Financial acumen is just one aspect of being a successful financial adviser. Building relationships with clients and their families based on trust takes time and often requires the use of soft skills such as emotional intelligence.
Some of the largest wealth managers in the UK are focused on getting this right. Barclay’s Private Bank and Wealth Management have emphasised, “Fostering a personal relationship with our clients is still our number one priority.”[1]
In this article, we will explain why cash can affect clients psychologically and how advisers can support their clients and sustainably build trust through major life events.
Acquiring a large sum of cash, commonly referred to as a cash windfall event, can provide a chance to support and strengthen relationships with clients, as these events often coincide with significant life changes such as divorce, selling a business, or inheriting money.
If a client becomes the sole beneficiary of a large estate, it may seem like a fortunate occurrence. However, inheriting often means that the client has lost a loved one, which can impact their emotional well-being in the short to medium term.
Furthermore, you may come across a client who is a business owner earning a salary and then sells their business. After the sale, the client may feel a loss of purpose and be inclined to making more impulsive decisions.
Suddenly, the client is keen to purchase a holiday home in the Bahamas or splurge on a Maserati. These decisions might be a short-sighted emotional fix, and after six months, once the dust has settled, the client may reassess and experience a sense of regret at their impulsivity.
Winning the lottery (although far less likely) may, on the surface, appear to improve a client’s life overnight. However, according to Psychology Today, winning the lottery can lead to poor investments, scams, and overspending as the recipient adapts to their newfound wealth.[2]
Even though you might not consider a lottery winner as a ‘vulnerable’ customer, if they previously had limited financial resources, then education could be crucial in your strategy.
This is especially true when advising winners on how FSCS protection works, particularly if they previously didn’t have savings over the £85,000 protection threshold per person, per regulated institution.[3]
One of the FCA’s principles is to ‘enable and support retail customers to pursue their financial objectives’ and sometimes, putting a pause on client decision-making in the short term by using effective cash management can help diversify risk[4].
In all these cases, as an adviser, you are presented with a unique opportunity to support your clients in a way that will build a bond with them that could span a 10-20-year relationship.
Emotional Support: Clients may feel vulnerable during major life changes. Empathetic advice can provide much-needed reassurance.
Building Rapport: Educating and informing the client in a non-patronising way can help build a stronger, more empathetic advisor-client relationship.
While it’s not your responsibility to be your clients’ sole source of emotional support, we must understand the role their emotional state during these events might have on their financial decision-making.
Acquiring a large amount of cash under any circumstances should bring a sense of security and freedom but often it can have the opposite psychological effect, bringing about a sense of added responsibility and fear of loss.
Cash management can serve as a stable option for the short term. It provides an opportunity for cash to accumulate interest earnings for clients, allowing time to assess their financial goals and needs in the short and medium term.
Discover how Insignis Cash can help you support your clients through major life events with a secure, diversified cash management solution. Build stronger relationships by providing financial and emotional reassurance, while giving clients access to market-leading savings rates across 3,500+ products.