The Psychology of Financial Planning

The Psychology of Financial Planning: Practitioner Resource Guide is written by financial planning practitioners for financial planning practitioners. Comprehensive, fiduciary financial planning is much more than being competent at financial planning technical skills. In order to maximize a financial planners’ value to clients, they must also be able to communicate effectively and deliver recommendations in a way that moves client motivation forward through recommendation implementation.This guide is intended to complement The Psychology of Financial Planning by providing financial planners with resources and tools to incorporate the psychology of financial planning into their practice.

Section 1: Client and Planner Attitudes, Values and Biases

Section 1 includes Chapters 1, 2 and 3, and provides an overview of client and planner attitudes, values, and biases. This section discusses the importance of understanding how a client's psychology, background, learning style and values can all impact the financial planning process. It also discusses the importance of the financial planner framing advice in a way that accounts for all those psychological characteristics, leading to a more effective client-planner relationship and a higher probability of success. Research has shown that when clients can see that financial planning recommendations are demonstrably connected to their personal values and goals, they are much more likely to act on those recommendations and achieve success.

Chapter 1: Framing Advice in Light of Client's Risk Tolerance (Swarn Chatterjee and Dave Yeske)

Chapter 2: Developing a Productive Client-planner Relationship That Addresses the Psychological Elements of Financial Planning (Megan McCoy and Neal Van Zutphen)

Chapter 3: Identifying and Responding to Client Values and Goals (Megan McCoy and Meghaan Lurtz)

Section 2: Behavioral Finance

Section 2 includes Chapters 4 and 5, and introduces key concepts from the area of behavioral finance. This section provides an understanding of the impact of cognitive biases and heuristics on people's financial decision-making and well-being, and discusses strategies for overcoming some of the common client psychology barriers in the financial planning process.

Chapter 4: Impact of Cognitive Biases and Heuristics on Financial Decision-making and Well-being (Ron Sages and Swarn Chatterjee)

Chapter 5: Client Psychology Barriers in the Financial Planning Process and Strategies for Overcoming Them (Ron Sages and Swarn Chatterjee)

Section 3: Sources of Money Conflict

Section 3 includes Chapters 6 through 10, and provides an overview of the major sources of money conflict. This section focuses on the harnessing of client's motivation for achieving their financial goals, examining couple and family financial transparency, and discusses strategies for mediating potential financial conflicts and facilitating goal congruence. This section also discusses counseling strategies that can be used for identifying when money is being used for purposes of manipulation.

Chapter 6: Building the Client's Motivation for Achieving Their Financial Goals (Rick Kahler)

Chapter 7: Examining Couple and Family Financial Transparency (Emily Koochel and Meghaan Lurtz)

Chapter 8: Mediating Financial Conflict (Sonya Lutter and Emily Koochel)

Chapter 9: Facilitating Goal Congruence (Rick Kahler)

Chapter 10: Identifying When Money Is Being Used as Manipulation (Saundra D. Davis, Meghaan Lurtz and Megan McCoy)

Section 4: Principles of Counseling

Section 4 includes Chapters 11 and 12, and introduces the principles of counseling. This section includes the application of counseling theory in the financial planning process, and discusses strategies for forging trusting client-planner relationships.

Chapter 11: Applying Financial Counseling Skills to the Financial Planning Process (Emily Koochel, Megan McCoy and Saundra D. Davis)

Chapter 12: Forging Trusting Relationships (Megan McCoy and Sonya Lutter)

Section 5: General principles of effective communication

Section 5 includes Chapter 13, and provides an overview of the general principles of effective communication. This topic is of great importance as effective communication has been shown to be the single largest predictor of client trust and relationship commitment, which in turn can lead to a greater propensity by clients to reveal personal and financial information, engage in effective conflict resolution, and act on financial planning recommendations.

Chapter 13: Multifaceted Communication (Swarn Chatterjee and Ron Sages)

Section 6: Crisis Events with Severe Consequences

Section 6 includes Chapters 14 and 15, and discusses strategies for helping clients who experienced crisis events with severe consequences. The strategies discussed in this section focus on helping clients navigate unanticipated personal and environmental crises, and the importance of empathy when working with clients who experienced such events. As is true across all topics in this book, self-awareness and self-development by the financial planner is as important as understanding the client's psychology when helping them navigate difficult circumstances.

Chapter 14: Navigating Change (Sonya Lutter, Megan McCoy, Saundra D. Davis, and Lance Palmer

Chapter 15: The Necessity of Empathy (Megan McCoy and Sonya Lutter)