The formation of a financial wellbeing industry body for advisers has shone a spotlight on the soft skills required for a profession that often has to broach sensitive topics.
The Institute of Financial Wellbeing aims to promote happiness among clients and was founded by 26 financial planners. Since its launch on 25 September, 290 people have expressed interest.
The institute will research the principles of money and happiness, in order to develop ways in which financial advisers can improve the financial wellbeing of their clients.
Ovation Finance chairman Chris Budd says the institute formed out of his book The Financial Wellbeing Book.
Budd says advisers are trained to look at technical issues such as tax, pensions and investments, and not to understand what makes people happy.
He explains that the exam system for becoming a regulated adviser does not provide training on the softer skills needed to help clients understand how to improve their financial wellbeing.“Financial advice tends to focus on money, when it should, in my view, focus on happiness.”
He adds: “This is why we have just launched the Institute of Financial Wellbeing, to provide advisers with information and a knowledge centre on issues around money and happiness, including how to get these skills. In the fullness of time it is an ambition to develop a financial wellbeing qualification.”
But Personal Finance Society chief executive Keith Richards says the Chartered Insurance Institute’s level 4 diploma in financial planning develops core technical understanding across a broad range of key financial planning areas to ensure advisers have the knowledge they need to help clients going through a range of life events.
“For example, Diploma in Financial Planning modules such as J05 Pension Income Options make sure financial advisers are aware of how they can assist clients concerned about the impact of divorce on their pension,” he says.
“Alongside our qualifications, the Personal Finance Society also produces good practice guides and holds Power events across the country to develop adviser soft skills. For example, the Personal Finance Society published good practice guidance earlier this year explaining how to assist customers with dementia.”
A need for qualification
Research from the Mental Health foundation revealed that 74% of Brits are stressed about money, according to Be-IQ director of behavioural insight Neil Bage.
He says if there isn’t a qualification for it already, there needs to be. “I think all advisers have the wellbeing of their clients at heart, else they shouldn’t be in the profession they are in. However, delivering financial wellbeing requires a deeper understanding of the human being – notice I didn’t use the word client – in front of them than the current process affords.
“For example, all advisers go through a ‘know your client’ process, but I would argue that many of them only know their clients superficially. To really understand people, you need to get inside their brain and explore the very thing that makes them who they are, their behaviours.”
He explains that while questionnaires can be helpful, humans are affected by mental shortcuts known as heuristics and judgemental filters which are behavioural biases when making important financial decisions. “These all combine to cloud, influence, affect my judgment, so decisions I make won’t be objective, they will be subjective.”
Oxford Risk head of behavioural science Greg Davies agrees, arguing there is a very broad issue that money is almost always emotional. He explains that increasingly, the best of financial advisers out there are talking to people about more than just their finances.
“They are going beyond just narrow financial needs into helping people to understand and assess the goals, their motivations, their emotional states – something I am seeing more.
“A good financial adviser who is playing a therapist role without necessarily being a ‘financial therapist’, is certainly able to help people to moderate their emotional states, and thereby to make better decisions financially and otherwise. I think we’re increasingly seeing this across the industry, and expansion of the remit of advisers is a good thing.”
Davies explains that he would prefer to see traditional financial advisers expand out that way, rather than have financial therapists just “pick up the pieces on the outskirts without having the financial knowledge”.
He adds: “If you want to talk to people about their money, you need to have the financial expertise and skills as well as the technological expertise and skills. Although that, of course, is a relatively unusual combination. Finance people are often all about numbers, in psychology people are never about numbers.”
Client anxiety
However, Portfolio Adviser spoke with advisers about their experiences dealing with client anxiety around investing and some argued they already go beyond just the numbers.
PGI Financial financial planning director Phillip Instone explains that most advisers already provide some type of therapy as an integral part of their role, empathising and reassuring clients through open questions and education.
“Those who have been bereaved suffer a high degree of emotional stress. Advisers have been dealing with these clients since the business began – it is not called therapy, it is simply compassionate management of the client relationship.
“Having worked with vulnerable clients and those experiencing mental health issues for my whole career, I believe that most financial advisers are called on to address client anxiety in almost every meeting.”
But Instone says when it is apparent that the client has deeper issues such as clinical depression, low self-esteem and deep feelings of guilt, specialist mental health experts have the skills and time to meet the client’s specific needs.
“To merge the two specialist fields, in my opinion, is a hugely challenging and potentially dangerous path that will require significant investment and may only appeal to/benefit a relatively small minority. If a client appears to have serious enough mental health issues to require specialist help, that should take priority and expert financial planning sought later at the appropriate time.”
Concept Financial Planning managing director Paul Richardson agrees. “It is very important to understand that a counsellor or therapist is not there to discuss investments and certainly not there to sell a financial product,” he says. “These two services can never be combined, they require different skill sets.”
Could financial therapists be the cure?
Bage says he thinks people should always start with talking to a good financial planner or money coach.
“We need to look beyond the regulatory tick-box requirements and concentrate on the thing that we’re all good at – developing human relationships and understanding.”
Meanwhile, although Instone and Richardson both remain cautious to the concept of ‘financial therapists’, the two suggest it is something that could work.
“The idea is great but it is in its deployment that will matter; not all clients would want or need this service,” Richardson says. “The concept probably exists in a very raw form at present through financial planners asking a varied number of questions to understand – we term this like trying to peel the layers of the onion to get to the root and the understanding.”
Instone adds: “[This is] for those who have become unexpectedly wealthy very quickly such as lottery winners. Financial therapists could manage both the client’s emotions and feelings, alongside their financial goals.
“These people may be more overwhelmed than people who have built their finances themselves over many years, and therefore need more time exploring their emotional triggers and desires.”
