Helping Clients During Moments of Discomfort

Prioritize the priorities

Investors seek financial professionals who can help them reach their many – and often competing – short- and long-term goals. In establishing those goals, clients often use mental accounting, a process where they treat money differently based on its purpose or source. This means that across a client's goals, each one may have its own risk and motivation. Balancing this does not come naturally to people, and when clients are overwhelmed, it is hard for them to make progress towards one goal, let alone a comprehensive plan. This is where your objectivity makes a world of difference.

Through deep personal relationships, financial professionals can better understand their client’s prioritization, motivation and timeline for each financial goal to create a more accurate, tailored and comprehensive financial strategy that serves their goals in aggregate. If a client tells you they are trying to navigate saving for their own retirement while putting away money for their child’s education goals and using emergency funds to handle unexpected car trouble, you can help them understand the scope of their needs and create a thoughtful plan to accommodate all goals.

To do this successfully, advisors must develop skills grounded in psychology. These include deep discovery, active listening, cultural awareness, positive-inquiry techniques, and knowledge of family dynamics, negotiation strategies and meeting facilitation. Some advisors are already adept at many of these, while others need continuing education to develop those skills.

Prepare for the wealth transfer

A prime example of where those skills are crucial is planning your estate and legacy – topics that surface raw human emotions. Financial advisors know that clients find these conversations uncomfortable and daunting, as discussing end-of-life decisions, incapacity and their family’s legacy from generation to generation can cause them to confront reality.

But at the same time, we know it’s coming. Our profession expects an unprecedented intergenerational wealth transfer of $84 trillion through 2045, according to Cerulli Associates. Within the next 10 years, a third of assets at our firm, Edward Jones, will transfer to the next generations, increasing the frequency of legacy conversations. Our financial advisors have heard the horror stories of disputes among siblings arguing over what their parents left them as beneficiaries, but these conversations also offer an opportunity for financial advisors to bring the family together.

When you involve a client’s family and other loved ones in the estate process, you foster connections that facilitate productive conversations and demonstrate the positive power of relationships for both your client and their heirs.

Historically, wealth transfers have been framed using a fear-driven narrative. The adage “shirtsleeves-to-shirtsleeves in three generations,” though largely unfounded, fostered a culture of mistrust and over-caution. Fear and mistrust are not only emotional pitfalls, but they lead to overly restrictive trusts and self-fulfilling prophecies in which children born into wealth never develop a sense of purpose, autonomy or the ability to sustain meaningful social connections.

This narrative is being replaced by a more positive process, shifting the dialogue from “What keeps you up at night?” to “What gets you up in the morning?” This shift underscores the importance of engaging in healthy discussions, understanding family dynamics and fostering a climate of mutual respect to successfully navigate the complexities of intergenerational wealth management. By offering reassurance, support and guidance for all parties on how to seamlessly transition wealth, you’ve transformed an experience that many worry will be fraught with negativity to one that is positive and sets the next generation up for the best opportunity for success.

Balance the equation in 2024

As inflation and volatility continue into the new year and 2024 presents new emotions and situations to navigate, focus on the skills needed to cultivate deep personal relationships and convert those into comprehensive planning and advice. When clients begin to rely on your guidance for emotional support coupled with your technical savvy, there is greater opportunity to support their evolving needs and help them stay on track towards their goals. The best financial advisors see an opportunity to combine knowledge and empathy to serve clients in a personalized way. Supporting clients emotionally – not just financially – will be crucial to serving and retaining them through continued volatility.

Hasan Malik is chief strategy officer at Edward Jones. Zarak Khan is a behavioral scientist for Edward Jones. Both are helping to improve decision-making in investing for Edward Jones and its 8 million clients and more than 19,000 financial advisors. Edward Jones, its employees and its financial advisors are not estate planners and cannot provide tax or legal advice.

¹ Taking a timeout Understanding the key pitfalls investors make, and how to avoid them (RES-8119I-A) (edwardjones.com)

² Avoid Emotional Investing by Taking a Timeout | Edward Jones

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