FP922 - Human Behaviour

Advocis Core
Curriculum Program
Course 922 | Edition 2020
HUMAN BEHAVIOUR
Module 12: Human Behaviour
Advocis Core Curriculum Program for

CFP® and QAFPTM Certification
Important disclaimer
This publication is designed to provide accurate and authoritative
information about the subjects covered. While every precaution has been
taken in the preparation of this material, the authors and Advocis assume
no liability for damages resulting from the use of the information contained
in this publication. Advocis is not engaged in rendering legal, accounting,
or other professional advice. If legal, accounting, or other professional
advice is required, the services of an appropriate professional should be
sought.
About the Advocis Core Curriculum Program

Advocis is a proud founding member of FP Canada™ (formerly known as
Financial Planning Standards Council), which was established in November
1995 with the core mission of “promoting and enforcing professional
standards in financial planning through the Certified Financial Planner®
certification, and raising Canadians’ awareness of the importance of
financial planning.” Advocis continues to support and uphold this
commitment — to promote competency and ethical standards among
financial advisors and planners.
Working with industry experts, Advocis has developed an FP Canada

approved education program leading to both the QAFP and CFP
Certification. The Advocis Core Curriculum Program for QAFP and CFP
Copyright © 2020 The Financial Advisors Association of Canada

Certification is offered through 12 distinct modules, aligned with FP

Canada’s Body of Knowledge. The Advocis Advanced Curriculum Program
for CFP Certification consists of one course with a final integrative
comprehensive exam. By focusing on the most important concepts and
required skills, practitioners are provided with a high degree of education
in the delivery of competent financial planning advice and service.
CFP designation holders are highly regarded for their ability to provide
clients with comprehensive financial planning services. They put clients’
interests first and ensure clients’ financial needs and objectives are being
met through the financial planning process.
About the Certified Financial Planner (CFP) Certification

The CFP Certification is an internationally recognized designation held by
more than 175,000 people in 26 territories around the world. FP Canada, a
member of the Financial Planning Standards Board (FPSB), has licensed
more than 16,500 individuals in Canada.
Qualifying to take FP Canada’s CFP Examination is a demanding process,

yet the professional rewards for successful candidates are significant. On
average, CFP professionals who have achieved this coveted certification
report a substantial increase in gross income and preferred clients in
comparison to non-designation holders.
This Advocis Core Curriculum Program is an accredited qualifying program

of study designed with the CFP Certification requirements in mind. By
successfully completing this program of study, students gain both the
knowledge and confidence needed to succeed in obtaining the designation,
and in building a thriving financial planning practice.
ii

Advocis Core Curriculum Program, 2020 Edition
CFP®, Certified Financial Planner® and are trademarks owned by Financial Planning
Standards Board Ltd. (FPSB) and used under license. All other trademarks are those of FP
Canada™.
Copyright © 2020 The Financial Advisors Association of Canada. All rights reserved.
Unauthorized reproduction of any images or content without permission is prohibited.
iii

Acknowledgements
First Edition, 2020
Written by:
Ryan Laverty, CFP®, FCSI, CIM, CIWM, PFP®, MBA, B.COMM
iv

Module Requirements
For more information on the requirements of this module (course outline,
instructions and assessments), please refer to the Syllabus, accessible
from the module homepage of the learning environment.

Table of Contents
LEARNING OBJECTIVES .................................................................... 1
INTRODUCTION ................................................................................ 2
Evolution of the technical knowledge topic of Human Behaviour ...... 2
Future of the technical knowledge topic of Human Behaviour .......... 4
Sub-topics of the technical knowledge topic of Human Behaviour .... 5
Caution related to the technical knowledge topic of Human

Behaviour ......................................................................................... 6
DECISION-MAKING AND BEHAVIOUR ............................................... 7
The brain .......................................................................................... 8

Central Limbic System .............................................................................................................................9
Prefrontal Cortex ........................................................................................................................................11
System 1 and 2 in the financial planning process ............................................................12
Using knowledge related to System 1 and System 2 to help clients make
decisions ...........................................................................................................................................................13
Heuristics and biases ...................................................................... 14

Memory .............................................................................................................................................................14
Heuristics .........................................................................................................................................................15
Biases .................................................................................................................................................................19
Biases affecting financial planners ...............................................................................................41
Values, attitudes, emotions and disorders related to money .......... 49

Motivation to meet psychological needs ..................................................................................49
Motivation to seek support .................................................................................................................51
Emotional state ...........................................................................................................................................52
Values, attitudes and beliefs related to money ..................................................................58
Disorders and problematic behaviour related to money .............................................61
vi

RELATIONSHIPS ............................................................................. 65
Communication............................................................................... 65
Effective communication ......................................................................................................................70
Motivation .................................................................................... 136

Change.............................................................................................................................................................136
vii

List of Figures and Tables

Figure 1: Homo Economicus versus Homo Psychologicus ........................... 3
Figure 2: Much Remains to Be Discovered about Human Behaviour ............ 5
Figure 3: The Human Brain .................................................................... 8
Figure 4: Characteristics of System 1 and System 2................................ 13
Table 1: Biases Commonly Found in Financial Planning ............................ 21
Figure 5: Maslow’s Hierarchy of Needs .................................................. 50
Figure 6: The Stages of Grief ............................................................... 54
Figure 7: Where Mental Energy Is Spent................................................ 56
Figure 8: Actions to Reduce Mental Fatigue ............................................ 57
Figure 9: Common Beliefs about Money ................................................. 59
Table 2: Common Money Disorders ....................................................... 62
Figure 10: The Communication Process ................................................. 66
Figure 11: The Contexts within Which Communication Occurs .................. 67
Figure 12: The Trust Matrix ................................................................. 71
Figure 13: A Client’s Evaluation of Trust in a Financial Planning Professional
........................................................................................................ 72
Table 3: Behaviours and Actions That Build Trust ................................... 74
Figure 14: The Components of Voice ..................................................... 76
Table 4: Types of Listening and Their Uses ............................................ 79
Figure 15: Characteristics of Active and Empathetic Listening .................. 80
Table 5: Physical Actions a Speaker Should Take When Engaging in Active
and Empathetic Listening..................................................................... 82
Table 6: The Five Components of Emotional Intelligence at Work ............. 85
Table 7: The Five Categories of Skills That Comprise Social Intelligence .... 88
Figure 16: The Domains and Competencies of Emotional and Social
Intelligence (ESI) ............................................................................... 90
Table 8: The Emotional and Social Intelligence Competency ..................... 93
Figure 17: Professional Attire ............................................................... 98
Table 9: Closed-Ended versus Open-Ended Questions ........................... 103
Table 10: Types of Noise ................................................................... 110
Table 11: Five Factor Model of Personality Traits .................................. 115
Figure 18: The Communication Style Model ......................................... 117
viii

Table 12: Body Language Characteristics That Accompany Different

Communication Styles ....................................................................... 122
Table 13: Communication Style Characteristics under Extreme and Stressful
Conditions ....................................................................................... 123
Table 14: Methods Financial Planners Can Use to Communicate Effectively
with Individuals with Different Communication Styles ............................ 124
Figure 19: Communication Tone Spectrum .......................................... 125
Figure 20: Learning Modalities ........................................................... 132
Table 15: Actions Financial Planners Can Take to Aid Individuals with
Different Learning Style Preferences ................................................... 134
Table 18: Transtheoretical Model of Change (TTM) ............................... 137
Table 16: When Adherence to Change Is Most and Least Likely .............. 140
Table 17: Promotion and Prevention Focused Language ......................... 146
Table 19: How Clients Show Resistance and Ambivalence to Change ....... 150
Figure 21: Spirit of Motivational Interviewing ....................................... 153
Figure 22: Guiding Principles of Motivational Interviewing ...................... 154
Figure 23: Approach to Motivational Interviewing ................................. 157
Figure 24: Core Skills of Motivational Interviewing ................................ 158
Table 20: Reflective Listening Techniques ............................................ 162
Table 21: Change Talk ...................................................................... 165
Table 22: Methods for Eliciting Change Talk ......................................... 166
Table 23: Planning for Change ........................................................... 168
ix

Learning Objectives
This module explores the fundamentals of human behaviour — in
particular, how the brain works as it relates to decision-making. It provides
candidates with a detailed understanding of values, heuristics, emotions
and disorders related to money that may affect the decision-making
process. Knowing how to influence human behaviour is essential to helping
clients benefit from financial planning.
The first section of the module explores decision-making and behaviour. It

explains how individuals make decisions and how the human brain works
under various circumstances. The second section focuses on how trust and
communication help motivate individuals to act in their own best interests.
After completing the coursework for this module, the learner will be able to:
 Explain, in a non-scientific manner, how the human brain functions in

the decision-making process
 Identify values, attitudes, disorders and emotions related to money that
an individual may have by recognizing language and behaviour cues.
 Identify heuristics and biases that an individual may have by reviewing
the individual’s decisions
 Use effective behaviour and communication strategies to foster

relationships built on trust
 Motivate an individual to engage in appropriate actions that facilitate the

individual’s success
 Respond to an individual’s resistance to change in a way that allows an
effective financial planning relationship to continue

Introduction
Understanding human behaviour and knowing how to affect it is essential
to helping clients benefit from financial planning. At every point in the
financial planning process1 — from engaging a prospective client with a
value proposition and getting him or her to share information during
discovery to communicating financial planning recommendations and
handling objections — financial planners will be called upon to use what
they know about human behaviour to help individuals achieve their goals
and fulfill their needs.
Evolution of the technical knowledge topic of

Human Behaviour
In his seminal 1776 work The Wealth of Nations, Adam Smith, the founder
of Classical Economics, described how rational self-interest can lead to
economic prosperity. Building on his work, neoclassical economists such as
Jeremy Bentham and John Stuart Mill argued that individuals make
decisions by rationally weighing costs and benefits to maximize their own
individual benefit or “utility.” Their theories, along with other related
theories such as Rational Choice Theory and Expected Utility Theory
(based on the model of Homo Economicus, or Economic Human), persisted
until the early 1950s when Nobel Prize-winning psychologist Herbert Simon
proposed that human judgement and rational decision-making ability are
subject to limitations. Further research during the 1960s, 1970s and 1980s
1
As presented in FP Canada’s Standards of Professional Responsibility
(www.fpsc.ca/docs/default-source/FPSC/standards-and-
enforcement/standards_of_professional_responsibility.pdf?sfvrsn=52).

by Noble Prize-winning psychologist Daniel Kahneman and his partner

Amos Tversky2 determined that human decision-making involves the use
of heuristics (mental shortcuts) and biases (cognitive errors in judgement).
With Kahneman and Tversky’s work, the field of behavioural economics
was born and, with it, Homo-Psychologicus, a model of human decision-
making in which rational thinking is not immune to environmental and
emotional factors.
Figure 1: Homo Economicus versus Homo Psychologicus
 Dispassionately pursues  Ill-defined desires,

self-interest preferences
 Makes unbiased  Judgements and choice

judgements influenced by emotions
 Effortlessly implements  Subject to self-control

rational decisions problems
The model of Homo Economicus (Economic Human) suggests that human beings make unbiased, self-interested,
rational decisions that result in optimal outcomes. The model of Homo-Psychologicus (Psychological Human)
suggests that humans are rational, but their decision-making is influenced by emotions and biases, which can lead to
sub-optimal outcomes considered irrational under the traditional definition of rationality.
Source: Lewis, David. “Behavioural Economics.” Presentation, September 17, 2018.

Behavioural Economics Summit for Science in Financial Services, Toronto, Ontario.
Much of the initial work in behavioural “Behavioural economics studies the

economics focused on how investors make effects of psychological, cognitive,
emotional, cultural and social factors
decisions, leading to a sub-branch of the field on the economic decisions of
known as behavioural finance. As the new individuals and institutions.”
(University of Queensland, 2018).
millennium began, members of the Canadian
financial planning profession recognized the importance of behavioural
2
Kahneman and Tversky conducted research together, but Tversky died before he could
receive the Noble Prize in Economics. The award was given to Kahneman for the duo’s
important work related to decision-making.

finance knowledge for financial planners by making it the 11th technical

knowledge topic in the 2006 release of the CFP® Professional Competency
Profile. As the financial planning profession has evolved, so too have the
competencies and knowledge expected of financial planners.
In 2017, members of the financial planning profession recognized the

changing role of financial planners — particularly their ability to influence
and motivate individuals to make decisions that will help them with their
goals — by expanding the technical knowledge topic from Behavioural
Finance (focused on investing) to Human Behaviour (which pervades all
areas of financial planning).
Future of the technical knowledge topic of Human

Behaviour
As our knowledge of the human mind evolves, so will the technical
knowledge topic of Human Behaviour. The study of human behaviour,
particularly in relation to how people make decisions affecting their
finances and future, is in its infancy. Just as we can see only a minimal
portion of the volume and mass of an iceberg above the waterline, we
have only begun to scratch the surface of the topic of human behaviour. As
economics and psychology come together to form new fields such as
neuroeconomics,3 the field of human behaviour will continue to grow.
3
“Neuroeconomics is a nascent field that represents the confluence of economics,
psychology and neuroscience in the study of human decision-making.” Society for
Neuroeconomics, 2015.

Figure 2: Much Remains to Be Discovered about Human Behaviour
Just as we can see only a minimal portion of the volume and

mass of an iceberg above the waterline, we have only begun
to scratch the surface of the topic of human behaviour.
Source: Clevenger, Ralph A. The Essence of Imagination. Composite Image, 1999.

www.freedomisknowledge.com/otw/stuff/tipoftheberg.html
Sub-topics of the technical knowledge topic of

Human Behaviour
The technical knowledge topic of Human Behaviour is separated into two
complementary sub-topics:
 Decision-Making and Behaviour

 Relationships
Decision-Making and Behaviour focuses on how individuals make decisions

and how the human brain works under various circumstances.
Relationships focuses on how trust and communication can help motivate
individuals to act in their own best interests.

