PLANADVISER - Winter 2023 - 25

The Psychology
Of Financial
Planning
" THE PSYCHOLOGY of Financial Planning " -referred
to in the title of one of
the sessions-is how people think and
feel about money. An advisory practice
can leverage findings from the social
science to produce better results for
both adviser and client, said Sonya
Britt-Lutter, Ph.D., CFM, and a licensed
marriage and family therapist.
The study of financial planning
differs from behavioral finance, which
is often cited by advisers and providers
in relation to retirement saving.
The psychology of financial planning
considers how the mind works,
whereas behavioral finance tells the
person what she should think and feel,
Britt-Lutter said during a fireside chat
with Alison Cooke Mintzer, ISS Media
publisher.
" It's how they feel that guides how
we communicate with them, " BrittLutter
said. " It's not therapy; advisers
are not treating [their clients]. " Behavioral
finance is a tiny segment of the
psychology of financial planning, the
certified financial manager noted. It
is what a professional uses to make
suggestions to help people improve
financial behaviors.
According to Britt-Lutter, advisers'
own psychology about money will
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affect what clients do. " If we can check
our own psychological stress, it will
have an influence on clients, " she said.
Advisers can assess their psychological
stress, she said, by considering their
reactions to terms such as " old money "
or clients who belong to " Generation Z. "
When advisers are feeling stressed,
they should consider whether they are
being authentic, Britt-Lutter advised.
To
detect
clients'
psychological
stress, the quickest means is by
shaking the person's hand. " When
clients are having a difficult time, their
bodies go into self-protection mode, "
Britt-Lutter said. " They might make
statements to prove they're in charge
or start arguing. "
If advisers recognize that a client is
feeling stressed and unprepared for a
conversation, Britt-Lutter said, ask the
person how her day is going, or, if the
adviser knows the client well, ask about
her family. " Within a matter of seconds,
this light conversation can raise the
temperature of the person's extremities, "
Britt-Lutter said.
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Ready for Change?
Advisers can also listen with their eyes,
Britt-Lutter pointed out. " When you say,
'Let's talk about retirement,' does the
client start shifting around, look at his
spouse or change the subject? "
She said advisers should be comfortable
saying what they see. For example,
they can say, " This doesn't seem important
to you. Why is that? "
In a short time, advisers can focus on
whether the client is ready for change
or not. " If they're saying, 'I'm good,' or
'I'm just here because my friend/spouse
suggested it,' they are not motivated to
change, " Britt-Lutter said.
If a client says he is there because of
someone else, extrinsic value will move
him to be ready for change, she said. For
example, the adviser can ask the client
a question such as, " If you don't change,
how will this affect your children? "
If a client shows ambivalence, BrittLutter
said, the adviser can focus on
education and building confidence.
Look to the Future
Another way to get a sense of a client's
feelings about money and potential for
change, according to Britt-Lutter, is to
ask how the person's allowance-or
lack of one-was handled when the
person grew up. " Ask them what they're
doing now and how that compares with
what it was like growing up, " she said.
In terms
of
ences, Britt-Lutter said, Millennials and
Gen Zers often value experiences and
impact over building wealth.
" Turn the conversation into how
they can have experiences and/or make
a difference in the future, " she said.
Speaking to the idea that the
industry is having a hard time defining
financial wellness, Britt-Lutter said she
is confident most people actually have
a good idea of what financial wellness
means.
" Looking at what people think, feel
and do with money, when all three are
in line, that is financial wellness, " she
said. " -Rebecca Moore
generational differPlan
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PLANADVISER - Winter 2023

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