Future of Investing

The newest metric for financial success: Customers’ emotions

  • Wealth managers are increasingly conducting customer personality assessments
  • In order to personalize the experience, wealth managers must balance needs-based financial plans with an emphasis on hard numbers metrics
The newest metric for financial success: Customers’ emotions

For Guardian Life customers, the route to finding a financial plan involves a lot more than outlining savings goals. Clients complete a series of quizzes about their needs, wants and behaviors to build a behavioral profile that will start off a conversation with a financial adviser. A financial and emotional confidence quiz asks questions about how they orient their spending goals, and a personality assessment cuts to the core of the motivations that underlie financial decisions, with such true-and-false questions as “I still kick myself for poor financial decisions” and “I can be hard to know on a deeply personal level.”

It’s a part of an approach to financial planning that goes beyond the numbers, said Matthew Bryan, assistant vp of marketing at Guardian Life.

“Being able to establish an emotional connection with the client is going to be one of the biggest determinants of success for financial advisers over the long term, as products, pricing and fees become commoditized,” he said.

An excerpt from Guardian Life customer questionnaire

Bryan explained that being able to establish an emotional connection with the customer is a key differentiator in a crowded market. To him, understanding the emotions that drive behavior is key to understanding what’s best for a customer’s financial health.

“There’s a lot more going on behaviorally,” he said. “I liken it to an old comparison, like losing weight and going to the gym — I know I have to work out X number of days and eat X number of calories, but how many times does this fall flat without implementing?”

Based on results from the questionnaires, Guardian Life divides customers into different personality types (examples include day-to-day decision-maker, ambitious spender, retirement realist and confident planner). The customer then devises a plan informed by the personality assessment.

Guardian Life isn’t alone among financial advisory firms that are appealing to customer emotions to gain loyalty. For instance, Atlanta-based financial advisory startup PeachCap elevates the understanding of a customer’s emotional makeup as a core building block: “If a wealth adviser doesn’t have an emotional understanding of themselves and their clients, how can we expect them to keep their clients on track for their goals when emotions enter the picture?” said founder David Miller in a recent interview with Forbes. “Meetings with clients are like therapy sessions.”

Beyond personalization, the emotional connection can drive continued business as trust solidifies between the client and adviser.

“People make more purchases than you would think based on their emotional state, or even the emotional connection to the salesperson or the brand, and a lot of that comes back to trust,” said Marco Hansell, CEO and founder of Speakr, an influencer marketing platform. “This is where marketing and advertising is at a crossroads with investing.”

Some automated platforms have sought to balance the need for personalization with an emphasis on numbers. Earlier this summer, robo-adviser WiseBanyan launched Planning, a feature to learn more about customers than just raw financials. Depending on the answers, customers with similar financial profiles but different motivations could be sent on different types of planning paths.

“There are a lot more questions than just dollars and cents; Planning is a holistic way to guide people through their financial plan,” said co-founder Vicki Zhou. So while two customers may have nearly identical financial profiles, one whose goal is to safeguard the security of the family may be on a different planning course than a customer who is solely focused on growing their career.

Involving the emotions too much in financial planning can be to the detriment of the customer’s financial health. For Jason Escamilla, CEO of ImpactAdvisor, a wealth management firm that focuses on values-based investments, emotions and money are inextricably linked, as values-based investments are often driven by emotional responses to causes. (For example, an investor may choose not to invest in companies that he or she sees engages in practices detrimental to the environment.) But too much emotion can mean the volatility of market movement can sway the customer.

Being emotional is not an edge in investing,” he said. “I’m bullish about the stock market, but even today, we have a lot of fear; a lot of people are too scared.”

Others insist that hard numbers should drive the approach.

“Money is very emotional, but at the end of day, good investing comes down to boring math,” said Kate Wauck, spokeswoman for automated investment platform Wealthfront.

For Wealthfront, the focus on the bottom line ensures the client stays razor-focused on achieving their financial objectives, said Wauck. Emphasizing emotions, said Wauck, can be harmful for the client’s overall interests.

This whole emotional intelligence conversation is used as a tool so advisers can sell clients things they may not necessarily need,” she said. “It’s about figuring out mathematically, ‘Do your goals make sense, and are they realistic?’ We need to take the emotional element out of it.”

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