Caution related to the technical knowledge topic

of Human Behaviour
The information contained within the technical knowledge topic of Human
Behaviour is expected knowledge for financial planners. However, financial
planners are not expected to be psychologists nor act as a client’s
professional therapist. The knowledge is presented to provide financial
planners with insight into how people make decisions and why they might
behave in the way they do with respect to money and financial matters.
Financial planners should be careful not to diagnose or stereotype an
individual based on the information presented in this text or their
observations while working with an individual.
A financial planner may wish to refer an individual to a qualified health

practitioner or recommend that the individual set up and attend an
appointment with his or her medical practitioner in situations where an
individual appears to be dealing with:
 Debilitating anxiety
 Depression
 Significant relationship dysfunction
 Addictive or compulsive behaviours
 Chronic inability to change destructive financial behaviours
 Consistent inability to follow through on financial plans
 History of painful or traumatic experiences involving money

Decision-Making and Behaviour

Have you ever wondered why people do the things they do?
Take clients with substantial consumer debt in the form of loans, lines of
credit and credit card balances who, at the same time, hold substantial
liquid assets in a savings account. They are paying high interest charges
(particularly on the credit card balances), while earning little to no return
on the savings account. Yet even when a financial planner recommends
using the money in the savings account to pay down the debt — explaining
that it will help them become debt-free sooner, save interest and increase
cash flow — clients may fail to follow through and make the rational
choice. Instead, many will continue to make minimum debt payments and
incur unnecessary interest fees.
Humans are complex creatures. While we like to believe that we are

completely rational and make optimal decisions, the opposite is true in
many instances. To see this in action, we can look at the stock market as a
continuing case study. History has shown repeatedly that when stock
market downturns occur, people liquidate their investment holdings to
avoid further losses. This fear and panic leads to losses that would not
have occurred if individuals remained invested. After downturns, including
the two worst in 1929 and 2008, post-downturn stock market growth
eclipsed the downturn losses and resulted in record-high stock market
levels and returns. Many of those same investors reinvested only when the
stock market reached levels above the pre-downturn high, demonstrating
again the irrationality of their decision-making process.

The brain
To understand human behaviour, we must first understand how the brain
works. The brain is the central command centre for the human body’s
central nervous system. It collects, organizes and processes information
received from the body’s vital organs and five senses: sight, sound, touch,
smell and taste. Using this information, the brain makes decisions and
provides instructions to the body via the brainstem about how to react.
The human brain is a complex organ, comprising numerous parts, and it

continues to evolve as we age, experience and learn. While a number of
areas in the brain are responsible for decision-making, two are particularly
important to understand how we make decisions: the Central Limbic
System and the Prefrontal Cortex.
Figure 3: The Human Brain
The human brain contains the Central Limbic System (System 1) and
the Prefrontal Cortex (System 2).
Source: Khan, Sumaiya. “Diagram of the Brain and Its Functions.” Bodytomy, May 31, 2018.
https://bodytomy.com/diagram-of-brain-its-functions
These two areas can be thought of as the emotional (Central Limbic

System) and rational (Prefrontal Cortex) parts of the brain. Psychologists
Keith Stanovich and Richard West described them as System 1 and System 2,

and Daniel Kahneman made those terms famous in his book Thinking, Fast
and Slow.
Central Limbic System

The Central Limbic System, or System 1, The Central Limbic System — System 1
is the emotional part of the brain that Characteristics of System 1:
focuses on immediate rewards and/or
 Automatic
the removal of pain. While we are awake,  Quick
 Instinctive, impulsive, intuitive
it is always on and ready to make
 Reacts emotionally
decisions. It distinguishes surprises from  Focused on immediate gratification
 Fears loss
the normal; identifies and creates  Focuses on existing evidence and
patterns based on experience; generates ignores absent evidence
 Neglects ambiguity
impressions, feelings and inclinations;  Suppresses doubt
 Frames problems in isolation; does not
and infers and invents causes and integrate
intentions. Based on these reactions, it  Overweights low-probability events
 Responds more strongly to losses than
makes short-term predictions and gains
decisions regarding familiar situations.
One example of System 1 in action is the acute stress response, commonly

known as the “fight or flight” response (first described by Walter Cannon),
that animals, including humans, experience when faced with a perceived
threat. Based on the inputs the brain receives, System 1 instinctively and
intuitively determines whether a threat is present and whether to stay
(and fight) or escape (take flight). For example, imagine you are walking
down the street when a person jumps out from between buildings. System 1
in your brain automatically and quickly determines whether there is a
threat and what to do about it. Because System 1 fears loss and focuses
on existing evidence as opposed to absent evidence, your System 1 will

tell your body to release cortisol and adrenaline, which cause your feelings
of surprise and fear. If the person who jumped out is a friend you
recognize, then your System 1 will also let your legs know they don’t need
to move since you are unlikely to be in danger. On the other hand, if the
person who jumped out is unknown to you and holding a gun, your System
1 will notify all parts of your body that it is time to flee to a safer place.
System 1 does not only ensure that we remain safe. It also performs
automatic tasks learned over time, such as discerning whether one object
is closer than another, turning our head towards a sound’s source,
detecting the tone in an individual’s voice, answering a simple math
question such as one plus one and understanding simple sentences.4
System 1 faces three different types of situations. When it comes across

information, ideas, circumstances or events that it recognizes, System 1
engages memory and uses heuristics (mental shortcuts) to make
decisions. In these instances, the heuristics used generally lead to
decisions that are logical and rational, and result in positive and
appropriate outcomes. However, when it comes across information, ideas,
circumstances or events that pose more complex questions and require
more complex decisions, System 1 tries to substitute a similar and easier
question or decision that it can solve using a heuristic. This use of
heuristics often leads to biases (cognitive errors in judgement), resulting in
illogical and irrational decisions that produce sub-optimal or negative
outcomes. Finally, when it comes across information, ideas, circumstances
or events that violate the world it knows, System 1 engages the Prefrontal
Cortex (System 2) to perform a more detailed and complex analysis. When
4
Kahneman, Daniel. Thinking, Fast and Slow, p. 21. New York: Farrar, Straus and Giroux,
2011.
10

System 1 engages System 2, it generally communicates its thoughts,

feelings and potential decision to its partnering system. System 2 can then
decide to endorse System 1’s judgement or seek out and incorporate new
information and analysis in support of a decision.
Prefrontal Cortex
The Prefrontal Cortex, or System 2, is the The Pre-Frontal Cortex — System 2
planning and predictive system that
Characteristics of System 2:
makes decisions based on our rational
 Deliberate
ability to weigh pros and cons. While we  Slower
are awake, System 2 is on, but in a much  Effortful
 Logical
lower-effort capacity than System 1. It  Uses messages from System 1 to
generate beliefs, attitudes,
sits in the background until called upon to
intentions
perform an activity involving greater  Controls thoughts and
behaviours
complexity and requiring greater  Follows rules
attention. System 2 is deliberate, slower  Makes comparisons among
objects across several attributes
and more effortful, and it uses logic in its to make deliberate choice
decision-making process. It employs the
impressions, feelings and inclinations System 1 develops to generate the
beliefs, attitudes and intentions that shape our thoughts and behaviours.
System 2 also follows rules and can make comparisons and decisions
based on several attributes.
The complex decisions System 2 makes are the kind that make it possible
to send people into space. The planning, predictions, calculations and
decisions related to such a complex undertaking require the brain to make
voluntary and effortful choices. This type of thinking, which includes
11

identifying whether further information is required before making a

decision, is the domain of System 2.
Additional attention-requiring operations that System 2 manages include

listening to one person when multiple people are talking in a room, looking
for an individual in a crowd, recalling a fact from memory, communicating
a physical or email address, parallel parking, comparing two products and
completing a tax form.5
System 1 and 2 in the financial planning process

It has been said that you never get a second chance to make a first
impression. This adage is founded on the almost instant and automatic
conclusions that a prospective client’s Central Limbic System draws about
a financial planner even before the financial planner has spoken a single
word. Based on a multitude of variables, including the financial planner’s
appearance and body language, the prospective client’s System 1 quickly
determines whether or not to trust the financial planner and whether to
engage or avoid him or her.
5
2011.
12

Figure 4: Characteristics of System 1 and System 2
Source: Upfront Analytics. “System 1 vs. System 2 Decision Making.”

http://upfrontanalytics.com/market-research-system-1-vs-system-2-decision-making
(accessed July 1, 2019)
Meanwhile, a financial planner uses the Prefrontal Cortex on a daily basis.

Calculating an individual’s net worth, interpreting financial projections,
explaining the advantages and disadvantages of a recommendation,
comparing registered plans, and monitoring and managing one’s own
behaviour when dealing with a client all require the financial planner to
engage System 2.
Using knowledge related to System 1 and System 2 to

help clients make decisions
Financial planning involves making choices and decisions. Based on how
the brain uses the two systems to make decisions, it is clear that how a
financial planner presents the decisions that must be made can improve
clients’ decision-making.
13

As much as possible, financial planners should ask clients to make simple

decisions focused on a single topic with a limited number of choices and
minimal ambiguity. These will engage System 1. When choices are more
complex, financial planners should ensure clients have the time they need
to acquire and consider information before making a decision. Financial
planners should also be prepared to continue to provide information in
support of a decision, since complex decisions require System 2 and are
less likely to be made with System 1’s speed and minimal effort.
Heuristics and biases

The human mind makes millions of decisions each day. If each one
required a comparison of pros and cons, we would often fail to act,
resulting in limited productivity for an individual and limited progress for
humanity. To facilitate efficiency, System 1 automatically takes care of
many of the choices we make each day, using memory, heuristics and
biases to make decisions quickly.
Memory
System 1 recalls past events to help determine future courses of action.
Recall the example in which a friend jumps out from between buildings and
scares you slightly. The more often your friend plays this trick on you, the
more often your System 1 experiences that there is no threat. The
resulting reduction in fear and stress for each successive experience is a
product of System 1’s ability to recall from memory and determine that
there is no need to flee.
14

Heuristics
System 1 also uses heuristics to aid in decision-making. Heuristics are
mental shortcuts used in the decision-making process. In many cases, a
heuristic “is a simple procedure that helps find adequate, though often
imperfect, answers to difficult questions.”6
The human brain’s ability to make decisions is constrained by a number of

variables, including:
 The time constraints the individual faces

 The quantity and quality of information the individual has available
(including too much, too little, incomplete or unknown information)
 The quantity and quality of knowledge the individual possesses
 The individual’s motivation to make the decision
 The biological circumstances the individual is experiencing (such as
fatigue or hunger)
 The individual’s resilience to stress and anxiety
 The number of decisions, thoughts, circumstances and emotions the
individual is experiencing simultaneously
 The individual’s environmental circumstances (such as the physical
environment, time of day or year and weather)
By using heuristics, the human brain can save significant amounts of time,
reduce complexity and minimize cognitive load (mental effort) when faced
with the need to make a decision. In many instances, the use of heuristics
allows the human brain to make effective and efficient decisions, leading to
correct outcomes that align with the idea of rational-decision making.
6
2011.
15

However, in some instances, the use of heuristics results in flawed

judgements and interpretations and sub-optimal outcomes based on
inaccurate, illogical and irrational thinking.
Financial planners often use heuristics in the form of rules of thumb. Some
of the most common include:
 50/30/20 Rule: allocate 50% of after-tax income to necessities, 30% to

financial goals (such as debt reduction or saving) and 20% to wants
 Six-Month Emergency Fund Rule: keep enough to cover at least six
months of expenses in liquid assets for emergencies
 70% Retirement Replacement Income Rule: plan to generate at least
70% of current after-tax income in retirement to maintain your lifestyle
 10% Retirement Savings Rule: save at least 10% of earnings towards
retirement
 4% Withdrawal Ratio: withdraw less than 4% of invested retirement
assets annually to help preserve retirement savings
 Age Rule for Equities: subtract age from 120 to determine the
percentage of equities that should be in an investment portfolio
In many cases, these rules of thumb are easy to understand, remember

and explain — a benefit to both the financial planner and the client. They
can help clients make quick, easy decisions, even though they may not
result in the optimal outcome.
General purpose heuristics

Heuristics come in two types: specific and general purpose. Individuals use
specific heuristics only in certain circumstances, and they are beyond the
scope of this module. Individuals use general purpose heuristics more
broadly, and they include:
16

 Affect heuristic
 Availability heuristic
 Representative heuristic
 Anchoring and adjustment heuristic
The affect heuristic is a mental shortcut that makes judgements and

decisions based on how a person feels about a particular option. Many
times, people make decisions based on their “gut feeling.” They can’t
pinpoint or articulate why they have made a certain choice, other than to
say, “It just feels right.” In these cases, they are substituting an easier
question for the harder question they face. In other words, the brain
substitutes “how do I feel about the option?” for “what do I think of the
option?” since it is easier and quicker for System 1 to decide how it feels
than to engage System 2 to compare in detail the value of each of
attribute of two options. The “affect” is based on the type and strength of
the individual’s emotion towards the options. For instance, if a prospective
client feels comfortable with one financial planner and uncomfortable with
another, he or she is more likely to decide to work with the first financial
planner even if the second financial planner is more qualified.
The availability heuristic is a mental shortcut that makes judgements and

decisions based on how easily a person can recall related information from
memory. People tend to put more weight on information they can recall,
thinking that if they are able to recall it, it must be important to consider in
their decision. The availability heuristic is a common occurrence after stock
market downturns. Meeting with prospective clients after the 2008
economic downturn was difficult for many financial planners because, with
that event fresh in their minds, even people with long-term investment
horizons wanted to stay away from investment markets. Because System
17

