Guest Post: Financial Planners — Are They Listening?

Since I started blogging I Heart Wall Street in March of this year I’ve been expressing mostly things that bug me about Wall Street and the finance game, offering insights where I can. I’ll never run out of material, but starting now I’ve decided to take some things off the wishlist I have for what this blog will ultimately become.

Starting now, I plan on adding more content from guest bloggers. I can’t wait for you to see what I’ve got cooking. I hope it turns out. Fingers crossed.

In the first guest post to I Heart Wall Street, I’ve asked my good friend, Michael Kitces, one of the most respected & renowned financial planners in the US, to drop a little knowledge into what makes a good financial planner great. The answer may not surprise you, but his insights are very real, very tangible. If you have a financial planner (or don’t) you really should read Michael’s post. I hope your knowledge profits from the experience.


The One Skill That Has The Biggest Impact On Being A Successful Financial Planner

By Michael E. Kitces, Nerd’s Eye View

Developing your skillset as a financial planner is complex. From learning the financial planning body of knowledge itself, to the analytical skills to apply it to specific client situations, to the written and verbal skills necessary to communicate recommendations to clients, to the interpersonal skills required to actually motivate and support clients on implementing those action items, there’s a lot to learn. Not to mention the skillset necessary to find and attract new prospects to become clients in the first place. But if there is one skill that seems to have a bigger impact above all else for the success of a financial planner, it’s the ability to listen. To REALLY listen.

The inspiration for today’s blog post comes from a question I received recently from another planner, which simply asked “What one skill (above all others), if you developed and did it in an excellent fashion, would have the biggest impact on you as a financial planner?” Given the myriad of skills and knowledge necessary to succeed in the remarkably complex and multidisciplinary profession of financial planning, at first it seemed difficult to choose just one.

Certainly, many who know me would probably have expected me to respond with some kind of skillset or knowledge tied to technical expertise, given my proverbial “alphabet soup” of degrees and designations. But in truth, having the technical knowledge isn’t relevant or useful if you can’t truly understand the needs of your clients in the first place. Otherwise, you’re simply an expert at carrying around a hammer and looking at every problem like it’s a nail; you may even become highly proficient at fitting square pegs into round holes (and occasionally happening upon a square hole, too); nonetheless, you’re not actually an expert at doing real financial planning, and providing solutions that help clients achieve their own goals, if you’re not skilled at really exploring what those goals are in the first place.

In reality, it’s hard to overestimate the value of good listening skills in financial planning. In watching other planners interact with clients over the years, I’ve observed several “levels” of effective listening:

Level 1 – There is no effective listening by the planner, or should I say “planner”. The individual – generally simply a product salesman at this point – it conducting a one-way conversation, just trying to pitch the product as a solution, regardless of the prospective client’s needs (or lack thereof).

Level 2 – There is a limited amount of effective listening by the planner, at least enough to hear some of the needs that the prospect or client is articulating. However, the conversation is generally still one-sided towards the planner, who may simply grasp onto pieces of what has been said, to once again try to fit it into the planner’s pre-determined solution – whether it be an annuity, a managed investment portfolio, some income or estate tax planning strategy, or otherwise. In the end, listening is only done to the extent necessary to identify how parts of what the prospect or client needs to match the already-intended solution.

Level 3 – Some real amount of listening is beginning to occur. The planner starts to look beyond the comfortable and standard recommendations and solutions, and starts to hear first what the client or prospect really says is needed, and only second begins to formulate what those recommendations might be. However, the listening is generally still somewhat “superficial” – all that’s heard are the exact words being said.

Level 4 – At this level, the real active listening begins. The planner begins to hear not just what is verbally said, but perceives some nonverbal communication signals as well, from posture and eye contact to gestures. The planner engages in some active listening steps to make the client feel heard, reflecting back and paraphrasing what’s been said to clarify understanding and help connect, and showing real empathy. Solutions grow naturally out of the conversation; the planner is trying to step away from any existing biases.

Level 5 – The planner is alert and attentive in consistently and proactively applying the principles of active listening; the process is not merely an intuitive conversation, but represents a trained and practiced skillset of the advisor. The client or prospect feels as though he/she is being really heard and understood, with a genuine empathetic connection to the advisor. Communication is not simply about what is said verbally, or even what the body language suggests, but is a conversation that drives to the root issues and deeper feelings. The planner doesn’t even begin to formulate recommendations until the end of the process, and there are no preconceptions about what might be right; by the time solutions are discussed with the client, they are such a natural fit to the needs that were discussed that they seem to be the only natural course of action.

Not unlike driving – where 80% of drivers rate themselves as being at least slightly above average – in my experience the majority of advisors believe that they spend their time at levels 3 and 4 with their clients. In reality, though, many are probably closer to levels 2 and 3; they have a strong tendency to talk about their expertise, knowledge, services, products, and solutions first, and only secondarily get around to actually hearing what the client really wants and needs, much less taking the proactive steps necessary to make the client feel truly heard and understood. The level 2 conversation might focus on fitting every client into the firm’s financial planning process, or investment management portfolio – it’s not necessarily about traditional “sales” products, but the outcome is the same – that the conversation in reality is more an effort to make the client see the value of what the planner has to offer, than on what the client truly needs.

In fact, some psychologists I’ve spoken with who teach active listening skills suggest that almost no one would consistently reach beyond what I’ve defined here as “level 3” until/unless the planner has actually spent some real time learning the skills and practicing them; this level of active listening simply does not come naturally for most human beings, especially in a professional business context where we also feel the pressure to demonstrate that we’re the experts and should be paid for the advice that we offer.

Newer planners in particular often struggle with these skills, as there’s so much to absorb – not only the verbal (and nonverbal) communication of the client, but trying to really understand it, reflect it back, and connect with the client. At the same time, the mind races to just connect the financial planning concepts to the discussion that’s underway,  while simultaneously trying to capture the information in notes to work on the financial plan, and ask the probing questions necessary to determine which recommendations and solutions may ultimately be correct. The pressure is even more severe if it’s a prospective client conversation, and the planner is also just trying to convince the prospect that it’s worth signing up for a financial plan in the first place. The common end result is that eventually the newer planner ends out doing more talking than listening… especially if he/she is also trying to demonstrate value as an expert in the first place.

So if I had to recommend one skill to learn that would have the biggest positive impact on someone advancing themselves as a financial planner working with clients, it would be learning to engage active listening skills effectively. Planners who can do that best can ultimately deliver solutions so “obvious” – because they match the needs and the situation perfectly – that success with clients easily follows. It’s a much more effective path to success than simply trying to be the best and most knowledgeable expert at making every situation look like a nail because your only tool is a hammer, whatever form of product or service offering that hammer might take.

So what do you think? Where do most planners rank on the listening levels? Where do you think you rank? Have you ever engaged in training to improve your listening skills? Is there another skill that you think is ultimately more important than this to the success of a planner?


I’m so glad I listened to you, thanks Michael!!! And check these great resources:

How To Spot A Liar – TED

Listening Skills Test — Psychology Today

Active Listening — Colorado University Conflict Research Consortium

5 thoughts on “Guest Post: Financial Planners — Are They Listening?

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  2. MarkWolfinger

    Advice is good. But until FP learn to use stock options to reduce risk and increase the probability of earning profits, they are not going to be very helpful to their clients

  3. Anonymous

    Using options to hedge is not a panacea by any stretch. And don’t forget, financial planners are not necessarily investment advisers. As a matter of fact, I think the two are specialized tasks if you really want quality work from a financial plan or investment advice. Thanks for reading, and the comment.

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