The chapter on “Client Diversity’’ stresses that “stakeholder groups are composed of people of varied backgrounds, cultures and lifestyles’’ and that ‘’clients’ needs are influenced by their unique backgrounds and experiences.’’ Women, immigrants and people of color represent a larger share of the workforce than 30 years ago, as predicted by the Hudson Institute’s report of 1987.
Advisors are urged by the authors to research potential diversity clients’ risk tolerance, priorities and motives because those characteristics are what “drive financial planning decisions.’’
Retaining clients over many years brings potential problems: are older clients still mentally and emotionally capable of making financial decisions? Between 2014 and 2060, the size of the 65 and older population is expected to reach 98.2 million; by 2060, the ratio of 65 and older to under 65 will be 1 in 4.
Because the incidence of dementia increases with age, the authors write that advisors will need to understand cognitive signs of aging in focus, attention, inference, comprehension, judgment, communication, reasoning and memory.
Researchers suggest advisors can improve service to older clients by learning to recognize neurocognitive disorders and by consulting experts in geriatric health care and financial capacity for guidance.
The chapter on financial psychology—the integration of financial planning with psychology—includes useful research findings, such as: men and women clients had higher levels of risk tolerance when dealing with an advisor of the opposite sex; and clients were readier to accept change in their financial behavior when an advisor’s office had the feel of a living room and the TV showing financial news was turned off.
Client Psychology, Charles Chaffin, editor. John Wiley & Sons. $50. 312 pages.
Eleanor O’Sullivan is an award-winning journalist who writes for Financial Advisor.