1 is short-sighted and fears loss, many people rationalized this by quoting

recent loss statistics they had seen in the media and citing recent
examples of individuals who had experienced financial ruin because of the
downturn. Others overweighted the small probability of loss, a classic
System 1 mistake, and ignored the very high chance they would make
substantial returns — as others had by investing in the market during any
downturn over the previous 90 years.
The representative heuristic is a mental shortcut that makes judgements

and decisions about the likelihood of an event based on the probability that
another related event will occur. To help make meaning of our
experiences, the human mind attempts to classify and store them to
memory based on a pattern it believes is appropriate. When it encounters
a new experience, the brain tries to classify it by comparing it to past
experiences. If it finds a similar one, it uses the past experience to make
decisions and judgements about the new experience. In essence, the brain
uses the past experience to represent the new experience. This can be
problematic when a financial planner meets with prospective clients for the
first time. For example, an engineer who arrives at the financial planner’s
office wearing a suit and holding today’s newspaper in his hand is more
likely to be judged as investment savvy than a garbage collector who
attends a meeting with the financial planner wearing his work coveralls
and holding a lunch box. Based on past experiences with people who
worked in similar roles, some financial planners would jump to the
conclusion that the engineer knows more about investing — but this could
be completely wrong. That’s because System 1 doesn’t take into account
information it doesn’t know. The garbage collector may have just finished
work and not had a chance to change clothes, may be attending school
18

part-time to earn a securities license, and may have much more time
outside work than the engineer to research investment markets.
The anchoring and adjustment heuristic is a mental shortcut that makes

decisions and judgements based on an initial or familiar piece of
information. Because the human mind is better at thinking in relative
terms than absolute terms, it makes decisions and judgements using
relative thinking, not absolute thinking. The most commonly cited
examples of the anchoring and adjustment heuristic demonstrate the
effect that a “starting point” has on the final outcome that an individual
experiences. For example, someone who is purchasing a car generally
starts the bargaining process based on the sticker price. Similarly, an
investor who wishes to negotiate a management fee tends to make a first
counteroffer based on the initially stated cost. If an advisor starts by
offering a fee of 2%, the client may counteroffer 1% and negotiations will
ensue. On the other hand, if an advisor starts by offering 3% and the
client subtracts the same 1%, the counteroffer will be 2%. In that case,
the agreed-upon fee will be higher simply because the advisor set a higher
anchor.
Biases
As the human brain classifies and categorizes new information and
experiences to help it make sense of the world around it, it creates a
subjective model of how the world works. In processing information, it
determines whether that information aligns with personal beliefs and it
also takes into consideration feelings about the information and any
resulting decisions. While engaging in these cognitive processes, the brain
is susceptible to errors based on stereotypes that align with the human
19

brain’s subjective model of reality, but not with objective reality. These
errors, resulting in inaccurate understandings of reality, are biases — and
they can result in illogical or irrational decisions.
Many factors affect biases, including an individual’s sex, gender, culture,

religious and spiritual beliefs, current circumstances, learned behaviour
and the heuristics we use to make decisions. There are two types of
biases: cognitive and emotional.
Cognitive biases are systematic errors in thinking that impact judgements

and decision-making. They can occur as the brain tries to reason by
processing information (information processing biases) and assessing
whether it aligns with personal beliefs (belief perseverance biases).
Because the brain uses heuristics to process information, cognitive biases
are some of the most commonly occurring biases.
Emotional biases are distortions in thinking that impact judgements and

decision-making. They can occur when emotional factors (such as fear and
regret) override an individual’s reasoning. Because emotions tend to
influence System 1 to make a quick decision without consulting System 2,
emotional biases are some of the hardest biases to overcome.
Table 1 lists biases commonly found in the field of financial planning. They
are described in more detail on the following pages.
20

Table 1: Biases Commonly Found in Financial Planning
Cognitive Biases Emotional Biases

Information Belief Perseverance
Processing Biases Biases
Anchoring and Conservatism bias Loss Aversion bias
adjustment bias
Availability bias Confirmation bias Regret Aversion bias
Recency bias Hindsight bias Status Quo bias
Saliency bias Illusion of control Endowment bias
Familiarity bias Self-Serving bias
Framing bias Overconfidence bias
Sunk-Cost bias Affinity bias
Outcome bias Disposition bias
Self-Control bias
Source: Author’s creation.
Anchoring and adjustment bias

The anchoring and adjustment bias is the tendency to rely heavily on one
piece of information. It is linked to the anchoring and adjustment heuristic,
in which the human brain makes judgements and decisions based on an
initial point of reference. In many decisions, an individual focuses on one
piece of information and discounts all other pieces of information.
Anchoring and adjustment bias in practice

The anchoring and adjustment bias influences many financial planning decisions,
particularly when a client receives information that positions the original anchor in a
negative context. For example, the cost of insurance can be a sticking point for clients
who feel that what they will pay exceeds the potential benefits they will receive. They
fixate on the cost, rather than taking into account the benefits insurance provides.
21

Availability bias
The availability bias is the tendency to place a higher importance on
information and events that come to mind more readily. The availability
bias is linked to the availability heuristic, in which the human brain makes
judgements and decisions based on how easily information can be recalled
from memory. What types of information and events come to mind most
readily? In general, those that were personally observed, are memorable
because of their uniqueness or unusualness, have occurred recently, or are
vivid and visceral because they evoke an emotion.
Availability bias in practice

The availability bias often appears when the media report large downturns in
investment markets, particularly when these downturns occur during one day or over
a short period of time. When making decisions related to their investments, people
tend to recall and lend more credence to the negative messages in these media
reports, even when shown evidence to the contrary.
Recency bias
Recency bias is the tendency to recall and place greater weight on recent
information and events than on past information and events. The human
mind’s memory storage and recall functions are tremendous tools.
However, the mind tends to retrieve recently acquired information and
recently stored memories more easily than older ones. And, as already
discussed, people tend to think that if they are able to recall information
with ease, then it must be important and should be weighted more heavily
in their decision-making process.
22

Recency bias in practice

The recency bias often shows up during the reversal of a bull or bear market.
Investors often assess performance based on the most recent value of their
investment portfolio.
When an upward-trending market experiences a correction, many view the drop in

their portfolio’s value as a loss. They easily recall the value of their portfolio on their
last quarterly statement (e.g., $500,000), but forget that their portfolio’s current value
(e.g., $475,000) is higher than it was five years ago (e.g., $300,000).
Similarly, when markets begin to recover following a downturn, some investors who
liquidated their portfolios during the downturn to avoid volatility and losses continue to
sit on the sidelines. They maintain their portfolios in cash despite substantial growth
opportunities. Their focus is on recent losses rather than recalling the pattern of a
previous market recovery that occurred some time ago.
Saliency bias
Saliency bias is the tendency to focus on information that is more
prominent and discount information that is not as prominent. Linked to the
availability heuristic, saliency bias is based on factors that include how
easy it is to process the information and the emotional impact of the
information. People tend to rely on information that is easy to identify,
understand and process when making a decision because it reduces the
required mental exertion. In addition, people tend to be influenced by
information when it evokes an emotion, particularly pleasure or pain
because System I focuses so heavily on these two feelings.
23

Saliency bias in practice

When presented with the benefits and drawbacks of a particular strategy, many
individuals make their decision based on one or two salient pieces of information that
stick out to them – and this is the saliency bias in action. For example, when
consolidating debt, a financial planner can highlight the expected quantitative impact,
including increased cash flow and a reduction in interest costs. However, the client
may focus instead on emotionally charged qualitative benefits, such as getting better
sleep at night without having to worry about debt and starting retirement 10 years
earlier than expected.
Familiarity bias
The familiarity bias is the tendency to place a higher importance on
familiar information and events. The familiarity bias occurs because people
prefer the comfort that comes with the familiar to the discomfort or even
fear associated with the unknown.
Familiarity bias in practice

The familiarity bias often influences the decisions investors make about their
portfolios. Without proper advice, many will choose to invest in guaranteed investment
certificates (GICs), rather than mutual funds, exchange-traded funds or individual
stocks and bonds, simply because they are more familiar with how GICs work.
Conversely, they are unfamiliar with how investments involving risk will react to
environmental factors, such as changes in the economy. Investors who allow the
familiarity bias to take the lead in their portfolio decision-making are at risk of failing to
achieve their goals. That’s because they may shy away from investments with the
potential to generate the returns required to fund those goals.
24

The familiarity bias can also shape the asset allocation of an investment portfolio.
Many investors overweight assets from familiar geographic areas and industries. This
can lead to a “home bias” in which Canadian residents may have an inappropriately
large allocation to Canadian companies and insufficient diversification.
Framing bias
The framing bias is the tendency to draw different conclusions from
different presentations of the same information. Originally demonstrated in
experiments by Kahneman and Tversky, this bias is one of the strongest in
decision-making.7
Kahneman and Tversky discovered that people are risk-averse when

potential outcomes are positive, preferring a sure gain to a probable gain.
For example, they would prefer a guaranteed $10 to a two in three chance
of winning $15, even though the mathematical expectation of both options
is the same: $10. Conversely, people are risk-seeking when potential
outcomes are negative, preferring a probable loss to a sure loss. For
example, they would prefer a two in three chance of losing $15 to a
definite loss of $10. These findings, along with others related to how
people decide among alternatives that involve risk and uncertainty,
became known as Prospect Theory.
An important conclusion related to these discoveries is that the way

information is framed can influence the decision an individual makes.
When information is framed positively, people tend to avoid risk. However,
7
Thomas, Ayanna, and Peter Millar. “Reducing the Framing Effect in Older and Younger
Adults by Encouraging Analytic Processing.” The Journals of Gerontology Series B:
Psychological Sciences and Social Sciences, 67B(2) (2011): p. 139
doi:10.1093/geronb/gbr076. As originally quoted in Choices, Values, and Frames. Edited
by Kahneman, Daniel, and Amos Tversky. New York: Cambridge University Press, 2000.
25

when the same information is framed negatively, people tend to seek out
or take risk. This means that how a financial planner chooses to present
information can have a significant impact on a client’s decision.
Framing bias in practice

The framing bias can dramatically affect an individual’s conclusions prior to making a
decision. Investments that are framed more positively (such as “the investment
achieved positive returns in 70% of calendar years”) will likely be better received than
when framed negatively (such as “the investment experienced negative returns in
30% of calendar years”), despite the two descriptions applying to the same
investment.
Sunk-cost bias
The sunk-cost bias is the tendency to continue to contribute resources
(e.g., money, time and effort) to a venture despite evidence that shows
the expected cost of doing so exceeds the expected benefits. There are
many reasons why the sunk-cost bias occurs, and many relate to people’s
aversion to loss. In general, people fear losses and react more strongly to
losses than gains. So, people who view resources already committed to a
venture as a loss may not want to step away from the venture despite that
decision seeming irrational. The sunk-cost bias also aligns with Prospect
Theory: given a choice between a cancelled venture (a sure loss) and a
venture that just may turn around (a probable loss), many people will
choose the probable loss over the sure loss.
26

Sunk-cost bias in practice

The sunk-cost bias shows up in investment markets when investors hold onto losing
stocks or “double-down” by investing more money in a losing stock — in effect,
throwing good money after bad money.
The sunk-cost bias also recently appeared in the Canadian housing market. As prices
of residential homes in many parts of the country were increasing exponentially each
year, speculators purchased properties with the hope of flipping them and selling
them for a profit. This was problematic for some speculators who purchased new
builder homes and had to wait for construction to be completed. In some cases, the
housing market cooled and prices plateaued while the home was still under
construction, leaving speculators with a property worth not much more than the
purchase price. However, many individuals declined the offer of a price similar to the
one they had paid, explaining that their profit would not be substantial enough. While
they wait for house prices to increase, these speculators must continue paying bills
such as mortgage interest, property taxes and utilities. These ongoing monthly
expenses may end up costing them more than their potential future profit.
Outcome bias
The outcome bias is the tendency to evaluate a decision by its outcome
instead of its quality at the time it was made. This bias prevents people
from improving their decision-making abilities in the future, since they
consider the results more important than the decision-making process
itself. In other words, the outcome is viewed as more important than all
the factors that went into making the decision, including the information
that was available and the circumstances of the time and place the
decision was made.
27

Outcome bias in practice

The outcome bias is commonly on display when an individual puts all blame for the
performance of an investment portfolio on a financial planner. The financial planner
may have followed a tried, tested and true process to mitigate the risks associated
with investing in assets that can fluctuate in value; however, even the best laid plans
can result in unexpected outcomes given the number of variables involved and the
uncertainty that exists when investing. For example, very few people in the world
expected the 2008 financial crash; foreseeing such an event was improbable. Holding
a financial planner solely accountable for drops in the value of an investment portfolio
during this tumultuous time in the market is an example of the outcome bias in action.
The individual is placing too much weight on the outcome and too little weight on the
decision-making process that occurred prior to the downturn.
Conservatism bias
The conservatism bias is the tendency to revise a belief insufficiently when
presented with new information. People compare new information to their
pre-existing knowledge and beliefs. Many times, they underweight the
importance of new information, even when it is accompanied by strong
evidence. Rather, they attach greater credence to their existing knowledge
and beliefs. In many instances, this occurs because people experience
cognitive dissonance, a feeling of mental stress or discomfort when holding
two or more contradictory ideas, beliefs or values at the same time or
when confronted by new information that contradicts existing ideas, beliefs
or values. In addition, people may not want to admit they were wrong
when they formulated their original belief or they may not want to exert
the significant amount of energy required to revise their belief since they
already expended significant energy forming it. If people do choose to
revise beliefs and/or act on new information, they tend to be slow to do so,
28

which can have significant consequences. A prime example of the

conservatism bias occurred when it took many years for people to accept
that the Earth is round, not flat as was once believed.
Conservatism bias in practice

