Practical analysis for investment professionals
15 October 2014

Can Financial Advisers Make Their Clients Happy?

Financial advisers work with their clients to understand their goals and needs, then suggest investments that make sense in that context, and thereafter consult with them periodically to make sure everything is on track to realize those aspirations.

That simple feedback loop can be a powerful force. Even professional investors who don’t believe it’s possible to beat the stock market will acknowledge the value that comes from dealing with an adviser and working towards well-defined goals and checking in over time.

In that process, advisers gain a lot of highly personal information about their clients’ innermost selves. In a world where the fees advisers can charge are shrinking and the market for financial advice is arguably being disrupted, it would behoove financial advisers to extend their value proposition.

As an observer, it seems that one way they might do that is by taking on something of a life-coaching role. Since advisers must justify their value among a sea of algorithms and exchange-traded funds, they had better compete on something other than cost, accuracy, and speed. Empathy, intuition, and rapport are core strengths of financial advisers, and they should be building business plans that take those fully into account.

What would the world look like if the financial adviser’s job was also to focus their clients on taking tangible steps towards becoming happier, better-adjusted people?

Think Before You Laugh

There is a market for the pursuit of happiness. The “self-help” industry is estimated to generate $1 billion per year in the United States. At minimum, this is a sign of engagement with the concept of self-improvement.

Annual spending on self-help is just one measure of how consumers interact with products and literature aimed at improving their lives. What if that same information could be delivered as a service by somebody with an unusual amount of insight into a particular consumer and who was already regularly talking about long-term life goals with them? It seems likely that if the proper approach to integrating life and financial goals was applied, consumers would find substantial value there.

Joe Biden repeatedly said, “Don’t tell me what you value. Show me your budget, and I’ll tell you what you value” during the 2008 and 2012 US presidential elections. Those words were piercingly perceptive. As investment professionals, we are exposed to a vast array of explicit and implicit data about the values of our customers. Every decision to save or spend is reflective of the ambitions your clients have and the difficulties that they face in reaching them.

How Can Financial Advisers Actually Help?

It’s not necessary to transform yourself from security analyst to psychologist to begin helping your clients reach both their life and financial goals. It can really be as simple as framing the goals that you discuss in a way that focuses on more than just their financial implications and by paying attention to a client’s non-financial desires (like finding more time to read or doing yoga regularly) that might otherwise get ignored in favor of more “heavyweight” aspirations like retirement or buying a house.

Though even listening to these goals is important, consider taking two simple steps to extend the conversation a bit further. It might be useful to encourage a conversation about pursuing non-financial aspirations as more than just an icebreaker. Get granular with them and figure out what they are driving after. Then jot down notes and discuss what would be a reasonable goal for them to pursue in time for your next annual or quarterly review. Some clients may find that this approach brings them additional insights and helps them work towards their ambitions.

If you’d like to get serious, structure these conversations so that you can discuss how often your clients are having the sorts of experiences that researchers have determined lead to happiness. Though these are not rigidly defined, they provide a framework for inquiry and can give you the opportunity to suggest objectives that may help your clients increase their overall happiness. Here are a few of the key elements that recur in academic discussions of what contributes to happiness. If you’re really trying to understand what makes your clients tick, it might make sense to ask about them directly or indirectly:

  • How often are they having new experiences? They don’t necessarily need to be traveling the world on a regular basis. Simply trying new restaurants or going on hikes from time to time can be enough.
  • How do they play? It could be golf, tiddlywinks, or World of Warcraft. Experiencing the sensation of play is a powerful driver of happiness.
  • How close are their relationships? Friends and family are critical to feeling fulfillment in our lives, and grasping how your clients relate to these groups and the sort of satisfaction they receive from them will greatly help you to understand them.
  • Are they finding meaning? A sense of meaning can be a powerful contributor to happiness, and most people are eager to talk about the areas of their lives where they are finding it. It could be through volunteer work, raising their children, or their day job.
  • Do they appreciate the good things in their lives? People who take time to reflect on their positive experiences by writing diaries or simply acknowledging the good times they’ve had are found to be happier in general than those who don’t.

Integrating an understanding of what drives happiness into a wealth management practice can be useful in a lot of ways. On one hand, it gives advisers the opportunity to help clients work directly towards success and fulfillment, but it can also help them troubleshoot relationships with problem clients.

This is just an armchair survey of a developing branch of human understanding, but if you find yourself intrigued consider watching the documentary Happy, which talks through the research in some more depth and gives examples of particular aspects of happiness in detail. It might be a powerful set of information to tuck away.

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Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.

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About the Author(s)
Sloane Ortel

Sloane Ortel is the founder of Invest Vegan, an ethics-first registered investment adviser that manages distinctive discretionary portfolios of public equities on behalf of aligned individuals and institutions. Before establishing her own firm, she joined CFA Institute’s staff as a sophomore at Fordham University and spent close to a decade helping members adapt to a changing investment landscape as a collaborator, curator, and commentator. She is also a co-host of Free Money, a podcast for sustainability-oriented investors with a sense of humor.

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