Communication Essentials for Financial Planners. Grable John E.
should be obvious that communication skills are at the root of all impactful financial planning services. Based on the existing literature, it is hardly a stretch to conclude that communication and counseling skills are among the most important characteristics separating successful financial planners from others.
BUILDING CLIENT TRUST AND COMMITMENT
Appropriate use of communication methods can also go a long way to building client trust and commitment.10 Although there are many factors that help cement a client–financial planner relationship, five stand out as being very important:
1. Taking time to understand a client’s needs and concerns
2. Fully understanding a client’s goals
3. Providing each client with peace of mind
4. Clearly explaining difficult concepts
5. Placing the client’s needs above all else when making recommendations11
In regard to methods of communication, being predictable is of critical importance.12
A financial planner must be able to communicate effectively to bring these five factors together. For those financial planners who want to build client trust and commitment, developing and practicing outstanding client communication and counseling skills is the most effective path to this outcome.13
MODELS OF COMMUNICATION
Researchers working over the past half century have built numerous models that help explain the process of communication. Almost every model extends the basic rhetorical framework originally proposed by Aristotle, as shown in Figure P.1.
FIGURE P.1 Aristotle’s Original Communication Model
The components of the model are self-explanatory. The sender is the person who originates the interchange. The message consists of the content being delivered. The receiver is the person to whom the message is sent.
It should be clear that several important features are missing from Figure P.1. Of particular importance is the channel of exchange. In Aristotle’s time, the channel or medium of exchange tended to be either oral or written. Today, of course, there are many different channels through which two or more people can communicate. It is helpful to think of a channel matching up to one of the five senses: hearing, seeing, feeling, tasting, or smelling. Taken more broadly, the channel of communication provides a mechanism to deliver a message.
Messages are composed of information, elements (that is, words, sounds, gestures, images, and so forth); structures (that is, the composition of different elements); and codes (that is, the “language” of delivery words, tones, smells, music, and so forth).
Essentially, a sender encodes his or her message, chooses a channel to transmit the message, and sends the message. The receiver decodes the message. The decoding process will always be influenced by the receiver’s fluency in the language used by the sender and the receiver’s attitude when the message is received. Embedded in the encoding and decoding process are issues related to shared values, beliefs, language, culture, cognitive ability, experience, and knowledge. Berlo14 incorporated the concepts of sender, receiver, message, channel, encoding, and decoding to propose what he termed the SMCR communication model, which is shown in Figure P.2.
FIGURE P.2 Berlo’s SMCR Communication Model
Many adaptations to the SMCR framework have been proposed over the years. Advances include the inclusion of feedback loops from the receiver to the sender and more nuanced descriptions of encoding and decoding. This book adds to this discussion by proposing a financial planning communication and counseling skills framework. The framework was built using many of the concepts found in the SMCR model. The framework is described in more detail next.
FINANCIAL PLANNING COMMUNICATION AND COUNSELING SKILLS FRAMEWORK
The purpose of presenting a communication and counseling skills framework is to provide readers with a tool to help conceptualize the way in which a financial planner interacts with prospective and current clients. This book is primarily focused on helping financial planners encode, send, receive, and decode messages. While some attention is given to the channel of communication, the real emphasis of the book is devoted to exploring the inner workings of the framework shown in Figure P.3.
FIGURE P.3 Financial Planning Communication and Counseling Framework
The following example provides a step-by-step review of the financial planning communication and counseling process.
At Step 1, a financial planner formulates an idea to communicate with or to a client. For illustrative purposes, assume a financial planner intends to assess a client’s risk tolerance. Issues related to explaining what risk tolerance means, the reason for the assessment, and the best technique to evaluate the client’s risk tolerance need to be addressed. It is possible that some of this work will have been completed before the point of initial client communication.
At Step 2, the financial planner needs to choose a channel for delivering her message about risk tolerance to the client. Assuming the client and financial planner are meeting together, the delivery channel may be a combination of verbal – using a question – and tactile – having the client complete a brief questionnaire. It is important to note that this step in the process differs from other communication models. Typically, message development is the second step in the communication process. In practice, Steps 2 and 3 (channel and message) are somewhat fluid. Consider a situation in which a financial planner wants to provide an immediate market update to her clients. Choosing the channel first is appropriate as a way to edit the content of the message. For example, using a group email will require different message content than a decision to call each client separately. There is flexibility built into the framework, however, for situations that require content to precede channel selection.
At Step 3, the financial planner then needs to formalize the content and context of the message. Using the risk tolerance example, the content will include information about risk tolerance and the need to accurately assess the client’s risk attitude in the context of the financial planning engagement. Issues related to language, cultural sensitivity, and client skills also need to be incorporated into the message. Given the choice of channel, appropriate context needs to be considered. Consider how the word risk can be interpreted differently by people based on their values, preferences, beliefs, and cultural background. For some, risk can be perceived as an opportunity. For others, risk is considered to be just a softer word to describe a loss. The financial planner may decide to ask the following question: “Tell me, how would your best friend describe you as a risk taker?” After the client responds, the financial planner could then present the risk questionnaire.
Sending the message – Step 4 – is of particular importance. The financial planner needs to mix the elements of delivery to most effectively communicate what is being asked and needed. Elements include words, tones, gestures, expressions, images, and body language. In this example, the financial planner may simply use her voice and encouraging facial expressions to reassure the client when answering a question. This can be followed by physically handing the risk questionnaire to the client and then leaning away from the client to provide space for a response.
Once the message has been
D. Yeske, “Finding the Planning in Financial Planning.”
M. Swift and J. Littlechild, “Building Trust through Communication,”
K. C. Harad, “Devise a Client Communication System That Inspires Loyalty,”
T. Christiansen and S. A. DeVaney, “Antecedents of Trust and Commitment in the Financial Client-Financial Planner Relationship,”