Investors are notorious for failing to act, or acting slowly, when new evidence that
impacts the value of their investments becomes available. The repeated occurrence
of such behaviour demonstrates the prevalence of the conservatism bias in investing.
Confronted with consistently negative news about Nortel Networks, a multinational

telecommunications company, many investors continued to hold their positions in the
company’s public stock. Even when significant drops in the company’s stock price
occurred, people remained invested, believing the negative news was temporary and
that the company was too big to fail. Thousands of investors ended up losing
hundreds of millions of dollars when Nortel Networks ultimately declared bankruptcy.
Confirmation bias
The confirmation bias is the tendency to search out, favour, interpret and
recall information that confirms one’s preconceptions. A person engaging
in this type of behaviour seeks reinforcement that a preconceived belief is
correct. The confirmation bias also occurs when someone discounts,
underweights or filters out information that contradicts a preconception to
avoid challenging it. In both seeking reinforcement and avoiding challenge,
the individual is attempting to minimize cognitive dissonance.
29

Confirmation bias in practice

When advised to invest in market-related investments such as mutual funds, some
individuals immediately dismiss the recommendation based on preconceived notions
that those types of investments are too risky and/or result in losses. The confirmation
bias may be supported by other biases. For example, these individuals may recall
stories about others who lost money more easily than stories about those who have
successfully used market-related investments to earn a return on their money and
meet their goals.
Similarly, many individuals’ first response to recommendations involving insurance is

that it is expensive and that they are therefore unlikely to realize the associated
financial benefit. These individuals can usually identify examples of friends and family
who have paid insurance premiums for many years, but received no financial benefit
in return.
Hindsight bias
The hindsight bias is the belief that past events were more predictable
than they actually were. Individuals are often unable to recall the
uncertainty that preceded an event and also prefer to believe that order
and predictability prevail over randomness in the world. The hindsight bias
allows the human mind to reassure itself that an event was predictable
rather than random. In addition, people want to portray themselves in a
positive light when explaining the past. The hindsight bias gives them an
opportunity to demonstrate their ability to make correct decisions.
However, they often underestimate the complexity of events and forget
that the outcome likely occurred for reasons other than their ability to
predict that outcome.
30

Hindsight bias in practice

The hindsight bias may show up when a financial planner provides investment
recommendations to clients in the midst of a stock market correction. In this type of
environment, investors’ emotions may motivate them to request the liquidation of
investment portfolios to protect them from dropping investment values. If the
correction turns into a bear market, many investors will say they knew all along that
the correction would turn into a market downturn. If the correction reverses, many
investors will say they knew all along that the correction would be temporary. In both
cases, they “remember” incorrectly.
Illusion of control
The illusion of control is the belief that you can influence an outcome that
is outside your control. The human brain prefers predictability and order to
arbitrariness, so it is wired to believe that it can, given enough
information, identify, predict and control events. In many cases, this is
true. From housing to transportation and from finance to medicine, human
beings have proven that we can design, manufacture and construct
complex systems. We can and do control many aspects of the way our
world works. However, we are still at the mercy of random natural forces,
organisms that infect the human body and unpredictable chains of events
that can lead to disaster. In those cases, control is an illusion.
31

Illusion of control in practice

The illusion of control often arises when financial planners address risk management
and insurance planning. Many individuals don’t think they need life, disability or critical
illness insurance because they come from a family with longevity in their genes, eat
healthy foods, exercise, and avoid smoking and drinking. They believe they have full
control over their health — but, of course, they are still at risk of dying, acquiring a
disability or developing an illness.
Loss aversion bias

The loss aversion bias is the tendency to view losses as more painful than
equivalent gains. As part of their work on Prospect Theory, Kahneman and
Tversky observed that people make decisions after weighing potential
gains against potential losses, rather than focusing on the expected net
gain or net loss (final outcome). This led to the discovery that people
prefer avoiding losses to acquiring equivalent gains. In fact, it has been
estimated that, when making a decision, people consider a potential loss to
be twice as impactful as an equivalent potential gain. Put another way, to
accept an opportunity to take a risk, most people require the potential
benefit to be at least double the potential loss. This loss aversion bias is
linked to many of the emotional biases people experience.
The individual’s initial reference point is an important factor in how the loss
aversion bias manifests itself. Examples of initial reference points an
individual may use to determine potential gains and potential losses
include:
 A starting point (such as $0, no goal or no plan)

 An initial value (such as the original amount invested)
32

 A current point (such as the status quo or the fair market value of an
investment)
 A peak or trough value (such as the highest or lowest investment value
achieved)
 A future point (such as the expected outcome or the achievement of a
goal)
Loss aversion bias in practice

The loss aversion bias appears whenever a market correction occurs. Clients who
compare their current portfolio value to the highest value that their portfolio has ever
reached are more likely to consider liquidating their portfolio than clients who compare
their current portfolio value to the amount they originally invested.
Regret aversion bias

The regret aversion bias is the tendency to avoid making decisions
because they do not want to experience regret. People put more emphasis
on losses than gains when making decisions, so they look for ways to
minimize losses and the feelings that accompany them. When faced with a
decision involving a potential loss, it’s human nature to plan for the worst
case scenario. Furthermore, as part of the decision-making process, the
brain both projects the expected outcome and how the individual will feel
in that future scenario. When there is a potential for loss, the brain looks
for ways to minimize feelings of regret for making the wrong decision.
Kahneman and Tversky discovered that people feel more regret when they
take action and still experience a poor outcome (an error of commission)
than when they do nothing and experience a poor outcome (an error of
omission). Both errors of commission and errors of omission can lead to
33

increased risk aversion, decreased risk taking, the status quo bias and
missed opportunities.
Regret aversion bias in practice

The regret aversion bias is apparent in many of the financial decisions clients make.
When deciding whether or not to purchase term life insurance, for example, clients
weigh the regret they may feel if they pay premiums for many years and receive no
financial benefit from the policy against the peace of mind they will feel for taking
steps to ensure their beneficiaries are protected in the event they die prematurely.
When coupled with loss aversion, where potential losses are given more weight than
potential gains, the regret aversion bias may result in clients declining insurance or
postponing making the decision.
Status quo bias

The status quo bias is the tendency to prefer the current state of affairs to
change. It may occur because of a combination of loss aversion, sunk-cost
thinking, cognitive limitations and regret avoidance. When people compare
the status quo to a change, they tend to use a cost-benefit analysis in their
decision-making process. Many times, people view what they are giving up
as a loss and what they will receive as a gain. Because of the loss aversion
bias, they may overweight costs versus benefits, leading them to maintain
the status quo. Because of the sunk-cost bias, they may feel that they
have invested a lot of resources (time, money, effort, etc.) in the status
quo and therefore opt to maintain the current state. Because change
involves effort, they may view the increased workload as too costly (in
time or effort) and choose to maintain the status quo. Finally, because of
the regret aversion bias, they may fear making a wrong decision and
prefer to stick with what they know.
34

Status quo bias in practice

The status quo bias is one of the strongest biases clients face. When presented with a
recommendation to consolidate debts into a single loan, clients may choose not to
proceed despite the projected interest savings and increased cash flow. They may
maintain the status quo for a number of reasons, including a focus on the fees that will
be charged to set up the loan, the effort required to pay off their debts and/or the
feelings of loss associated with closing revolving credit accounts as part of the loan
approval process.
Endowment bias
The endowment bias is the tendency to place a higher value on an asset
you own than its objective market value. People with this bias ask for a
higher price when selling a good than when buying the same good. This
hesitation to sell a good for its market value occurs most often with goods
of sentimental value or other emotional significance. Items linked to an
experience that a person associates with his or her identity may also result
in the endowment effect — for example, a home, cottage or car. The
endowment bias is linked to the loss aversion bias and is a further example
of status quo bias. Both of these biases can result in people calculating
that the loss associated with giving up the good is greater than the money
(or other benefit) that will come from parting with it.
Endowment bias in practice

The endowment bias is often seen in the housing and investment markets.
Many times, people who are selling their homes fall prey to the endowment bias,
believing that their home is worth more than what is offered. While buyers offer a price
based on the characteristics of the property (e.g., location, age, size and amenities),
35

sellers add the value of their memories (experiences they have had in their home) into
the asking price. Something similar may occur when adult children sell the family
home they grew up in when their parents die or move into long-term care facilities.
When dealing with investments, clients may think that a stock purchased last week
was worth the price they paid for it — but that it is worth much more this week now
that they own it. This, despite no fundamental changes inside or outside the company.
Also, clients may be reluctant to part with the first stock they purchased or shares
from their former or current employer earned as part of the employee share purchase
plan. In each of these cases, clients may connect the investment to an experience, an
emotion or their identity and be reluctant to part with it, even though it may be in their
best interest to do so.
Self-serving bias
The self-serving bias is the tendency to attribute positive events (such as
success) to internal or personal factors that are under one’s control and
negative events (such as failure) to external or situational factors that tend
to be beyond one’s control. The self-serving bias is related to Attribution
Theory, which focuses on people’s tendency to look for a cause for their
own or another person’s behaviour. As a result, the self-serving bias is also
known as the self-attribution bias.
The self-serving bias occurs because of the human need to maintain a

positive picture of ourselves, both internally (through self-enhancement)
and externally (through self-presentation). Self-enhancement relates to
people’s desire to enhance their internal view of themselves, while self-
presentation focuses on people’s propensity to promote a positive image of
themselves to others. Attributing successes to personal knowledge, skills
and abilities and failures to external factors enables individuals to enhance
feelings of self-worth and showcase their success to others.
36

Self-serving bias in practice

Many individuals demonstrate the self-serving bias when given the opportunity to
engage a professional for investment or wealth management services, particularly if
this occurs during a bull market. Often, they will decline the offer, citing the substantial
positive returns their portfolios earned in the recent past. These individuals are quick
to attribute these returns to their security selection abilities, while discounting the role
the economic environment and bull market played in the growth of most asset values.
Overconfidence bias
One of the most common emotional biases, the overconfidence bias
describes the tendency people have to be overly sure of their own
knowledge, skills, abilities and beliefs. People tend to exhibit
overconfidence in one of three ways:
 They believe their performance is better than it actually is

(overestimation)
 They believe their performance is better than the performance of

others (overplacement)
 They believe their beliefs are accurate and correct (overprecision)
People tend to overestimate their abilities when they face harder tasks,
when failure is more likely or when they do not possess the requisite skills
to achieve success. Meanwhile, people tend to overplace their abilities
relative to others’ when the task is simple and easy to accomplish.
Overconfidence, and particularly overestimation, can become an issue

when it gets positive reinforcement from environmental factors. This can
trigger the self-serving bias, the confirmation bias and further
overconfidence, resulting in excessive risk-taking.
37

Overconfidence bias in practice

The overconfidence bias often emerges in the areas of financial management and
investment planning.
People who agree to change their behaviour frequently overestimate their willpower
and underestimate the length of time it will take to make substantive and long-lasting
changes. For example, people who say they will reduce their spending and redirect
money towards investments tend to overestimate their ability to track their finances
and avoid spending on non-necessities.
In addition, despite a large body of evidence that suggests it is difficult for an

individual to earn long-term returns that exceed market returns, many investors
choose to build and manage their own portfolios because they think they can do it
better than a professional money manager. This can become particularly problematic
if the environment has produced results that reinforce the self-serving bias (thinking
their skills, instead of the economic cycle, led to the growth of their portfolio) and the
confirmation bias (seeking out information that aligns with their beliefs). All of this can
further boost the individual’s overconfidence.
Affinity bias
The affinity bias is people’s tendency to prefer people and things that are
similar to them or that share the qualities they themselves possess. People
prefer the familiar to the different, because there is less unknown with the
familiar. This results in easier decision-making, given that the brain does
not have to make as many, or as complex, decisions. The affinity bias is
associated with the herd mentality, in which people make a decision based
on their desire to be part of the majority and not to separate themselves
from the norm.
38

Affinity bias in practice

The affinity bias is most often seen in relationships and product selection. Many
individuals choose to work with a financial planner who has characteristics similar to
their own. As a result, they may seek out someone of the same sex, race, ethnic and
cultural background and/or someone who shares many of their interests.
Many individuals also demonstrate the affinity bias when they buy goods and
services. They may invest in companies whose brands demonstrate the same values
that they hold. Following this type of investment mentality can lead to a portfolio that is
at risk of being under-diversified.
Disposition bias
The disposition bias is the tendency to sell assets that have increased in
value while holding onto assets that have fallen in value. The disposition
bias is rooted in the loss aversion bias and Prospect Theory, which suggest
that people attach more weight to losses than to gains. The disposition
bias is based on ego and emotion. By selling assets that have appreciated,
people get positive confirmation that they made a good decision by
investing in that asset. That feels good emotionally. By holding onto assets
that have depreciated, people avoid both admitting their decision to invest
was wrong and the emotional impact of a loss.
39

Disposition bias in practice

The disposition bias comes to the forefront when an individual continues to hold an
investment that is sitting in a loss position for an extended period of time and where
the outlook for the investment is not positive. Rather than disposing of the asset and
using the cash to buy another investment with a more positive outlook for returns,
many people refuse to sell, clinging to a belief that the investment will eventually
recover its value. In many cases, these investments never recover enough to match
the return the investor could have earned by switching to a different investment.
Self-control bias
The self-control bias is the tendency to choose actions that provide
gratification in the short term over those that provide gratification in the
long term. Rational decision-making involves maximizing the benefits that
occur over time, both today and in the future. As part of this process, an
individual engages in intertemporal analysis, weighing the costs of
delaying gratification (by not spending today) against the benefits of
achieving greater gratification in the future. When conducting this analysis,
the brain’s System 1 tends to overvalue today’s benefits compared to
future benefits. In other words, the brain discounts future benefits too
much. Coupled with the loss aversion bias, the self-control bias can prompt
people to believe that the future benefits of delaying gratification are too
small to make up for the consumption they are foregoing today. This type
of myopic (short-sighted) thinking can lead individuals to spend today and
forego potential future returns.
40

Self-control bias in practice

The self-control bias often shows up in an individual’s cash flow and saving patterns.
It affects an individual’s ability to forego spending today and save more towards
retirement. Buying coffee every day at a café, taking expensive vacations and
spending large amounts on entertainment-related goods and services all represent
the choice to consume and achieve gratification in the short term instead of saving for
the future.
Biases affecting financial planners

