Know Your Money with Bronwyn Waner and Craig Finch
Know Your Money with Bronwyn Waner and Craig Finch
89. The Power of Emotional Connection in Financial Strategies 3 of 7
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How can an emotional bond transform your financial planning experience? In this episode of Know Your Money, special guest Rob Mac Donald shares his expert insights on the pivotal role that emotional connection plays in effective financial advising. Promising you a fresh perspective, Rob draws an intriguing parallel with parenting techniques, emphasizing the concept of "connection before correction." Learn how fostering a genuine emotional bond with clients not only enhances trust but also ensures that financial advice truly resonates with their life goals. From mastering the art of open-ended questions to understanding the deep-seated emotional ties clients have with their assets, Rob's advice is designed to make financial plans more tailored and actionable.
We also delve into the vulnerabilities that clients often face while discussing their financial situations and how establishing a strong, emotional connection can build the necessary trust and confidence for successful planning. Rob shares the cautionary tale of Rose, who lost a large portion of her retirement savings due to a lack of understanding from her financial planner. This story serves as a critical reminder of why comprehending clients' emotional relationships with their assets is indispensable for effective financial advice. Tune in to discover why emotional connection is the cornerstone of robust financial planning and how it can transform both your practice and client relationships.
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Welcome to Know your Money, where we will explore our relationship with money and how the psychology of it impacts our financial decisions, as everyone thinks about money differently. In our podcast, we'll be presenting a variety of financial topics in an easy to understand way, which we hope will assist you with managing your money. Welcome to Know your Money, Craig Warren. How are you today?
Speaker 2:Me first Warren Looking good, how are you?
Speaker 3:I'm good, Craig Bronwyn. How are you?
Speaker 1:I'm very well, thank you, you look good Gigi.
Speaker 3:Yeah, nice and breezy. A nice happy day today and we're graced with Rob's presence again, rob how are you?
Speaker 1:we've got to get this series going right, oh no, that's brilliant.
Speaker 4:It's great to be back. Thank you very much, and it's still warm and joe big.
Speaker 3:I can't believe it, you guys what have you taken, sort of a monopoly on warm weather in South Africa you know it's crazy, just as a side note. So you know I was in the UK and it's apparently summer there. It's hotter in Joe Verger in the day than it is in the UK in this summer. Okay, so I'm not going back.
Speaker 2:So, Rob, are we on to the third C? Is this right?
Speaker 4:Yes, yeah, we're on to the third C, which is connection. Okay, which might seem odd to have that as part of a financial planning conversation, but yeah.
Speaker 2:Because we're connecting in the studio every Monday. Yeah, that's right.
Speaker 4:Yeah, yeah, and I'm going to be bold enough to give you a direct quote from my book, if I may, yeah absolutely.
Speaker 2:Which is that?
Speaker 4:connection is the fuel that drives the engine of financial advice, which might sound quite extreme. I like that, that's true. And I suppose maybe we could even take it back to parenting. So I don't know if you've heard the term connection before correction. Yes, but you know, from a parenting perspective, if you want to reprimand your child and put them on the straight and narrow, the best way to do that is to connect with them emotionally. You know, before you put them on the straight and narrow. You know.
Speaker 1:So what Rob means by that is, if you're standing and go, stop doing that, they're not necessarily going to listen, but if you go down and connect with your eyes and say, please can you stop doing that, they're more likely to listen.
Speaker 3:Well, why did you do that? That's a big one for me. I want to do that with a boy, okay. Well, yeah, you'll see and when he says something funny, I'll laugh and then say, okay, we don't do that.
Speaker 4:So, warren, if I might give you a little tip here and Bronwyn will know this but part of this thing about connection is that we I believe that financial planners ideally adopt what I call a coaching approach to financial advice.
Speaker 3:Yes.
Speaker 4:And in that, one of the key sort of tools that you use is questioning and open-ended questions. But open-ended. Yeah, but we do talk about. The one question you don't want to ask is why? Because, why? Elicits a defensive response.
Speaker 3:You know, I have noticed that with my wife. Yes, yeah.
Speaker 4:So it's just a little tip, but if you're thinking of asking why rather than just say what, but what happened there? You know your son walks over the glass or whatever.
