When advisors think of clients’ needs, it’s usually in terms of money (i.e., “Do we have enough?”) and its application to issues such as living standards, health-care planning and retirement income. It is the job of financial advisors to help clients meet these financial needs.  It’s what FAs are trained to do, and they do it well.   

These financial needs are ostensibly the point of investing. In reality they are a proxy for a set of deeper, hidden set of psychological needs, innate and universal motivators that actually drive client behavior and satisfaction. All investing decisions are attempts to meet these needs.   

Accessing this deeper level is challenging. In most cases it lies below the level of consciousness, and not even the clients are sure of the way there.

What follows is an, admittedly abridged, model for recognizing, accessing and satisfying this deeper set of investor needs. 

The Investor Hierarchy Of Needs

When you strip away all the distractions, what truly drives human behavior? The psychologist, Abraham Maslow examined this question, and in 1943 developed The Hierarchy of Needs, a theory for human motivation. If you took Psych 101, you may remember it. It has become a staple of mainstream psychology. Maslow’s hierarchy is a building-block model for behavior based on universal human priorities. Critical to the model is the notion that people are always seeking to meet needs (from “lower” to “higher”) and that until the need at one level of this hierarchy is satisfied, the need at a higher level cannot be.

The same applies for human beings as investors. The Investor Hierarchy of Needs is an analog to Maslow’s theory, specifically designed for the psychology of investing with a financial advisor. 

It may be thought of as pyramid with five distinct levels, each holding critical implications for the client-advisor relationship. Clients’ investing behavior is an attempt to meet these psychological needs, from the most basic at the bottom to the most aspirational at the top.

Level 1: Trust

Trust is the foundation of all advisor-client relationships. You cannot move forward without it. Financial Advisors agree. After 18 years of asking FAs, “What is the most important factor in client relationships?” I have never had a room tell me otherwise. 

The vital nature of trust is well accepted but not well analyzed. It is useful to think of trust not as one thing, but as three things. In a report titled Bridging the Trust Divide  (2007), State Street Global Advisors (in conjunction with Wharton Business School) identified three critical components of client-advisor trust:  1) professional expertise, 2) ethical conduct 3) and interpersonal trust. 

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