Professionals who provide financial advice are not immune to the impacts
of biases. In fact, heuristics and biases can lead even the most highly
trained individuals to make judgements and decisions based on inaccurate
and/or emotional reasoning.
However, being aware of heuristics and biases can help professionals

systematically review their decisions. By asking appropriate questions and
carefully reviewing their decision-making process, financial planners can
have greater confidence that they are basing their choices on rational
analysis and making the best possible decisions given the circumstances
and available information.
In addition to the heuristics and biases already described, financial

planners should be aware of some other biases to which professionals may
be susceptible.
Curse of knowledge
One of the most common biases financial planners can fall prey to is the
curse of knowledge. This bias is an individual’s assumption that someone
else has the background to understand his or her message. It commonly
41

occurs when a financial planner assumes that a client possesses the same
knowledge he or she does. This causes the financial planner to use
technical jargon in communications, such as when delivering
recommendations to a client.
One of the main problems resulting from the curse of knowledge is client
misunderstanding, which can lead to faulty decision-making and/or
resistance to enacting recommendations that will help them meet their
goals.
To safeguard themselves from the curse of knowledge, financial planners

should:
 Know the audience

 Communicate effectively
 Check for understanding
 Collect feedback
Know the audience
Knowing the audience enables a financial planner to ensure that the level
of his or her communication matches the client’s understanding. Start by
avoiding assumptions about client knowledge. Try to put yourself in the
client’s shoes and remember what it’s like to be a lay person. Many
financial planners find this difficult. As a professional and expert in the field
of financial planning who acquired a financial designation and learned the
appropriate knowledge some time ago, it can be challenging to take a step
back and recall what you knew before you became a financial planner. It
may help to ask people outside the profession — for example, spouses,
family members and friends — what they know about financial planning. In
addition, ask clients directly about their level of knowledge. Through
42

discussion and appropriate questions, a financial planner can determine

the depth and breadth of a client’s pre-existing knowledge.
Part of knowing the audience is understanding a client’s preferences for

communication, how they learn best and how they make decisions (all of
which are discussed later in this module). Talking to and observing a client
can provide valuable information that supports the effectiveness of a
financial planner’s communication with that client. The goal is to tailor
communication to each client, sharing information at an appropriate level
and speed to help the client make informed decisions.
Communicate effectively
Effective communication puts into practice the 10 Cs of Communication

Model (discussed later in this module). By ensuring that a message is
complete, clear, coherent, correct, considerate, conversational, courteous,
concrete, concise and compelling, the financial planner provides all the
components a client needs to understand it.
Check for understanding
A financial planner can get to know the client in advance and communicate
effectively during the meeting — yet factors such as the environment and
client circumstances may still lead to misunderstanding. The financial
planner should incorporate check-ins throughout the meeting to ensure the
client has understood what was said and allow time for clarification if
necessary. Check-ins give clients an opportunity to ask questions and
share their concerns about a course of action. Then the financial planner
can respond before moving on to the next subject, which otherwise may
compound misunderstanding. As a result, routine check-ins ensure that
the intended messages are delivered.
43

Check-ins can include asking clients if they have any questions or asking
them to share their understanding of what they have heard. The latter
strategy can help address a common issue in which a client confirm his or
her understanding simply to avoid looking foolish. Overall, check-ins allow
the financial planner to identify and quickly correct misunderstandings
before proceeding.
Collect feedback
Collecting feedback from clients and others can help a financial planner
assess whether he or she has avoided the curse of knowledge. Asking
clients for feedback on the quality and quantity of the communication they
receive can provide useful information for maintaining or improving future
communications. Quality feedback depends on trust between the financial
planner and the client, which can take time to develop. In situations where
it is not feasible to get feedback from a client, the financial planner can
reach out to people that client trusts (such as a spouse, family and friends)
to ask for their perspective on what’s working and what’s not.
Naïve realism
Another bias commonly experienced by professionals who are experts in
their field is naïve realism, which describes a tendency to believe
everything they experience is objective reality rather than subjective
reality. If financial planners see themselves as an infallible experts (whose
view of reality is always objective), they may view clients who disagree
with or resist their recommendations as uninformed, irrational or biased.
Financial planners who view the world with naïve realism can fall prey to
the false consensus effect and fundamental attribution error. The false
consensus effect describes the tendency of an individual to overestimate
44

the extent to which others agree with his or her opinions and judgements.
When financial planners provide recommendations to clients, they need to
ensure that they encourage open and collaborative dialogue, particularly
with clients who do not agree with them. The fundamental attribution
error, also known as the correspondence bias or attribution effect,
describes the tendency of an individual to emphasize someone’s internal
characteristics rather than external circumstances when explaining that
person’s behaviour. A client’s disagreement may be based on any number
of factors, including the financial planner’s communication. However, a
financial planner making the fundamental attribution error will assume the
disagreement is based on the client’s internal characteristics, which may
lead him or her to continue to try to persuade the client to accept the
recommendation. Both the false consensus effect and the fundamental
attribution error may lead to even more client resistance, known as
reactance, if the client feels his or her personal freedom and choices are
being challenged.
To avoid naïve realism and its related issues, financial planners should
remain open to the idea that their world view is subjective and that clients
may have a different perspective. They should also keep in mind that their
role is to guide and coach, but that clients have the ultimate decision-
making authority. In addition, financial planners should use the framing
effect and modality effect (both discussed later in this module) to present
information in persuasive and informative ways that help clients
understand information and make effective decisions. Finally, financial
planners should engage in motivational interviewing (discussed later in this
module) when dealing with clients who disagree with their
recommendations. This approach can help circumvent reactance and
resistance and maintain good relationships with clients.
45

Empathy gap
The empathy gap describes the tendency to underestimate how much
emotions influence thoughts, beliefs, attitudes and behaviours.8 An
empathy gap can be labelled based on the direction of the gap (e.g., a hot-
to-cold or cold-to-hot empathy gap) or based on whether it occurs within a
single individual or between people (e.g., an intrapersonal prospective,
intrapersonal retrospective or interpersonal empathy gap).
A hot-to-cold empathy gap exists when an individual underestimates the

extent to which his or her thoughts, beliefs, attitudes and behaviours are
influenced by a current emotionally heightened state. A hot-to-cold
empathy gap may occur when a financial planner has had a disagreement
with a family member before meeting with a client. The financial planner’s
heightened anger, frustration or sadness may negatively impact the
interaction with the client. Although the financial planner may believe he or
she is behaving dispassionately, in fact the financial planner’s behaviour is
influenced by short-term emotional changes.9
A cold-to-hot empathy gap exists when an individual underestimates the

extent to which his or her thoughts, beliefs, attitudes and behaviours will
be influenced by a future emotionally heightened state. A cold-to-hot
empathy gap may occur when a financial planner mentally prepares to
handle a difficult client. Based on a currently quiet emotional state, the
financial planner may picture himself or herself remaining completely calm
8
Van Boven, Leaf, George Loewenstein, David Dunning, and Loran Nordgren. “Changing
Places: A Dual Judgment Model of Empathy Gaps in Emotional Perspective Taking.” In
Advances in Experimental Social Psychology, 48, edited by Olson, James M., and Mark P.
Zanna, p. 118. Burlington: Academic Press, 2013.
9
Loewenstein, George. “Hot-Cold Empathy Gaps and Medical Decision Making.” In Health
Psychology, 24(4) (2005) (Suppl.): p. S49. https://doi.org/10.1037/0278-6133.24.4.s49
46

and handling the situation with ease. However, the financial planner may
not accurately predict how he or she will actually feel and how those
feelings will affect his or her behaviour when the client becomes defensive,
pushes back or resists. As a result, the financial planner can’t take the
steps necessary to avoid the emotional changes that occur in such
situations.10
Because current emotional state influences projected future behaviour,

people tend to assume that their current tastes and preferences will be the
same in the future.11 This is known as the projection bias and it has
implications for long-term decision-making. That’s because the financial
planner’s (or client’s) emotional state can influence current plans for
achieving future outcomes.
An intrapersonal prospective empathy gap occurs when people try to

predict how they will act in the future in a different emotional state.12 For
example, if the financial planner (or client) is feeling pessimistic, current
plans may prioritize current consumption (to help him or her feel better)
over saving for retirement.
An intrapersonal retrospective empathy gap occurs when people recall how

they behaved when they were in a different emotional state from the one
they are currently in.13 After a difficult client leaves and the financial
10
Ibid.
11
Loewenstein, George, Ted O’Donoghue, and Matthew Rabin. “Projection Bias in
Predicting Future Utility.” The Quarterly Journal of Economics, 118(4) (2003): pp. 1209–
1248. https://doi.org/10.1162/003355303322552784
12
Loewenstein, George. “Hot-Cold Empathy Gaps and Medical Decision Making.” Health
Psychology, 24(4) (Suppl.) (2005): p. S49. https://doi.org/10.1037/0278-6133.24.4.s49
13
Loewenstein, George. “Hot-Cold Empathy Gaps and Medical Decision Making.” Health
Psychology, 24(4) (Suppl.) (2005): p. S50. https://doi.org/10.1037/0278-6133.24.4.s49
47

planner calms down, he or she may remember the interaction differently

from what actually occurred.
An interpersonal empathy gap occurs when an individual tries to predict or

make sense of another individual’s behaviour when the two are in different
emotional states.14 This may occur when a financial planner has trouble
understanding the full extent of a client’s fear, anger or anxiety following a
correction in the stock market. The financial planner may have difficulty
grasping why the client is so resistant to advice to stay invested. In
contrast to the client, the financial planner may be in a calm emotional
state, having experienced many market corrections before. In addition, the
investment portfolio’s loss of value may have little impact on him or her
personally.
Illusion of transparency
As the empathy gap and projection bias show, an individual’s emotional
state can significantly influence decision-making and behaviour. One
challenge with interpersonal interactions between financial planners and
their clients is that it is difficult for one to determine what the other is
thinking and feeling. Compounding the problem, people have a tendency
to overestimate how aware others are of their personal mental and
emotional state (the illusion of control), as well as how aware they are of
another person’s mental and emotional state (the observer’s illusion of
transparency). These illusions can be particularly troublesome for financial
planners, who must guide and motivate individuals towards their goals.
This requires financial planners to determine what clients are thinking,
based on their mental and emotional state, so they can communicate
14
Ibid.
48

effectively and motivate clients to take appropriate actions to reach their

goals.
Values, attitudes, emotions and disorders related

to money
Heuristics and biases are only two of the factors that can influence an
individual’s judgements, decisions and behaviour. Other factors that affect
the decision-making process include the client’s:
 Motivation to meet psychological needs

 Motivation to seek support
 Emotional state
 Values, attitudes and beliefs about money
 Disorders and problematic behaviour related to money
Motivation to meet psychological needs

Maslow’s Hierarchy of Needs sheds light on the process individuals
undertake when making decisions about financial matters. Originally
introduced in his 1943 paper “A Theory of Human Motivation” and updated
over the next four decades by himself and others, Maslow’s Hierarchy of
Needs describes eight levels of needs that humans are motivated to meet.
Often depicted as a pyramid (as in Figure 5), Maslow’s theory postulates
that individuals must meet their most basic needs (biological, physiological
and safety) before they can be motivated to meet their secondary needs
(love, belongingness, social, esteem, cognitive and aesthetic) and higher-
level needs (self-actualization and transcendence).
49

An individual may be focused on meeting different needs from the

hierarchy at any given time with different intensities, but one need might
dominate his or her motivation.
Figure 5: Maslow’s Hierarchy of Needs
Trans-
• Pursuit of science, faith, service to others
cendence
Self- • Realizing personal potential, personal growth, self-

Actualization fulfillment
Aesthetic • Appreciation of beauty, form, balance
Cognitive • Knowledge, understanding and meaning
• Achievement and mastery, status and

Esteem
prestige
• Friendship, intimacy, love, affection,
Love, Belongingness and Social trust, acceptance, affiliation with
groups (family, friends, colleagues)
• Protection from the elements,
Safety physical and economical security
and stability
• Air, food, water, shelter,
Biological and Physiological
warmth, sleep, rest, sex
Source: McLeod, Saul. “Maslow’s Hierarchy of Needs.” Simply Psychology, 2018.

https://www.simplypsychology.org/maslow.html (accessed July 1, 2019)
50

Maslow’s Hierarchy of Needs applied to financial planning

Clients’ objections to saving for their children’s education or their own retirement may
signify their need to meet a lower-level financial need before investing for the future.
They may be worried about making their debt payments or having enough money to
cover emergencies. Through their actions, they are communicating that they cannot
decide to save for a future goal while feeling current financial risk.
This highlights the importance of safety (through financial security) for well-being.
These clients cannot achieve higher levels of contentment without first securing their
current financial circumstances.
Motivation to seek support

People generally seek support from a financial planner in two
circumstances:
 They decide they need to make a change

 Change is thrust upon them
Humans do not like change. It can be an unsettling experience filled with

unknowns, discomfort, apprehension and fear. All of this can be tiring,
particularly for the mind, which faces many decisions as change occurs. It
is no wonder that so many people favour the status quo. Only when the
status quo becomes unacceptable are people truly motivated to make a
change. This is as true for financial matters as it is for losing weight,
stopping smoking or finding a new job.
When people reach out to a financial planner, they tend to want to:
 Reduce complexity in their life

 Take action
 Save time
51

 Receive encouragement
 Make better tradeoffs and decide what to do next
 Persist with a change they are considering or have decided to make
More often than not, people engage financial planners when a change has
occurred — for example, when:
 A spouse is dying or has died

 A parent is dying or has died
 They are changing careers
 They are retiring or have retired
 They experience a critical illness or change in health
 A child or grandchild is expected or has been born
 They are getting divorced or are divorced
 They will be receiving or have received a large sum of money (such as an
insurance settlement, inheritance or lottery windfall)
Whether the change is voluntarily or not, it can influence an individual’s

decision-making abilities because people undergoing change are more
likely to experience grief and/or mental depletion.
Emotional state
Emotional state also affects decision-making abilities. While experiencing
any emotion can influence an individual’s judgement and decision-making,
two of the most common are grief and mental depletion.
52