Speaker 1:Well, how did that happen? How?
Speaker 4:did that happen, you know, or what was going on?
Speaker 3:What were you thinking about and you'll find there'll be a less defensive response Interesting.
Speaker 1:Thank you, pleasure Do you want to teach them.
Speaker 2:That's defensive, because this is all new parenting. My dad used to say if you don't stop it, you're going to connect with my hand, so that was the way they dealt with it in those days, which wasn't the right way.
Speaker 3:No, I mean, my mom used to just say and it was enough, wasn't it? Wait till your father gets home.
Speaker 4:That was all oh no, it's another form of connection.
Speaker 2:But, rob, are you saying connecting with a client has to connect with the plan that you've proposed Connect before, correct?
Speaker 4:Yeah, so I think there's a couple of sort of areas of connection. I mean, I think the first point is and I'm sure you and Bronwyn can talk to this is that ideally, the client will connect with you as a human being. And the reality is we connect emotionally, we don't, you know. So you know, bronwyn or Craig, you might be the brightest financial planners in the world with the greatest advice, but if I can't connect with you emotionally as a client, I'm not going to really, you know, stick to the plan or work with the plan. So that's the first part of connection, I think, is that emotional connection. And we as human beings, we are wired for connection. You know that's how we operate.
Speaker 4:The second part of that would be, to your question, craig, is to say well, once I've connected with you, the second part as a client that I need to work out is what's the connection between my money and my life? And I mean, I think the example that we've chatted about previously may be worth just discussing is the 30-year-old who you're trying to encourage to save for retirement? Yeah, and I sit here and think as a 30-year-old, geez, that's a long way off. I can't see the connection between that and my life. You know why would I do that? So that's the other part of connection is helping clients see the connection between their life and their money.
Speaker 4:So working that connection, but I think in the first instance it's about this emotional connection with clients, and I mean maybe you could talk to the fact that you probably connect in different ways with different clients and there's some people you don't connect with, yes, who ideally I'm sure you don't want to work with yeah.
Speaker 2:Yeah, hopefully that you as a client find the right financial planner that you can connect with and go the whole journey with that planner to make sure that your outcomes are what both of you feel are the right outcomes for you. So that's very. I think that you really hit the nail on the head about the connection Before you can. If you connect properly, then the plans will come into place and you'll keep the plan going and you'll make sure that that happens. You won't second guess the plan. I think that's very important.
Speaker 4:Absolutely, because I mean, I think what's interesting, because I think a key part of connection is empathy. You know, being able to be empathic with your clients. And some research was done in the States by a woman named Helen Reese who's a medical doctor. And some research was done in the States by a woman named Helen Reese who's a medical doctor, she's a psychiatrist and she actually teaches empathy skills to doctors in the States and they've done research there showing that doctors who've been trained in these empathy skills have better outcomes with their clients or their patients than those who haven't. And it talks to that because if I've connected with you, it's more likely that I'm going to take the pain of not having my coffee every morning because I've realized now that actually that's not good for my financial health. But if you're just telling me that because you think you're smart and I'm just a silly client, then I probably won't listen to you, in the same way that Warren's kids are not going to listen to him if he just shouts at them.
Speaker 3:True, Wow, I think it's important to…. It kind of worked with my mum and my dad. I think it's interesting, though, is when you say connection, how closely it ties back to confidence. Then Because, if you connect with the person, you can be confident in the plan you've made with them.
Speaker 1:Because if you connect with the person, you can be confident in the plan you've made with them, and I was going to say as well, I think, as the planner you have to have confidence that if you don't feel the connection, it's probably better for the client, and the same with the client and the advisor If the connection doesn't feel good, then they're potentially not the right person that's going to help you through one of the most important areas of your life. So trusting your connection and having confidence in it, I think is key.
Speaker 4:Yeah, yeah, absolutely. And again it goes back to that issue of trust, because you know, the relationship that you have with your clients is not, you know, a one-off appointment relationship or a one-year relationship. It's like a 20, 30, 40-year relationship. So it's almost like a marriage and therefore there's got to be that emotional connection and that trust. And what's interesting about trust is there was a book written called the Trusted Advisor. It was actually talking about advisors of any professional nature, not just financial planners, but any professional who gives advice and they actually came up with a trust equation. And there are four elements to this trust equation, two of which are linked to competence, so you've got to be competent and you've got to be reliable. So those are important elements of trust, but two are completely emotional.
