Practice Management

Getting a firm handle on emotional intelligence

Feb 5, 2012 @ 12:01 am

By Andrew Osterland

To a man and woman, the 1,300 advisers attending the TD Ameritrade conference in Orlando, Fla., last week likely would agree that the last four years have been the most challenging of their careers.

In fact, the period's extraordinary volatility made managing client emotions as much of a challenge as managing investment portfolios.

“The first step in managing client emotions is for advisers to ask themselves who they are and what their tendencies are,” said Matt Robinson, chief communications officer at consulting firm PsyMetrics Global, who ran a workshop on emotional intelligence at the conference.

InvestmentNews joined three RIA firm executives who attended the workshop to discuss why understanding emotional intelligence — the emotional underpinnings of behavior — is central to helping clients avoid mistakes, and vital to attracting and retaining clients.

Acknowledging Mr. Robinson's point about adviser self-awareness, Gordon Bernhardt, chief executive of Bernhardt Wealth Management of McLean, Va., which manages $170 million, said that he knows who he is.

“I'm a numbers person. I'm one of those guys who give a lot of information to clients. I know I can be a stumbling block for some of them,” he said. “It can seem obvious to me what the right decision for a client is, but I need to communicate in a way for them to more easily grasp it.”

Like most financial advisers, Mr. Bernhardt's ideal clients are open and eager to convey their life goals and financial objectives, content to let him execute a plan that they have drafted together, and calm when things go poorly. Unfortunately, such clients are few and far between.

“I lost a client who pulled out of the market at what I thought was the wrong time. I had another who wanted to pull out in March of 2009,” Mr. Bernhardt said.

“Fortunately, I convinced her not to. In retrospect, the first client was more of a control-oriented person. The second one, not as much,” Mr. Bernhardt said.

Understanding clients' personalities and differences in motivation is the key to making sure that an adviser doesn't alienate and potentially lose them, Mr. Robinson said.

Regardless of the quality of an investment plan, using a cookie cutter approach in communicating with clients is a recipe for disaster, he said, adding that advisers should assess which of five basic emotional needs drive a client's behavior.

Those drivers, Mr. Robinson said, are the needs for stability, attention, control, information and approval.

Still, he cautions advisers not to define their clients too narrowly or put them in a single bucket.

“Everybody has the five needs to varying degrees, but you don't want to stereotype clients,” he said. “The purpose of this is to understand the emotions that drive client behavior and to communicate with them in a way that can address that behavior.”

First impressions with new clients are crucial, panelists said.

“We have to be quicker reading people and assessing what their needs are,” said James Serrano, director of business development at ARS Wealth Advisors of St. Petersburg, Fla., which manages $230 million.


Although all advisers can improve their ability to communicate with their clients, often an adviser's strengths don't play well to a client's needs. For solo practitioners, that creates difficulties, but firms with multiple advisers, such as Mr. Serrano's, have the opportunity to pair clients with compatible advisers.

“Part of my job is to identify client types and to match them with an appropriate adviser,” he said.

Volatile markets and the stress they put on investors make these softer personality assessments crucial.

“These markets are creating more anxiety for clients and we have to respond,” Mr. Bernhardt said. “How we respond is extremely important.”

Effective communication with a client often can involve something as simple as letting them set the time for a face-to-face meeting. Individuals with a high need for control want to be given alternatives from which they can choose. Others look for their adviser to make the investment decisions, and merely need coaching and confirmation that strategies jibe with their broader objectives.

Identifying these differences accurately is increasingly key to maintaining a healthy practice, advisers said.

“Financial planning is more than a business; it's about understanding where people are in their lives and what needs they have as individuals,” said Bob Fasick, director of business development at Financial Enhancement Group LLC, an Anderson, Ind.-based firm that manages $160 million.

Noting that he has five certified public accountants on his financial planning staff who have “little people experience,” he said that the need for sensitivity with clients extends beyond just the advisers in a practice.

“Our paraplanners have a lot of contact with clients, and their communication skill sets are extremely important, too,” Mr. Fasick said.

In an environment that is likely to continue testing the emotional stability of investors, those skills will only become more important.


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