with too much credit card or student loan debt.
- Still coming to terms with growing up in a household fearing not having “enough.”
- Suffering from money management challenges and seeking alternative financial services.
- Not understanding the flow of money and how it can benefit their lives in the short and long term.
Whenever your clients are dealing with stress and anxiety around their finances, they are going to be much less likely to have retirement planning in place or a cash reserve in case of emergency.
Your role as a financial advisor is to ease these stressors. You can leverage EQ here by developing a solid bond with your client. Use clear communication and be patient with their needs as you listen to the root causes behind their decision making. This will shine new light on what you need to address to breakthrough any barriers and support them in making better decisions concerning their money and future financial security.
Remember, this is a long-term relationship. Being a trusted financial advisor is looking at the bigger picture while addressing short-term concerns so they pay out over the long run. Give yourself time to develop strong emotional intelligence skills and apply this little by little to your clients and you’ll find success.
Emotional Intelligence as a Financial Leader
Emotional intelligence doesn’t only apply to you and your clients. Most financial advisors have a team or work with peers under a larger company umbrella. These are human beings with similar needs, wants, and desires that you can practice and improve your EQ skills.
There is a good reason why so many top firms and Fortune 100 companies seek out leaders with strong soft skills like EQ. We have all had managers or CEOs that bring in unnecessary stress at work because they don’t seem to have a clue as to how their emotions dictate the working environment around them.
Poor team management naturally leads to lower revenues. Having a strong sense of self awareness and emotional regulation is a crucial step to boost team morale and social interactions.
Emotional intelligence leaders are willing to listen to peers and those underneath them in the company structure. They aren’t afraid to say they don’t have an answer, but are willing to help find a resolution so everyone feels equally supported. This philosophy puts everyone at least because team members become more comfortable sharing their insights and opinions, while maintaining a professional setting.
When done correctly, implementing emotional intelligence in your financial advising firm helps by:
- Boosting Job Satisfaction: Everyone begins to feel heard and valued across the financial advising firm. The happier they are in this environment, the more effort they will put into their job.
- Better Communication: Greater EQ naturally improves listening and communicating with others. You’ll know which employees want to be addressed in public and others who prefer a one-on-one meeting. You are showing you value them as individuals and are willing to meet them where they currently are on their personal journeys.
- Increased Performance: Setting the tone in your firm for emotional intelligence and empathy will translate into your team members doing the same with their clients. It is a trickledown effect that improves communication with clients so you can benefit from feedback and become a more agile firm – boosting your revenues and productivity.
- Lowers Conflicts: When you have strong emotional intelligence, you are better at recognizing the personal triggers that could tip a conversation into conflict. That empathy ensures others feel safe and protected, allowing smooth communication so crucial information is shared without the risk of conflict.
How to Cultivate Emotional Intelligence
You may have to get out of your comfort zone a little to develop emotional intelligence. There are many leadership programs and classes I can suggest, but if you want to go it alone for a bit, some easy suggestions will include:
- Journaling your thoughts at the end of the day or practicing mindful meditation.
- Conduct a self-assessment of our role as a financial advisor through the eyes of your boss, coworkers, and clients with a simple survey.
- Begin to practice active listening by focusing on what the speaker is saying instead of only hearing keywords and phrases.
- Pausing to recognize a strong emotion you feel, then analyzing where it comes from, how it was triggered, and how you can move past it in the future.
- Read books about emotional intelligence or even fun fiction you enjoy with complex characters that dive into the unique perspectives of other people and how they feel.
The goal should be to develop a new level where communication is celebrated and everyone feels valued and heard.
Final Thoughts
One final note I should mention is that there are generational gaps with emotional intelligence. You will find resistance based on cultural norms from some groups because they will view such empathetic commutation as uncomfortable.
However, a universal rule exists with EQ. When you take the time to listen to the actual needs of your clients, they will feel supported and appreciated. That will lead to stronger relationships and trust that you are working hard to provide the best service.
Developing emotional intelligence is a crucial skill any financial advisor should pick up. It will help you grow your practice, improve client relationships, and boost your personal life in ways you may have never dreamed of before.
If nothing else, you’ll learn how to better manage your own emotions and triggers and that results in a much happier, healthier career.