Grief
Grief is the “natural and normal emotional reaction that involves conflicting
feelings caused by the end of or change in a familiar pattern of
behaviour.”15 While most people associate grief with death, it can occur
when people suffer any loss, including the death of a person or pet, end of
a platonic or romantic relationship, loss of a job, diagnosis of an illness or
health issue, or another catastrophe.
Grief is a complex process that people experience in different ways. The

Kübler-Ross Model, also known as the Five Stages of Grief, presents a
framework of the responses many individuals have after a loss (including
when change occurs). While the model has five stages — denial, anger,
bargaining, depression and acceptance — people don’t necessarily
experience them in that order. After a change occurs, many individuals
ride a rollercoaster of emotions, moving from one stage to the next only to
cycle back to stages they have already experienced. The time spent in any
one stage and the progression between emotions and stages is unique for
each individual. Some people may move through the stages in short order
(sometimes minutes), while others may take quite some time (days,
weeks, months or even years).
15
Friedman, Russell. “The Best Grief Definition You Will Find.” The Grief Recovery Method.
June 4, 2013. www.griefrecoverymethod.com/blog/2013/06/best-grief-definition-you-will-
find
53

Figure 6: The Stages of Grief
Source: Author’s visual depiction of the Kubler-Ross Change and Grief Curves.
One of the first reactions to a loss is denial. Denying that the loss has
actually occurred is a defense mechanism humans use to survive the shock
and helplessness they feel. As the reality of the loss sets in, the primary
emotion many people feel is anger. Their anger may be directed at
anything or anyone, including the individual who caused the change, family
and friends who may not understand how they are feeling, or a deity for
allowing the change to happen. Anger provides people who have suffered a
loss with an outlet to help them feel again and replace the emptiness that
accompanies loss. As anger subsides, those who have suffered a loss look
to regain a sense of control. They think about the past and wonder what
54

they could have done to prevent the loss. Guilt often accompanies this
search for answers. People bargain with themselves and/or with their deity
to help them through the loss. After bargaining, people who have suffered
a loss tend to sink into a deep sadness as the reality sets in that what has
been lost can never be restored. This depressive time can seem long and
without a light at the end of the tunnel. However, it can lead to
acceptance, which entails recognizing and acknowledging that a new
reality exists even though the individual may not like it.
In each stage of grief, judgement and decision-making abilities may be

hindered. Judgements and decision-making do not occur in a vacuum;
they are influenced by emotional states. Because grief evokes a multitude
of ever-changing emotions, an individual’s judgements may be just as
quick to change. In many instances, the individual’s System 1 will be so
overloaded with doing whatever it can to release the pain the individual is
feeling that it will exclude System 2 from engaging and bringing a more
systematic approach to making a decision. It is generally recommended
that while an individual is experiencing grief, any decisions that can be
postponed should be deferred until emotions are less raw and an individual
can direct System 2 attention to them.
Mental depletion
During times of change, people tend to expend substantial amounts of
mental energy on managing pain and stress, directing attention towards
activities that must be addressed, making decisions, resisting temptations,
controlling emotions and the display of emotions, learning new things,
forming new habits associated with the change and even completing
everyday activities (Figure 7). When mental energy focuses on one area to
the detriment of other areas, mental depletion may occur. Financial
55

planners should be on the lookout for signs of mental depletion in their

clients, including:
 Amplified emotional reactions such as yelling, uncontrollable crying,

extreme pessimism and apathy
 Physical fatigue in the form of severe and chronic pain, lethargy and
constant sickness
 Mental fatigue in the form of confusion, hyper-focusing on one thing,
rigidity in thinking and difficulty making decisions
 Changes in behaviour such as stopping good habits (e.g., maintaining
hygiene) or starting bad habits (e.g., more alcohol or drug use)
Figure 7: Where Mental Energy Is Spent
Source: Somers, Moira. “Where Your Mental Energy Goes…” Poster Card.
https://moneymindandmeaning.com/resources-3 (accessed July 1, 2019)
Individuals experiencing mental depletion are at risk of diminished learning

capacity, flawed decision-making, vulnerability to temptation, and non-
adherence to change or recommendations. These are all problems for the
financial planner, whose role is to help clients learn, make decisions and
enact beneficial recommendations.
56

Mental depletion is generally temporary, and quality sleep, proper nutrition

and engaging in physical exercise and mental relation techniques (such as
mindfulness or meditation) can lessen its effects.
Figure 8: Actions to Reduce Mental Fatigue
Source: Canadian Health Food Association. “CHFA’s Four Pillars of Immunity,” 2016.
http://www.multivu.com/players/English/7969551-canadian-health-food-association
(accessed July 1, 2019)
When the financial planner feels an individual is suffering from mental

depletion that is not adversely impacting his or her cognitive abilities, the
financial planner may wish to:
 Affirm the individual

 Remove any stressors
 Prioritize decisions
 Simplify decision-making
Managing Mental Depletion

Clara shows up late to her appointment with a financial planner. The financial planner
asks how she is doing. She complains about how exhausted she is from working all
hours of the day to get a project completed by the end of the month and how frazzled
she felt trying to get to this appointment while battling rush hour traffic.
57

The financial planner can affirm the client by saying, “It’s natural to feel exhausted
when you’re burning the candle at both ends to get work done.”
The financial planner may also remove stressors by offering, “Would it be helpful if I
came to your home for our next meeting so you don’t have to battle the traffic?”
The financial planner can then help Clara prioritize decisions — for example, by
advising her, “You only need to make one decision today, as your mortgage is up for
renewal next week. We can discuss the remaining decisions at our next meeting. Are
you comfortable making just one decision today and leaving the rest until next
month?”
Simplifying decision-making, perhaps by giving Clara only two mortgage renewal

options, will also help reduce the mental energy she needs to expend to make the
decision.
Values, attitudes and beliefs related to money

It’s clear that decision-making is a complex process affected by an
individual’s motivations and emotions. Furthermore, even when decision-
making capabilities are not consciously influenced by motivations and
emotions, sub-conscious associations and beliefs may be at work,
overriding logic and rationality.
Specifically, the associations an individual has with money can affect his or
her behaviour related to financial matters. Whether they realize it or not,
many people make financial decisions and use financial resources based on
the emotional attachment they have to money, the depth and breadth of
their financial literacy and the level of sophistication with which they have
used money in the past.
An individual’s behaviour related to financial matters is also intertwined

with his or her beliefs about money. Beliefs inform attitudes, which evolve
58

into intentions, which transition into observable behaviour. Some beliefs

about money are ingrained early in life and stem from how we see people
close to us handle money, while others are learned over time through our
own experiences. For almost half a century, researchers have been
working on identifying the beliefs people hold about money. Figure 9 lists
some of the most common ones.
Figure 9: Common Beliefs about Money
People’s Beliefs about Money

Money is evil Money is bad Money is unimportant Money is good
People’s Associations with Money

Money Money Money Money Money
provides security is a sign of respect represents is power will give meaning
achievement or bring happiness
People’s Feelings about Worthiness and Money

I do not deserve I do not deserve I deserve I deserve
to spend money money money to spend money
People’s Feelings about How Money Should Be Handled

Money should be retained or conserved Money should be spent
People’s Feelings about the Quantity of Money

There will never be enough money There will always be enough money
People’s Feelings about Speaking about Money

Money should not be spoken about Money should be spoken about
Source: Adapted from The Communication Process, as presented in Thill, John, Courtland
Bovee, Wendy Keller, and K.M. Moran. Excellence in Business Communication.
Toronto: Pearson, 2019.
59

The book Money Beliefs and Financial Behaviours: Development of the

Klontz Money Script Inventory identifies four main money scripts that
people follow based on their underlying beliefs about money:16
 Money Avoidance: Money Avoiders have a negative view of money.

They believe that money is bad and that they do not deserve to have
it, nor should they have it. Their emotional connections to money
include fear, anxiety and disgust. In trying to possess as little money
as possible, they may spend what they do have or give it away. Money
Avoiders tend to have lower net worth and lower income, and are more
likely to be less educated and young and single.
 Money Worship: Money Worshipers believe that more money will make
things better: life will be easier and they will be happier if they can
acquire more money. Their emotional connections to money include
happiness and excitement in the pursuit of acquiring more money or
wealth. In trying to accumulate as much as possible, they may become
materialistic, and utilize revolving debt to purchase more goods and
services. Money worshipers tend to have lower net worth and lower
income, and are more likely to be less educated and young and single.
 Money Status: Money Status seekers believe their self-worth is based

on their net worth. Their emotional connections to money include pride
and shame, depending on how much or how little they possess. In
trying to display their wealth to others, they may overspend and fall
prey to the self-inflicted need to demonstrate their financial superiority
(also known as “keeping up with the Joneses”). Those who view money
16
Klontz, Brad, Sonya L. Britt, Jennifer Mentzer, and Ted Klontz. “Money Beliefs and
Financial Behaviors: Development of the Klontz Money Script Inventory.” Journal of
Financial Therapy, 2(1) (2011): pp. 14–17. https://doi.org/10.4148/jft.v2i1.451
60

as status tend to have lower wealth and are more likely to be less
educated and young and single.
 Money Vigilance: Money Vigilant individuals believe that money should

be protected and conserved. Their emotional connections to money
include security and anxiousness. In being cautious about their
finances, they avoid using credit and focus on saving. Those who are
vigilant about money tend to have lower incomes and may have higher
net worth.
Identifying an individual’s beliefs about money17 may help financial

planners better understand their client’s intentions, attitudes and
behaviour, as well as some of the factors that influence the client’s
decision-making process. Furthermore, they may be able to identify areas
of concern and use that information when crafting recommendations so
they avoid pain points based on the client’s beliefs about money and can
handle objections proactively.
Disorders and problematic behaviour related to

money
People sometimes exhibit problematic behaviour related to financial
matters. When this behaviour results in significant emotional distress or
negatively affects their ability to achieve goals and meet needs, they may
be suffering from a money disorder.
Table 2 describes common money disorders that may affect decision-

making abilities.
17
Financial planners can do this using The Klontz Money Script Inventory (KSMI-II),
which can be accessed at www.yourmentalwealthadvisors.com/your-money-script.
61

Money disorders are complex, rooted in psychology and require the

professional help of a financial therapist, psychologist or psychiatrist.
Financial planners may observe individuals experiencing emotional distress
or a chronic inability to move towards achieving goals and meeting needs.
In these cases, they should refer the individuals to a health care
professional such as a family doctor.
Table 2: Common Money Disorders

Workaholism “An addiction wherein the workaholic is highly involved in
work, feels driven to work because of inner pressures that
make the person feel guilty or depressed when not working,
and in which the person has low levels of work enjoyment.”18
Compulsive “An irresistible-uncontrollable urge, resulting in excessive,
Buying expensive and time-consuming retail activity; typically
Disorder prompted by negative affectivity and resulting in gross social,
(CBD) personal and/or financial difficulties.”19
Problem “Difficulties in limiting money and/or time spent on gambling,
Gambling which leads to adverse consequences for the gambler, others,
or the community.”20
Compulsive “The acquisition of and failure to discard a large number of
Hoarding possessions that appear to be useless or of limited value
[resulting in] living spaces [being] sufficiently cluttered so as
to preclude activities for which those spaces were designed and
[causing] significant distress or impairment in functioning.”21
Inability to The inability to live within one’s financial means because cash
Budget outflows exceed cash inflows.
18
Horowitz, Edward, Brad Klontz, and Meghaan Lurtz. “Money Disorders and Other
Problematic Financial Behaviours.” In Client Psychology, edited by Chaffin, Charles, p.
276. New Jersey: John Wiley and Sons, Inc., 2018.
19
Kellett, Stephen, and Jessica Bolton. “Compulsive Buying: A Cognitive-Behavioural
Model.” Clinical Psychology andPsychotherapy, 16(2) (2009): p. 84.
20
SA Centre for Economic Studies and Department of Psychology, Adelaide University.
“Problem Gambling and Harm: Towards a National Definition,” 2005.
www.adelaide.edu.au/saces/docs/problemgamblingandharmtowardnationaldefinition.pdf
(accessed September 25, 2018)
21
Frost, Randy, and Tamara Hartl. “A Cognitive-Behavioral Model of Compulsive
Hoarding.” Behaviour Research and Therapy, 34(4) (1996): p. 341.
http://dx.doi.org/10.1016/0005-7967(95)00071-2
62

Need for “The desire to experience pleasure or fulfillment without delay

Instant or deferment.”22
Gratification
Financial The act of delaying a financial decision and/or action for fear of
Paralysis making an incorrect decision, resulting in the opportunity cost
of waiting outweighing the benefits of implementing the
action.23
Underspending Spending less than one can afford to the extent that one’s life
and those around them are negatively impacted by the
individual’s decision to conserve money over purchasing goods
and services that would fulfill basic needs and/or make life
easier.
Overspending Spending more than one can afford to the extent that one’s life
and those around them are negatively impacted by the
individual’s decision to squander money over purchasing goods
and services that would fulfill basic needs and/or make life
easier.
Vow of The decision to forego the accumulation of wealth, resulting in
Poverty the inability to purchase goods and services that would make
life easier.
Financial The provision of financial support in a way that keeps the
Enabling receiver from having to take responsibility or become
independent.
Financial The continued reliance on another for income or information,
Dependency access to or management of money and financial matters that
results in “fear or anxiety of being cut-off, feelings of anger or
resentment related to the income, and a stifling of one’s
motivation, passion and/or drive to achieve.”24
22
Patel, Neil. “The Psychology of Instant Gratification and How It Will Revolutionalize Your
Marketing Approach.” Entrepreneur.com, June 24, 2014.
www.entrepreneur.com/article/235088
23
Vohwinkle, Jeremy. “Avoid Financial Paralysis by Analysis.” Generation X Finance.
http://genxfinance.com/avoid-financial-paralysis-by-analysis (accessed October 18, 2018)
24
63

