We often hear questions around how financial coaching can and should be incorporated into an advice practice.
First of all, defining coaching is difficult. It can be interpreted in many different ways.
Two of our speakers at a recent roundtable – financial wellbeing guru Chris Budd and business coach and trainer Jan Bowen-Nielsen – emphasised it is not just about clients’ emotional relationship with money.
43% of advisers report coaching is their favourite part of the job, according to the Personal Finance Society
In the wider sense, it contributes to a holistic, client-centred and practical approach to planning. It empowers clients and helps them develop the skills and behaviours they need to help themselves. And it’s important to stress that guiding clients towards that empowerment in no way disintermediates the adviser.
Coaching should begin with advisers truly focusing on clients and ‘actively’ listening. Only through listening in this way, asking open-ended questions and letting clients explain their thoughts and feelings, can planners start to understand the self-limiting barriers blocking clients from achieving greater wellbeing and happiness.
For example, Bowen-Nielsen suggested starting initial meetings with very high-level questions like: “What makes now the right time to take this meeting?” And, rather than ticking off a box on your discovery meeting template, probe deeper with questions like: “How does that make you feel?”
Coaching is not about giving solutions or problem solving: that’s what advice is for
Coaching is not about giving solutions or problem solving: that’s what advice is for. Coaching is about helping clients to see the solutions for themselves.
As well as the great benefits it can offer clients, it’s the coaching part of the job that can be most rewarding for advisers. In fact, according to research from the Personal Finance Society, 43% of advisers report coaching is their favourite part of the job.
Yet despite that enjoyment, advisers don’t seem to shout about it too often to clients. From the poll at our roundtable, one in three respondents who said they incorporated coaching into their advice said they didn’t make it explicit to clients, nor did they charge separately for it.
This raises an interesting question when it comes to coaching in advice: who owns the outcome? The client needs to leave thinking the result was their decision. Because if they think they own the decision, they’re much more likely to follow through with the plan.
Knowledge alone is not enough. Discovery and self-awareness are key
Ian Richards, who runs Work to Live Financial Planning, was our third guest speaker and said he was a big advocate of helping clients learn something about themselves they didn’t know. Knowledge alone is not enough, he said. Discovery and self-awareness are key.
What was clear from Budd is that people need this coaching and education. One theory, he explained, is the hypothesis that one’s financial wellbeing is influenced by three main factors: genetics (50%), circumstances (10%) and “intentional activity” (40%).
Budd also said there is an ingrained psychological gap in humans when it comes to thinking about their future selves. It’s worth thinking about how our brain operates differently when thinking about yourself versus others, and the ‘now’ versus the future.
When you think about yourself in 20 years’ time, you use the part of your brain you use to think about others – in essence, viewing yourself as a stranger
When you think about yourself you use a different part of your brain from that used when thinking about others. But, when you think about yourself in 20 years’ time, you use the part of your brain you use to think about others – in essence, viewing yourself as a stranger.
This means asking people at age 30 to save into a pension for when they are 60 will feel like they are giving their money away to a stranger.
This is a battle advisers are gently negotiating with every client they’re working with, particularly younger ones.
Advisers come up with fantastic plans and solutions for clients, and yet generating 100% buy-in from the person sitting opposite you can be difficult. And, of course, a plan that isn’t followed is no use to anyone. These kinds of psychological battles highlight the great benefit of building coaching into your advice process.
Ben Peele is managing director of PortfolioMetrix UK
Comments