Using Psychological Profiling Tools To Better Communicate With Clients

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#OfficeHours with @MichaelKitces Video Transcript

Psychological Profiling Tools & Communicating with our Clients

Welcome everyone. Welcome to Office Hours with Michael Kitces!

Today we're talking a bit about psychological profiling tools that can help us communicate more effectively with our clients. What can we do to improve the communication and interaction we have with our clients?

This comes to me from a question that Hans had emailed to me. Hans said [reading the question here]

"I've been searching online trying to find some tools that help advisors profile their client's behaviors, i.e., psychological profiling. I think it's important to understand psychology before people become clients, so that you can talk about their future behaviors and what they might go through. I've seen a few tools out there, but none really tailor-made for the finance industry or asset managers. Any suggestions?"

This is an area that's kind of close to my heart, since as a few of you may know, I was actually a psychology major as an undergrad. And so I've always had kind of a closeness for all things psychology, psychology research, including some of the really good researchers out there about the fact that different people think through problems and issues differently and communicate differently. Which is this broad area that we now call psychological profiling. And to me, I think it's the progression of how we develop as financial advisors.

First Financial Advisors Focus On Technical Competency...

So you all can tell me if this sounds familiar to you.

I think for most of us, the first few years when we're getting started, we're just trying to figure out the technical stuff. Things like "I want to make sure I don't tell a client a recommendation that's just factually wrong and incorrect." So we're getting our CFP marks, we're trying to learn the technical stuff, we're analyzing plans and just analyzing the heck out of them. We just try to make sure the information is accurate, is technically correct. It's what I call the technical competency phase of being a financial advisor.

Now, eventually you get through that phase. [You can tap your screen there on Periscope if this resonates with you.] After a while, the problems that clients come in with aren't really all that new anymore. You've seen most of them. Every now and then, there's an interesting question and maybe there's something you get to really look up or work on, but the novelty of new problems that clients come in starts to wear off a little. Which, to me, is the moment that you're reaching technical competency, and approaching technical mastery. It's like, "I know my technical stuff now, what's next for me as an advisor, as a practitioner?" Which I suspect is the stage that Hans is at right now.

From Technical Competency To Client Communication Skills

And I find that where most of us go, the next stage is, "Okay, I know the technical stuff. Now I want to figure out how to communicate it more effectively to my clients. How do I connect with them better?" Almost all of us have a history of a couple of clients where maybe they left and stopped being clients, or maybe you had trouble getting them on board in the first place. It was always tough with them, because you felt like you're just not really connecting very well with them. The communication was at an impasse, and you were not really gelling well.

And frankly that's not entirely surprising, because we're not really trained that much on communication styles, communication techniques, how to communicate with people differently and better. Most of us simply have a natural communication style. That's what we do. People who like that respond to us and interact with us, but you have to get pretty far down your career path before you're at a point where you feel like you can adapt your communication style to someone else's need. To progress to a higher level of communication and professional mastery.

Behavioral Finance Profiling Tool: Financial DNA

Now, in terms of particular tools that are out there, there aren't a lot, but there are a few I've seen that either advisors use, or have adopted into the industry.

The one that I'm most familiar as being used broadly by actual financial advisors is a program called FinancialDNA. You can look it up online. FinancialDNA put together by a gentleman named Hugh Massie, who's built into an entire [behavioral finance] psychological profiling system for clients. He does training classes around it. I think he may even be working on a certification around it, how to be fully competent and master of the tool.

But the idea of it is that clients have a different focus in their priorities and how they communicate. Some are very driven by goal setting. So you have to talk about longer term aspirational goals if you really want to get them energized and connect to the conversation. Other clients are more focused on stability. You have to make them feel like the base is comfortable and safe, and only then are they willing to talk about other stuff. Now, for the goal setters, if you talk about the base, they get bored. For the stability folks, if you talk about the goals, they don't feel like the base is secure, and you lose them.

So people come at financial issues and communication problems differently, and you can tailor your communication to fit their style. And that's essentially what Financial DNA is built to do - help you figure out how would you adapt the way you communicate financial planning recommendations, ideas, things you're going to implement, changes that a client needs to make, in a manner that's more likely to resonate and connect with them.

PDP Test

Now, beyond Financial DNA, there are some tools out there that are effective for personality profiling and communication in general, that have been adapted by advisors to use in the industry.

One that I'm aware of is called the PDP Test from ProScan, which similarly scores clients, or anyone you're communicating with, across different dimensions.

With PDP, some people are more of a dominant, take charge kind of personality, so you have to give them information then let them steer, otherwise you're going to be in like a power struggle for who makes decisions and you're not actually getting anything communicated to them. Other people are more extroversion-oriented. They have to feel comfortable socially, they want to engage with you socially, and then get to the information. People at the other end of the extreme, you try to engage with them socially and do chitchat, they're going bonkers because they just want to get to the stuff, the facts, the details. And other people are really focused on details, some just want high-level.