Financial “The family system operating in a state of increased fluidity

Enmeshment wherein the boundaries and roles are no longer clear or
appropriate, resulting in the inducement of stress.”25 Financial
enmeshment is a subset of financial incest, which is the act of
an adult exposing a child to, involving a child in or making a
child responsible for adult roles and decisions related to money
and financial matters.
Financial “Any purposeful financial deceit between two or more
Infidelity individuals wherein there is a stated or unstated belief in
mutual honest communication around financial matters.”26
Sudden The host of psychological issues that accompany an individual’s
Wealth sudden access to wealth.
Syndrome
Excessive Risk The willingness to take on a level of risk that exceeds the
Taking amount an individual needs to or has the ability to accept.
Excessive Risk The unwillingness to take on a level of risk that falls below the
Aversion amount an individual needs to or has the ability to accept.
25
26
Canale, Anthony, Kristy Archuleta, and Bradley T. Klontz. “Money Scripts.” In Financial
Therapy: Theory, Research and Practice, edited by Klontz, Brad, Sonya Britt, and Kristy
Archuleta, p. 59. Switzerland: Springer International Publishing, 2015.
https://doi.org/10.1007/978-3-319-08269-1
64

Relationships
Peter Drucker, the creator of modern business management, said, “The
purpose of a business is to create and keep a customer.” Whether creating
or keeping a customer, the key to success is cultivating productive
relationships through effective communication.27
Communication
At all stages throughout the financial planning process, effective
communication is critical to building client relationships. This includes
when financial planners:
 Deliver their value proposition to a potential client

 Collect information from a prospective client as part of the discovery
process
 Analyze data and formulate potential recommendations
 Deliver recommendations to the client
 Respond to questions, concerns, objections or resistance
 Provide updates and important information
Communication is the “process by which information is exchanged between

individuals through a common system of symbols, signs, or behaviours.”28
The communication process is dynamic, complex and occurs over time. In
its simplest form, it has eight steps (Figure 10).
27
Drucker, Peter. Management: Tasks, Responsibilities, Practices. New York: Harper and
Row, 1974.
28
Merriam-Webster Dictionary, 2019.
65

Figure 10: The Communication Process
Source: Author’s creation based on the contexts in which communication occurs. Hexagon
puzzle jigsaw pieces used from Presentation Magazine.
www.presentationmagazine.com/powerpoint-jigsaw-puzzle-1942.htm
In the first step in the communication process, the sender has an idea and
decides to share it with someone else. The sender then encodes the idea in
a message using words and/or images, before producing the message in
an oral, written or visual medium (including body language). The sender
then transmits the message through a channel such as an email, social
media post, report (e.g., a financial plan), telephone call, videoconference
or face-to-face conversation. When the audience receives the message,
that individual or those individuals decode it by interpreting and
understanding it. The communication process is complete when the
receiver responds to the message by acting on the information it contains
and provides feedback to the sender. In many instances, the feedback
initiates another cycle of the communication process. This back-and-forth
communication can occur until the message is transmitted properly.
66

Effective communication occurs only when the entire process is complete.

That means the feedback loop must be complete, and the sender must
learn from the feedback that the receiver understood the message and has
responded in the way the sender wanted.
Communication depends on context. Every communication is constructed,

sent, received and interpreted based on the circumstances that surround
the message. These circumstances influence how the message is delivered
and received. There are six main contexts: historical, physical, social,
psychological, temporal and cultural (Figure 11).
Figure 11: The Contexts within Which Communication Occurs
Source: Figure replicated from Barrett Values Centre. “Building a Culture of Trust.”
Presentation, September 16, 2013. Richard Barrett Building a Culture of Trust
Conference, location unknown. www.slideshare.net/TalentDynamics/richard-barrett-
building-a-culture-of-trust-trust-conference
67

Historical context refers to the expectations the sender and receiver have
based on their previous experiences with one another or the situation. For
example, clients may have a preconceived notion about how an annual
review meeting will progress based on their previous experience with past
financial planners or their current financial planner.
Physical context refers to the physical environment in which the

communication occurs. This can include the location, time of day and
activities occurring in and around the environment. Common physical
contexts financial planners find themselves in include an office, a client’s
home, a restaurant and a community event. The combination of place,
time and activities sets the unwritten rules for how communication will
occur between individuals.
Social context refers to the expectations the sender and receiver have
based on their current relationship with one another. Different
communication occurs in different types of relationships. For example,
friends speak to each other differently than an employer and employee do.
The social context between a financial planner and his or her client is often
based on how the relationship began and how it continues to evolve. Were
they family or friends before becoming advisor and advisee? Do they
consider themselves to be advisor and advisee or to be friends? Each
relationship has its own unique tone that establishes the communication
protocols between sender and receiver.
Psychological context refers to the sender’s and receiver’s mental and

emotional frame of mind during the communication process. How each of
them feels affects the way they communicate or receive a message.
Financial planners should be attuned to the psychological context that
surrounds their message. If they or their client is tired after a long day at
68

work or had a fight with a family member, it can affect the way they send
their message or the way it is interpreted. This can skew the financial
advice that financial planners provide and that the client interprets.
Temporal context refers to the timing of a message in relation to the

overall communication. A message sent and received at the beginning of a
conversation can be interpreted very differently from a message sent and
received at the end of a conversation. For example, a client will interpret a
request to sign paperwork that transfers investments differently if it is
made before the client receives a financial plan than if it is made after the
financial planner has presented a financial plan.
Cultural context refers to the values, beliefs and behaviour of the

individuals involved in the communication process. A financial planner
experiences cultural context with every client. Some cultures value
punctuality or being early for a meeting, while others view start times as
more of a suggestion. Some cultures value a handshake when saying hello,
while others prefer to bow heads as a sign of respect. Financial planners
should be cognizant of the cultural expectations of the individuals they
advise, as each client may have a different cultural expectation about how
the relationship should work and how information should be presented to
them.
69

Effective communication
It is not enough simply to communicate with clients. Instead, financial
planners must communicate effectively with clients.
To communicate effectively, financial planners should:
 Cultivate trust
 Use voice appropriately
 Engage in active and empathetic listening
 Create a receptive atmosphere
 Craft and deliver communications that adhere to the 10 Cs of
Communication
 Minimize noise
 Choose appropriate messages, media and channels
 Flex communication to each client’s communication style
 Flex communication to each situation
 Use a mix of modalities
 Present information using each client’s learning style preferences
Cultivate trust
Trust is the cornerstone of any professional relationship. If trust exists
between a financial planner and a client, the relationship can grow, flourish
and be a successful long-term partnership that is productive for both
parties. If trust does not exist, the relationship will be short-lived and
eventually end as one or both parties will no longer wish to expend the
effort required to maintain the relationship.
70

For a financial planning relationship to be successful, it is imperative for

the client to trust the financial planner and vice versa. The alternative will
eventually spell an end to the relationship and hinder both parties’
objectives.
In his book The Speed of Trust, Steven M.R. Covey contends that trust is
built on two platforms: character and competence (Figure 12).29
Figure 12: The Trust Matrix
Trust
Character Competence
Intent Integrity Capability Results
Caring Honesty Knowledge Reputation
Transparency Fairness Skills Credibility
Openness Authenticity Experience Performance
“Character,” he writes, “is a reflection of how you are on the inside, your
intent, and the level of integrity you display in your relationship to others.
These depend primarily on the level of development of your emotional
intelligence and social intelligence. Intent is demonstrated by caring,
29
Covey, Stephen R. The Speed of Trust. Toronto: Free Press, 2008.
71

transparency and openness; integrity is demonstrated by honesty, fairness

and authenticity. Competence is a reflection of how you are on the outside,
your capability, and the results you achieve in your role. These depend
primarily on the level of development of your mental intelligence, your
education and what you have learned during your professional career.
Capability is demonstrated by skills, knowledge and experience; results are
demonstrated by reputation, credibility and performance.”30
Figure 13: A Client’s Evaluation of Trust in a Financial Planning

Professional
Source: Author’s creation based on the work completed about the personal elements of
communication in Mehrabian, Albert. Nonverbal Communication. Chicago: Aldine-Atherton, 1972.
30
Barrett, Richard. “Building Trust in Your Team: The Trust Matrix.” LinkedIn, March 9,
2016. www.linkedin.com/pulse/building-trust-your-team-matrix-richard-barrett
72

Clients are constantly re-evaluating the four pillars of trust (intent,

integrity, capability and results) contained within the Trust Matrix. They
repeatedly ask themselves if the financial planner effectively demonstrated
his or her intent, acted with integrity, had the necessary knowledge, skills
and experience to do what the client required, and delivered results.
Covey suggests that each relationship has a “trust account” into which
each party makes deposits and from which each party makes withdrawals.
As the financial planner builds credibility through intent, integrity,
capability and results, he or she is building up the trust account, increasing
the account balance and the trust the client feels. However, when
something happens to harm the financial planner’s credibility, the trust
account balance declines and the client’s distrust grows.
Given the important role trust plays in the professional financial planning
relationship, it is essential to dedicate appropriate time and effort to
cultivating it. However, building trust is not necessarily easy in today’s
world, where too often prospective clients are wary of trusting because of
past experiences with others in the financial services industry. Overcoming
this hurdle can take time, but the return to both parties is well worth it.
A financial planner’s behaviours and actions speak volumes to clients.

Behaviours and actions grounded in integrity and accountability, as
described in Table 3, help build trust with prospective and existing clients.
73

Table 3: Behaviours and Actions That Build Trust

Behaviours Actions
Character
Talk straight Act with integrity and communicate accurately, fully
and transparently
Demonstrate respect Show genuine interest in the other person and act
with empathy
Show loyalty Act with benevolence by putting the other person’s
interests first
Competence
Obtain a professional Signal capabilities by earning a designation focused
designation on the provision of professional financial advice
Manage expectations Reveal, discuss and validate expectations
Deliver results Perform competently and deliver the agreed-upon
results
Character and Competence
Keep commitments Act in consistent and predictable ways and ensure
congruence between words and actions
Practice accountability Be transparent about and take responsibility for
results; apologize and make restitution to right
wrongs
Listen Listen with the intent to understand, not to respond
Source: Author’s Creation. Adapted from “The 13 Behaviours of High-Trust Leaders” in
Covey, Stephen R. The Speed of Trust. Toronto: Free Press, 2008.
Building trust begins before a financial planner ever meets a client.

Prospective clients typically use the internet to search for information
about products or services before buying them. It is important that clients
get a good first impression of a financial planner as soon as they begin
their online research. Two ways the financial planner can make that more
likely are to obtain a professional financial planning designation and to
include a professional photograph on any marketing materials.
Designations such as Certified Life Underwriter (CLU®) from The Institute

for Advanced Financial Education or Certified Financial Planner (CFP®) from
FP Canada™ show the financial planner’s capabilities and signal to
prospective clients that the professional has met the educational,
74

examination and experiential requirements to practice in the profession.

Designations also assure prospective clients that the financial planner is
responsible for adhering to prescribed ethical standards enforced by a
professional oversight body working in the public interest.
Including a professional photograph on marketing materials such as a

website also helps build trust. People have a hard time trusting someone
they can’t see. A professional photograph on marketing materials indicates
openness. Its absence can make it seem like the professional has
something to hide. More importantly, a professional photograph provides
prospective clients with an opportunity to begin building a personal and
emotional connection to the financial planner, which is a tenet of success.31
Building trust continues when a prospective client and financial planner

meet for the first time. Whether the meeting occurs in person, over the
telephone or online, the professional’s voice is integral to the prospective
client’s decision to trust or not to trust.
Using voice appropriately

An individual’s voice comprises three parts (Figure 14):
 Kinesics
 Language
 Tone
31
Zorfas, Alan, and Daniel Leemon. “An Emotional Connection Matters More Than
Customer Satisfaction.” Harvard Business Review. August 29, 2016.
https://hbr.org/2016/08/an-emotional-connection-matters-more-than-customer-
satisfaction
75

Figure 14: The Components of Voice
Kinesics Tone
Language
Kinesics are the non-verbal physical behaviours (body language) an

individual uses to communicate. Kinesics include body posture, facial
expressions, gestures, eye movements, touch and use of space.
Language refers to the verbal words an individual uses and the literal
meaning they carry.
An individual’s tone of voice is a mixture of kinesics and language and

helps imply attitude or feelings. Tone comprises pitch (degree of highness
or lowness), volume (degree of loudness), pace (speed of talking) and
timber (perceived quality of communication).
Language is what one says, tone is how one says it and body language
signals how one really feels about it.
The importance of voice when meeting a prospective client cannot be

underestimated. System 1 judges people an individual sees and/or meets
almost instantaneously based on their voice (body language, language,
and tone) and categorizes them as potential friend, enemy or sexual
76

partner.32 Friends are people the individual trusts and from whom the
individual receives resources (including knowledge and advice, in the
financial planner’s case), while enemies are people who will take resources
from the individual. Messages from a friend will be interpreted positively,
while messages from an enemy will be framed negatively. When the brain
cannot categorize someone an individual meets into potential friend,
enemy or sexual partner, it becomes indifferent to the person and
essentially ignores them and what they say.
To promote trust when first meeting someone, a financial planner should

maintain an open body stance and keep gestures symmetrical at or around
the height of their navel.33 An open body stance is a relaxed posture with
palms visible and belly and neck exposed. A relaxed posture makes a
person less intimidating and more approachable, and it demonstrates
openness to communicating. Keeping palms, belly and neck visible is an
evolutionary signal that shows the individual has no weapons, intends no
harm and is choosing to be vulnerable with areas containing vital organs
(belly) and blood supply (jugular) exposed. Symmetrical gestures make
the message more stable and allow the receiver’s brain to engage with the
message without distraction.34 Symmetrical gestures at navel height allow
32
Bowden, Mark. “Maximizing Meeting Engagement with Winning Body Language.”
YouTube, October 1, 2011. Video, 0:52. www.youtube.com/watch?v=8nFXlVD_RD4
33
Bowden, Mark. “Presenting Body Language: Trust the TRUTHPLANE® Tip.” YouTube,
December 4, 2015. Video, 0:42. www.youtube.com/watch?v=PhShDJQrAWA
34
Bowden, Mark. “Presenting Body Language — Symmetrical Gestures Tip.” YouTube,
December 15, 2015. Video, 0:10. www.youtube.com/watch?v=fmyn1PRroyc
77

the sender to remain level-headed, balanced and full of energy.35 All of this
helps the receiver “move into… and accept the message.”36
Engaging in active and empathetic listening

