Psychology of Financial Planning

Chapter 6Principles of Effective Communication

Being an effective financial planner requires impactful and honest communication. Communication is more than just presenting a financial plan or speaking eloquently. It involves skills related to listening, nonverbal communication, and techniques to build trust and ensure that the client knows they are being heard. In this section, we focus on techniques that will help you build a deeper relationship with your client and ensure that you are effective in listening and responding to their goals and needs.

Open‐Ended Invitations Versus Closed‐Ended Questions

Closed‐ended questions are efficient and can be great for gathering information. They typically prompt clients to give single‐word or short‐phrase responses. For example:

Advisor:

“Do you have a Will?”

Client:

“Yes.”

Advisors:

“When do you want to retire?”

Client:

“When I am 62.”

The problem with closed‐ended questions is that they leave little room for establishing rapport, limit the amount of information the client shares with the planner, and provide little room for the client to elaborate, limiting the client's ability to engage in self‐discovery.

In contrast, open‐ended questions invite the client to offer a more detailed response to a specific question. “Open‐ended” means that there is room for an expanded response and “invitation” is substituted for “question,” based on the research that shows that using a question leads to a physiological stress response.