The psychology of financial planning merges traditional financial advice with elements of behavioral and psychological finance, encouraging financial advisors to reach beyond the numbers. “Much of financial planning is about supporting our clients’ quest for meaning as well as meeting their material needs. Helping clients develop both money skills and emotional intelligence is essential to promoting their financial and emotional well-being and guiding them through major transitions in their lives.” (Source: Kahler, R. “Building the Clients Motivation for Achieving Their Goals." In The Psychology of Financial Planning. Certified Financial Planner Board of Standards, Inc., 2022.)
The Benefits Of Financial Psychology In Financial Planning
Financial psychology provides financial advisors tools and techniques to navigate emotive planning topics, such as retirement planning, and provides education on how to identify if the needs of the clients go beyond the scope of the financial services provided. To prepare for this occurrence, financial advisors should consider expanding their referral network to include more specialized financial professionals such as financial therapists, coaches, and counselors, and seek collaborative opportunities.
Money is deeply personal and impacts all aspects of our lives. Advisors with an understanding of financial psychology can engage with their clients’ emotions to provide greater motivation, conduct more holistic planning, and improve overall outcomes for those clients.
Dr. Emily Koochel is a senior financial planning education consultant at eMoney Advisor.