So PDP is designed to help figure out what are the different ways that you need to communicate the information, so again you're going to be able to resonate with whatever those folks are struggling with or whatever they're interested in, or however they want to take in information.

Using Risk Tolerance Tools in Marketing

And we're even seeing some of these become a marketing angle. That this isn't just a tool you might use with a client in your office, this is even something that you might use with a prospect to encourage them down the road of becoming a client.

I think frankly, some advisors have used risk tolerance tools in this manner, and Riskalyze has been particularly good at leveraging their software this way. So Riskalyze is a risk tolerance-style question, not just that you give to existing clients or new clients per se, but that you can embed on your website and have people take that to learn about their own risk tolerance, see how it maps on their own portfolio, and if there's a gap, they're prompted to contact you as a solution.

Bob Veres and PreciseFP just launched a new tool called Financial Personalities that's meant to do a similar thing. I actually haven't even had a chance to look at it yet, but as I understand it, a similar pre-engagement tool on your websites that clients can come in, answer some questions, learn a little bit more about their own financial personality. And of course, that becomes not only a self-discovery tool for them, but a communication tool that you can use to understand how to communicate to that prospect, to engage them more effectively.

Adapt to Different Learning Styles - Auditory, Visual, and Kinesthetic

And really, I think, at the base of this is just a recognition that people have different ways of learning.

At a very high level, the research has found we learn in three different ways. Some people are auditory learners. They learn primarily by hearing and listening. Some people are more visual learners. They've got to see it. The picture is worth a thousand words folks. Or for them, it's 10,000 words because it's that much more powerful! And then some people are what are called kinesthetic learners, which means that they need to do it. They need to be hands-on. They need to really build or construct something, put something together with their hands, in order to really engage and learn.

So different people tend to align more on one of these dimensions or the other. If you've got very auditory learners, they want to hear you talk about the planning recommendations. If you've got visual learners, they need to see charts, graphics, the planning output to learn it. If they're kinesthetic learners, you might have to put the planning software up on the screen, and hand them the mouse, because they're kinesthetic, they're hands-on. Let them actually drag the sliders around, interact with the plan, see how it changes. That's how they cement the information in their mind.

So I think the hardest part for all of us as advisors is just recognizing this dynamic, that you've got to sometimes get out of your own head, take a step back, and just try to recognize what does the client actually need? How do I need to communicate the information that's helpful for them?

And I'll admit, I've struggled with this for a long time. I think I was terrible at it early on when I started as an advisor, because I was just mired in that competency phase, make sure that I'm telling people stuff that's accurate. I hadn't even gotten to the point where I could think about how I was communicating it to them. That's been a continuous journey of improvement. I think I've gotten a little better. I think I've still got a ways left to go.

Now, this is still separate from other types of tools that are out there in the industry that are used in our businesses. I'm also a huge advocate of using tools like Kolbe for assessing your work style, the work style of the people around you, that tells you how they tend to tackle problems. Very helpful for you figuring out how to work with your team. In fact, for our recruiting business, we actually take all the new candidates through Kolbe so that we can understand how do they tackle problems or will they be a good match for the firm. And I actually do know a handful of advisors that use Kolbe with their clients as well. I do think it gives you some useful information, some guidance about how [those clinets are] going to tackle decision making and problems. Which can then inform you about how you're going to present the information to them.

But the point is we're not talking about personality profiling and some Facebook quiz about which Kardashian do you most represent or something like that. This isn't a personality quiz type of endeavor. This is really about the recognition that different people communicate in different ways, and as an advisor, if you want to connect with them well and you want to connect with a wider range of people, you have to be ready to understand that some people want to be communicated to differently, and figure out how to adapt your communication style for that.

And I know one of the areas where this hit for me most personally is just the recognition that couples often have very different communication styles. My communication style is very different from my wife's. For a lot of our clients, the communication style of a husband is different than the wife's, and what that ends meaning for a lot of us advisors, we tend to connect with one versus the other, usually whoever is most like our communication style. And I think that's one of the reasons why we often unwittingly leave a spouse sort of behind or out of the conversation, because you have to adapt the communication to someone that may have a different communication style, and for a lot of us, that's not natural. That takes effort, that takes work.

But the good news is some of the tools out there like Financial DNA, like ProScan PDP, help to adapt to that process or help provide you the information about how does this person think and communicate, and how would you adjust your communication style to match them better?

So thanks for joining us here on Office Hours with Michael Kitces. We run this every Tuesday at 1 pm East Coast time and hope to see you next week. Take care everyone. Bye!

So what do you think? Have you ever used any kind of psychological profiling tools with clients in your practice? Would you consider using them in the future? Please share your thoughts in the comments below!