Speaker 4:The one aspect that they talk about that builds trust is intimacy and, in a way, if I'm coming to you as a client of yours, I need to be able to share with you anything that's going on in my life. Yeah, whether I'm and I think this is an important part whether I feel good about it or not. You know so, because I think the one thing that happens with money is, as a client, I can often feel judged. So I come to you I mean, I know from my perspective and I've been working in the industry for 25 years I come and see you as a financial planner and I worry that you're going to say geez, rob, didn't you learn anything in the last 25 years? You know you only saved this amount. I can't believe how much you spent. So there's a sense that I'm going to be judged when I come and see you. That's why it's so important that I feel a connection with you, because otherwise I'm going to run a mile.
Speaker 3:That's why it's so important that I feel a connection with you, because otherwise I'm going to run a mile. Yeah, very true. Hi everyone, if you would like to get a copy of Rob's book the Seven Pillars of Financial Health, we have shared a link in the bio with the web address as well as a discount code you can use. The book retails for R375 excluding delivery, and with this promo code, you will pay 370, which includes delivery. Alternatively, you can find the book at exclusive books or other bookstores. We would like to thank you for listening and please remember to like, subscribe and share the podcast so that we can bring on more exciting guests like Rob to help you with knowing yourself and knowing your money. Yeah, no one wants to feel like that, do they?
Speaker 2:Well, then you won't take action.
Speaker 3:Well as Rob said, you won't come back.
Speaker 2:Yeah.
Speaker 3:If my interaction with Craig is I can't believe you haven't got a retirement fund yet, then I'm going to go. Yeah, well, you're not the guy for me, you're already going down on me. Yeah, exactly.
Speaker 4:Yeah, yeah, and it's such an important sort of aspect of financial planning is that you know clients are exposing themselves to financial planning.
Speaker 2:Yeah, very true.
Speaker 4:And you have this great sense of vulnerability, you know, and that vulnerability can either, as you say, make me run a mile or, if there's a connection, helps me stick around.
Speaker 3:It makes me trust you. It makes me confident in the plan we've come up together. Yes, 100% Gives you clarity. All of that, absolutely, absolutely, yeah.
Speaker 4:Yeah, which is why I think that connection is the fuel that drives financial advice it does feed into all of that Very important.
Speaker 4:Yeah, yeah. So I mean, I think that the challenge obviously for financial planners is you're not going to connect with every client or every person that works through your door and in a way you've got to be okay with saying sorry, I don't think we're going to work together, Because I think historically it's always been the client chooses a financial planner, decides whether they want to work with a financial planner, but connection implies that it's a two-way street, Two-way street true.
Speaker 4:You know, and so for you guys, I would imagine you must have those instances where you meet somebody and you think I can't work with this person.
Speaker 1:Yeah, and I think in the past we just did because you've got to work with everybody. But it's an important thing, and I think it's not just important for us, it's so important for that person too, because they should be with someone that….
Speaker 3:I've had that three times in the past year with people who've asked me to do quotes for them, and I've gone to meet them and I just said I'm sorry, I can't help you.
Speaker 1:And that's good.
Speaker 2:That's really brave as well to do that.
Speaker 1:Yeah.
Speaker 3:Your happiness is worth a lot more, absolutely.
Speaker 4:Yeah, and I'm always amazed, you know, when clients I hear from a client I've got a financial planner but I don't really like them or, you know, I'm not sure about them, or you know, I'm not sure if I can trust them or they're telling me some odd things. Clients should be running a mile as well. Yeah, your gut should run, yeah 100%, yeah, yeah, so I mean I think that you know connection is absolutely key to enabling good financial advice to land.
Speaker 2:Yeah, so I think the flow would be much easier for both sides, for the client and the financial planner. If you're, whatever you're both talking about, you're on the same page. You're not keep on second guessing what's been said and suggested.
