Why Psychology is Important in Financial Planning
The psychology of financial planning is not to transform financial planners into therapists but to help professionals improve their listening and communication abilities and benefit clients.
Why Psychology Matters
Financial professionals focus on their clients’ psychology to better understand the biases, actions, and perspectives that influence client decision-making and financial security.
By being more alert, advisers and planners can develop stronger relationships with their clients, ultimately leading to happier and wealthy clients. Hence, the importance of psychology in finance should be generally considered.
Financial planning isn’t only about crunching numbers and making projections. Financial planning identifies and responds to attitudes, behaviors, and situations that impact financial decision-making, the client-planner relationship, and the client’s economic well-being. At the same time, behavioral finance, which has been around for decades, involves client communication, counseling, learning concepts, and applying tools.
Working with emotional clients requires skills advisors hone over years and decades of practice. Advisors must learn their clients’ money beliefs by exploring how money was defined for them growing up and seeing if their views align with those of their spouses.
Advisors must also learn empathy, as there are emotional issues when clients see their money drop in value.
Role(s) of financial planners in Clients’ Future Goals
Working with a financial planner with a financial psychology background can only benefit clients in the long run. A well-designed financial plan can guide customers’ spending, saving, and investing decisions.
However, there are definite connections between clients’ personalities and spending choices. In other words, a client’s financial thinking might influence their choices even when a strategy is in place.
The most efficient way to build a long-lasting and fruitful connection with a client is for financial planners to:
- Comprehend their personality.
- Be well-versed in communication, counseling, and crisis management strategies.
- Be able to foresee potential financial conflicts.
Working with a financial advisor who can guide customers away from behavioral problems guarantees they reach their long-term financial objectives.
Practical Use of Psychology
Retirement planning must address each client’s hopes and concerns for the future. Ultimately, how these hopes and concerns get addressed will drive the cost of retirement.
Retirement Planning
A planner needs to explore the thinking behind the goal of a retiree. He should begin by asking the person to elaborate on their vision for retirement.
The planner should inquire about the couple’s shared vision and whether the person is married or partnered. How will they prepare for a shift from earning to spending? Where will they choose to live, and why?
Our minds can play tricks on us when it comes to money. We spend more using a credit card because we feel less pain than if we were to hand over cash. Sale prices cause us to make too many purely discretionary purchases. We focus too much on the short term and miss the bigger picture.
These lapses can lead to anxiety, cash flow issues, and a lack of progress in achieving goals. A planner should be able to identify and talk about the unsound beliefs that can drive a person to make poor financial decisions.
Investment Planning
In times of market volatility, a planner may need to calm the nerves of panicked investors by helping them keep their eye on the long term. Be ready to take phone calls from clients whose financial troubles have led them to extreme anxiety, a sense of helplessness, or worse.
After addressing these emotions, you will only consider the individual’s financial concerns. They want to work on things they have some control over, including their finances.
Psychology and Financial Planning Crisis
Although most financial planning client cases do not reach crisis level, the planner must be ready for such a potentiality. All planners need coaching on helping people cope with the more common day-to-day stress of finances.
Focusing on the psychology of financial planning as a financial planner or advisor should drive how and why you crunch the numbers in a personal financial plan.
When choosing a financial planner, get a trusted, reliable personality with a voice of proficiency. Then you’ll achieve a super financial goal with lifetime happiness.
Contact Information:
Email: [email protected]
Phone: 3604642979
Bio:
After entering the financial services industry in 1994, it was a desire to guide people towards their financial independence that drove Aaron to start Steele Capital Management in 2013. Armed with an extensive background in financial planning and commercial banking coupled with a sincere passion for helping people, Aaron has the expertise and affinity for serving the unique needs of those in transition. Clients benefit from his objective financial solutions and education aligned solely with
helping them pursue the most comfortable financial life possible.
Born in Olympia, Washington, Aaron spent much of his childhood in Denver, Colorado. An area outside of Phoenix, Arizona, known as the East Valley, occupies a special place in Aaron’s heart. It is where he graduated from Arizona State University with a Bachelor of Science degree in Business Administration, started a family, and advanced his professional career.
Having now returned to his hometown of Olympia, and with the days of coaching his sons football and baseball teams behind him, he now has time to pursue his civic passions. Aaron is proud to serve on the Board of Regents Leadership for Thurston County as the Secretary and Treasurer for the Morningside area. His past affiliations include the West Olympia Rotary and has served on various committees for organizations throughout his community.
Aaron and his beautiful wife, Holly, a Registered Nurse, consider their greatest accomplishment having raised Thomas and Tate, their two intelligent and motivated sons. Their oldest son Tate is following in his father’s entrepreneurial footsteps and currently attends the Carson College of Business at Washington State University. Their beloved youngest son, Thomas, is a student at Olympia High School.
Focused on helping veterans and their families navigate the maze of long-term care solutions, Aaron specializes in customized strategies to avoid the financial crisis that care related expenses can create. Experience has shown him that many seniors are not prepared for the economic transition that takes place as they reach an advanced age.
With support from the American Academy of Benefit Planners – an organization with expertise and resources on the intricacies of government benefits – he helps clients close the gap between the cost of care and their income while protecting their assets from depletion.
Aaron can help you and your family to create, preserve and protect your legacy.
That’s making a difference.
Disclosure:
Disclosure:
Investment advisory services are offered through BWM Advisory, LLC (BWM). BWM is registered as an Investment Advisor located in Scottsdale, Arizona, and only conducts business in states where it is properly licensed, notice filed, or is excluded from notice filing requirements. BWM does not accept or take responsibility for acting on time-sensitive instructions sent by email or other electronic means. Content shared or published through this medium is only intended for an audience in the States the Advisor is licensed in. If you are not the intended recipient, you are hereby notified that any dissemination, distribution, or copy of this transmission is strictly prohibited. If you receive this communication in error, please immediately notify the sender. The information included should not be considered investment advice. There are risks involved with investing which may include market fluctuation and possible loss of principal value. Carefully consider the risks and possible consequences involved prior to making an investment decision.
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