How psychology affects your search for a financial advisor

Choosing the right financial advisor is an important but difficult decision. Key considerations include whether your potential advisor has the right technical skills, charges a fair fee, and puts your interests first. Focus on these factors and you will find thousands of qualified advisors. But what factors should you prioritize to find the best one for you?

Turns out you should be looking at psychology. A 2019 Vanguard study found that a customer’s emotional connection with their advisor — not their fees or technical skills — accounted for more than half of the perceived value of engagement. These feelings have real consequences on your bottom line.

Another set of Vanguard studies found that customers who work with advisors have better returns on investment than those who don’t. To explain this effect, studies have looked at the individual impact of many factors, including a range of technical skills, such as optimizing asset location and implementing the most profitable strategies. It turns out that behavioral coachinga psychological factor, was half of the total effect – double that of the most impactful technical skill.

As you interview a potential advisor, here are some other considerations and questions to ask:

What are your values?

Financial planning is the process of helping clients achieve their goals, whether those goals are to be financially independent, to support a charity, or anything in between. Advisors are trained to respect and help achieve all of their clients’ goals. But if your goals and values ​​conflict with those of an advisor, it can be difficult for them to take your perspective and make the best recommendations. For example, an advisor who tends to prioritize financial independence may constantly push back against your goal of giving 10% of your income to charity.

An advisor who shares your core values ​​will have an easier time understanding your financial situation and will be more likely to make recommendations that you will implement.

Will we get along?

If we could be friends with everyone, but some personalities just don’t fit together. Don’t think you have to think too much about this (although you are welcome). Think about the types of people you tend to get along with. Remember that you may spend many years working with your advisor, so it helps to like them and feel that you get on well.

At a minimum, feel free to avoid working with someone who gives you a bad first impression. Although our first impressions are not always accurate, they can tell us a lot – and quickly! For example, one study found that it only takes a fraction of a second to decide if you should trust someone.

How will you communicate your recommendations and coach me?

It is essential that you fully understand your advisor’s recommendations. Otherwise, you will not implement them! Consider your learning style. How do you understand things most easily: in writing? With tables and graphs? Whatever your answer, find a counselor whose communication style matches your learning style.

Often, recommendations take a long time to implement and involve many steps. Some people find it hard to follow, especially if they have anxiety about money. The best advisors support their clients throughout the process.

Not all great coaches are the same. Phil Jackson, winner of 11 NBA championships, was known as a “Zen Master”. Bill Belichick, the NFL coach with the most Super Bowl wins, is much more detail-oriented and logistical. Consider what motivates you to stick to a plan and try to find a counselor who meets your coaching needs.

Keep in mind that some people are better communicators than others. The quality of an advisor’s communication has a real impact on their clients. For example, a study looking at clients’ trust in their financial advisors found that advisors’ communication skills were twice as important as their technical skills.

Do you have good experiences working with people from my background?

Individual differences aren’t the only thing to consider when selecting a financial advisor. Your advisor’s cultural background and cultural competency can affect the success of your relationship.

When people share similar experiences and backgrounds, they often find it easier to communicate and empathize with each other. Additionally, financial advice has not always been offered or provided equitably to women, people of color, and members of many other minorities. Research published by the American College Center for Economic Empowerment and Equality underscores this point: Three in five black women expressed difficulty finding finance professionals or advisors they trust, according to the study. That’s why efforts like the CFP® Board’s diversity and inclusion initiatives are essential to increasing the representation of people from all backgrounds in financial planning and meeting the needs of our diverse society.

That said, the client and advisor do not need to share a cultural connection to have a successful relationship. Many financial advisors have excellent cross-cultural communication and cultural competence. Some of the best thinking comes when people with different perspectives can work together to come up with innovative solutions.

Ultimately, you need to build a relationship you care about with an advisor you trust. Exactly how you make this decision is up to you. To start this process, consider resources such as and that can put you in touch with advisors held to fiduciary standards.

Assistant Professor of Financial Planning, The American College of Financial Services

Matt J. Goren is an assistant professor of financial planning at the American College of Financial Services and focuses on the interplay of personal finance and psychology. In addition to teaching and developing content, he provides strategic advice on financial literacy initiatives and hosts a personal finance radio show, Nothing Funny About Money, which has been named the financial information resource for most remarkable consumers of 2018 by the AFCPE.

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