Speaker 1:Maybe like the story about Rose. Yeah, absolutely yeah.
Speaker 4:So that's actually about Rose? Yeah, absolutely yeah. So that's actually a good point, bronwyn. So Rose is not the real name, but it's a real client who, in sort of the late 90s, worked for a technology company, a listed technology company, and those of you who are listening to this podcast might recall in 1999, we had the tech bubble Yep to this podcast might recall, in 1999 we had the tech bubble Yep and basically tech shares on the stock market, just, you know, went through the roof and Rose was thinking about retiring and she was about three or four years hence, but she was thinking about it and she went to see her financial advisor and you know he looked at her portfolio and discovered that 90% of her retirement savings were held in one share, the share of her employer and which was not unusual at that time because people were given share options as they worked and it grew in value. And so, if I might ask the financial planners, what was the advice that was given to Rose?
Speaker 2:Well, it should have been diversify. Yeah, it was diversify. In fact, what was the advice that was given to Rose? Well, it should have been diversify, it was diversify.
Speaker 4:It was the advice.
Speaker 1:I knew the answer, I just didn't know what you were pregnant to.
Speaker 4:Yeah, that was the answer. The problem was Rose didn't take the advice you know, because diversify meant that she had to sell her share. And what happened there was that the financial planner hadn't connected with Rose and got a sense of her relationship with the share. So we talked about that connection. So it's not just connection between the financial planner and the client, but the connection of the client to whatever else is in her life, and this, you know, this employer had been sort of the only stable aspect of her life. She'd been divorced, they had been the sort of rock for her in the last 25 years, and so she had huge loyalty to this company and so the thought of selling the share, which has given 90% of her retirement value, was anathema to her, and so she didn't sell. And I mean, you know, I know you were around then, craig, yes, I was 2000 there was a crash, it was ugly, yeah, and literally 90% of the value of the share was lost, and so her retirement plans were completely scuppered.
Speaker 4:But if the financial planner had connected with her and said, okay, rose, tell me more about this company and what it means to you, and all of that before telling her to diversify, because I think the other part of this is that often people don't even know what you mean when you say diversify. You know, because we're in the industry, we assume that everybody knows what diversify means. And so, again, if the financial planner were able to connect her plans and her dreams, you know what she really wanted to do was to go and buy a small plot of land, basically become like a subsistence farmer in a sense, grow organic veggies and just live. You know, simply. And if she had been able to realize that her plan to do that was at risk because she had a single stock exposure, then it's a different conversation, because then she can see the connection between that. But all the advisors said was you know, you've got too much money in this one share. We need to diversify. That was like was purely technical.
Speaker 2:Oh, yes, yeah.
Speaker 4:And so that's why it's so important for connection to happen, you know, to enable. What I like to say is your challenge is to create the fertile soil for the advice to land on. Yes, you know, because we all know what we need to do really to be healthy financially, as we know what to do to be healthy physically, but we often don't do it for emotional reasons.
Speaker 3:And that's where this connection comes in. And I think procrastination as well. Yeah, absolutely yeah.
Speaker 4:Yeah, I mean we can get. I mean, maybe you know if we need to go in to talk about some of the other Cs, we can talk about that, because the reality is that we are our own worst enemies, you know, and we behave to our own detriment. And the challenge is how do you overcome that? How do I stop somebody who's procrastinating about saving? Or the story that Craig told us about the guy who didn't have, you know, income protection? How do you get them to take that income protection?
Speaker 3:And, like you say, you have to have a connection with them to build the confidence to help make those changes.
Speaker 1:Absolutely, I think that's a good spot, and we'll have to wait till next week.
Speaker 3:Yes, can't wait.
Speaker 2:Thank you again, Rob.
Speaker 3:Thank you, Rob.
Speaker 4:Thanks, Rob, Great to be here. Take care guys.
Speaker 2:Bye everybody. Thank you again, rob. Thank you, rob. Thanks, rob, great to be here. Take care guys. Bye everybody, cheers. Thank you for listening. If you have enjoyed this podcast and would like to subscribe, please visit our website, wwwgrowthfpcoza. The information we have provided in this podcast is our personal opinion. For more detailed information, please discuss your financial situation with a financial planner.