Trust continues to be cultivated between financial planner and client
throughout the financial planning engagement. One of the most important
ways this occurs at all points in the relationship is by listening to the other
person.
There are four types of listening: informational, critical, active and

empathetic. Informational listening is listening to learn. Financial planners
use this type of listening when gathering quantitative data from clients,
such as the type and value of their assets, liabilities and cash flows.
Critical listening is listening with the intent to analyze and evaluate the
content in support of making a judgement. Financial planners use this type
of listening when they review provincial and federal budget news looking
for changes that may have an impact on their clients. Active listening is
listening to understand with the intent of providing counsel to another
individual. Empathetic listening goes one step further by listening to
understand emotions, feelings and motivations to provide them with an
outlet. In many cases, giving clients an outlet is necessary to the change
process.
For example, a financial planner may listen to a 30-year-old single client in

a higher income tax bracket say she no longer wishes to contribute to an
35
Cunningham, Steve. “Winning Body Language by Mark Bowden.” Financial Post,
November 15, 2010.
www.financialpost.com/executive/Winning+Body+Language+Mark+Bowden/3830131/story.html
36
Bowden, Mark. “Presenting Body Language — Symmetrical Gestures Tip.” YouTube,
December 15, 2015. Video, 0:10. www.youtube.com/watch?v=fmyn1PRroyc
78

RRSP each year, preferring to direct free cash flow towards a TFSA. The
financial planner who asks open-ended questions to discover the client’s
motivation is to avoid her estate having to pay almost half of her RRSP
assets in tax upon her death is engaging in active listening. The same
financial planner engages in empathetic listening when he or she discovers
through further conversation the client’s primary reason for requesting the
change is that she stays up at night worrying that her child, who has just
been diagnosed with a disability, will not have sufficient resources if her
estate is cut in half.
Table 4: Types of Listening and Their Uses

Type of Listening What It Means Why It’s Used
Informational Listen to learn To gather information
Critical Listen to analyze and evaluate To judge information
Active Listen to understand To provide counsel
Empathetic Listen to understand emotions To understand motivations or provide
an outlet for emotions prior to change
In The 7 Habits of Highly Effective People, Covey suggests the “majority of

people listen with the intent to respond, rather than the intent to
understand.”37 By listening with the intent to understand, a financial
planner demonstrates genuine interest in the other person and the desire
to put the other person’s interests first. Both are important to build trust.
Moreover, engaging in active and empathetic listening allows the financial
planner to gather sufficient information to counsel clients, as well as giving
them an outlet for their emotions. This helps them engage in the process
of change that is often required to achieve goals.
37
Covey, Stephen R. The 7 Habits of Highly Effective People. Toronto: Free Press, 1989.
79

Figure 15: Characteristics of Active and Empathetic Listening
Be Present
Observe Hear
Voice Content
Listen for Active and Avoid

What Is Not Empathetic Listening to
Being Said Respond
Listening
Respond
Listen for
Only to
Feelings
Understand
Be
Comfortable
with Silence
Source: Author’s visual depiction of the domains and competencies of the Emotional and
Social Competency Inventory developed by the Emotional Intelligence Consortium.
www.eiconsortium.org/pdf/emotional_competence_framework.pdf.
Venn diagram used from https://slidemodel.com.
Active and empathetic listening involves:
 Being present and fully engaged, both physically and mentally, in the
conversation. The listener must have a clear mind so he or she can focus
completely on the speaker. As thoughts not connected to the
conversation enter the listener’s mind, the listener needs to be able to let
them go and refocus on the speaker and his or her communication.
80

 Being able to hear the content and determine what the speaker means.
The listener needs to remove all forms of communication noise to get to
the heart of the matter.
 Avoiding listening to respond. The listener should refrain from making
assumptions, drawing conclusions, solving problems, delivering
recommendations and sharing his or her own experiences.
 Responding only to understand. The listener should use varying
techniques, including asking open-ended probing questions, restating,
paraphrasing, clarifying and reflecting to help motivate the speaker to
elaborate.
 Being comfortable with silence. The listener should not feel obligated to
fill any silence that occurs during the conversation. While silence can be
awkward and uncomfortable, it can lead to important realizations for
those who feel pressure to fill the silence.
 Listening for feelings and what is not being said. Many times, an
individual’s feelings and what he or she is not saying shed light on the
real issues, future points of resistance and potential motivations. The
financial planner can use these insights to help the individual help himself
or herself.
 Observing the speaker’s voice. The listener should be able to observe and
interpret the speaker’s body language (posture, body movements,
gestures, facial expressions and physiological responses), the verbal
language the speaker uses (positive or negative focus, reoccurring words
or phrases, pauses, silences and emphasis), and the speaker’s tone
(pitch, volume, pace and timbre), and also determine whether all three
are congruent with the speaker’s message.
Engaging in active and empathetic listening is not easy. It takes practice

and constant vigilance not to engage in non-listening activities such as
81

ineffective listening (not listening to the entire message or missing pieces

of the message) or inadequate listening (focusing on one’s own thoughts
instead of the other person). It can help for the listener to implement the
physical actions in Table 5 to signal to the speaker that he or she is ready,
willing and able to listen and help the speaker with whatever is on his or
her mind.
Table 5: Physical Actions a Speaker Should Take When Engaging in

Active and Empathetic Listening
Action How to Complete Action Signal to
Speaker
F Full Square shoulders to the speaker’s body Listener is ready
attention and willing to
listen
O Open Sit up straight, hold head high, relax arms Listener is
posture and legs, keep arms and legs uncrossed, approachable and
leave chest and abdomen unprotected, open to listening
point feet towards the speaker
L Lean Lean forward slightly towards listener Listener is
forward interested and
involved in the
conversation
D Declutter Remove potential barriers or distractors This conversation
that could hinder communication or draw is important and
either party’s attention away from the nothing should
conversation; this includes removing distract from it
physical objects (such as desk, client files)
and silencing and removing technological
tools (such as a cell phone, laptop and/or
tablet)
E Eye Make intermittent eye contact with listener, Listener is
contact but refrain from staring. Look at listener, engaged in the
not around or behind listener conversation
R Relax Find comfortable balance between sitting or Listener is
standing bolt upright and slouching present in, and
comfortable with,
the conversation
82

Financial planners can learn active and empathetic listening with practice.
To help develop these skills, it is important to cultivate emotional and
social intelligence.
Emotional and social intelligence
Howard Gardner’s Theory of Multiple Intelligences suggests that people

have eight forms of intelligence:38
 Linguistic (words)
 Logical-mathematical (logic and numbers)
 Spatial (pictures)
 Musical (music)
 Bodily-kinesthetic (physical)
 Naturalist (nature)
 Intrapersonal (emotional)
 Interpersonal (social)
Historically, linguistic, logical-mathematical and spatial intelligences have

been the focus of education and preparing to achieve employment success.
Grouped together, they can be measured by academic grades or
intelligence quotient (IQ). However, a growing body of knowledge shows
that success in the workplace, particularly when dealing with the public (as
financial planners do), requires high levels of intrapersonal (emotional)
and interpersonal (social) intelligence.
38
Gardner, Howard. Frames of Mind: The Theory of Multiple Intelligences. New York:
Basic Books, 1983.
83

Emotional intelligence (EI)
Emotional intelligence (often referred to as EQ or EI) focuses on

perceiving, understanding, using and managing emotions39 to interact with
others. It includes “the ability to recognize and understand one’s own
emotions and their effects on other people, the ability to control or redirect
disruptive impulses and moods, and the skill in treating people according
to their emotional reactions.”40 Emotional intelligence is more closely
linked to academic achievement and career success than IQ, as well as
being connected to more successful interpersonal relationships, better
physical and mental health, and higher life satisfaction.41
Table 6 describes the five main components of emotional intelligence at

work.
39
Mayer, John, Peter Salovey, and David Caruso. “Emotional Intelligence: Theory,
Findings, and Implications.” Psychological Inquiry, 15(3) (2004): p. 199.
https://doi.org/10.1207/s15327965pli1503_02
40
Goleman, Daniel. “What Makes a Leader?” Harvard Business Review, 76 (1998): pp.
93–102.
41
Houston, Elaine. “The Importance of Emotional Intelligence.” Blog, June 2, 2019.
https://positivepsychology.com/importance-of-emotional-intelligence
84

Table 6: The Five Components of Emotional Intelligence at Work

Self- Self- Motivation Empathy Social Skill
Awareness Regulation
The ability to The ability to A passion to The ability to Proficiency in
recognize and control or work for understand managing
understand redirect reasons that the emotional relationships
one’s moods, disruptive go beyond makeup of and building
emotions and impulses and money or other people. networks.
drives, as well moods. status.
as their effect Skill in An ability to
on others. The A propensity treating find common
propensity to to pursue people ground and
suspend goals with according to build rapport.
judgement — energy and their
to think persistence. emotional
before acting. reactions.
Source: Table 6: Reproduced from Goleman, Daniel. “What Makes a Leader?” Harvard
Business Review, 76 (1998): pp. 93–102.
Emotionally intelligent individuals are able to recognize how their feelings

affect their behaviour. They are able to manage their reactions and
express their emotions appropriately — at an appropriate time, in the
appropriate place and in the appropriate way. Those with high emotional
intelligence are able to transform negative emotions and feelings into
motivating factors to achieve and perform better in the future. They learn
from their experiences and observations of others. High emotional
intelligence allows individuals to manage conflict well and recognize and
diffuse difficult situations based on communication skills that manage the
emotions and reactions of others. Individuals with high levels of emotional
intelligence are masters of influencing others through the personal, social
and emotional connections they have made with them.
85

One can inherit the capacity for emotional intelligence — but, with time
and effort, one can also learn how to be more emotionally intelligent.42
Strengthening emotional intelligence requires commitment, planning,
foresight, opportunity, feedback, reflection, and sometimes difficult times
and failure. In other words, emotional intelligence comes from one of
nature’s greatest teachers: experience.
Here are some ways to enhance emotional intelligence.
Build self-awareness
 Journal the situations you experience, the emotions they trigger, the
thoughts and feelings you have as a result of your emotions, the
behaviour you took and the resulting outcomes
 Before reacting to an emotion, ask what emotion you are experiencing,
what event caused that emotion, what your first response was likely to
be because of that emotion, what other actions you could take instead,
and what the expected outcomes are from taking those actions
 Engage in self-reflection after experiencing a situation that went well or
didn’t go well
 Ask for constructive feedback, including how your behaviour made people
feel
 Observe how other people respond to your behaviour
Build self-regulation
 Define your values and ethics

 Take responsibility for your successes and failures
 Engage in mindfulness activities such as meditation and yoga to learn to
focus on your breath
42
Goleman, Daniel. “What Makes a Leader?” Harvard Business Review, 76 (1998): p. 97.
86

 Engage in low-risk expressions of emotions (e.g., write down your

negative thoughts and responses to others on paper or in an email and
then throw it away or delete it)
Build motivation
 Revisit your original goals and progress towards them

 Look for the silver lining in every situation
 Look for lessons learned from your experiences and plan and practice
how you will handle similar situations in the future
Build empathy
 Look at situations from another person’s point of view

 Practise reading body language
 Learn to engage in active and empathetic listening
Build social skills
 Learn and practise how to handle conflicts using compromise

 Improve communication skills
 Build relationships
Social intelligence (SI)
According to one definition, “social intelligence is the awareness of

situations and the social dynamics that govern them, and a knowledge of
interaction styles and strategies that can help a person achieve his or her
objectives in dealing with others.”43 It takes a broader and deeper dive
into the social skills element of emotional intelligence by determining the
categories of skills required for individuals to achieve the positive
43
Karl Albrecht International. “What Is Social Intelligence (SI)?”
http://karlalbrecht.com/wordpress/social-intelligence-theory (accessed June 1, 2019)
87

outcomes they desire (based on their observations and learnings from

emotional intelligence).
Table 7 describes the categories of skills that make up social intelligence.
Table 7: The Five Categories of Skills That Comprise Social

Intelligence
Situational Presence Authenticity Clarity Empathy
Awareness
The ability to The The extent to The ability to The skill of
observe and impression or which others express ideas building
understand total message perceive one in an effective connections
the context of one sends to as acting from and efficient with people,
a situation, others with honest, ethical manner, including the
and to one’s motives, and resulting in capacity to
understand behaviour. the extent to impact. get people to
the ways in which they meet on a
which the sense that personal level
situation one’s of respect and
dominates or behaviour is willingness to
shapes the congruent cooperate.
behaviour of with their
the people in personal
it. values.
Source: Author’s visual depiction of skills that comprise social intelligence from Karl
Albrecht International. “What Is Social Intelligence (SI)?”
88

Emotional and social intelligence (ESI)
Emotional and social intelligence have recently been combined,44 resulting

in the following four domains:
 Self-awareness
 Self-regulation
 Social awareness
 Relationship management
Self-awareness involves identifying your emotions and recognizing their

impact on your behaviour and on those around you. Self-regulation
concentrates on managing your emotions, including controlling and
redirecting emotions towards productive outcomes. Social awareness
focuses on how aware you are of others’ feelings and the social
environment that affects your relationships. Relationship management
details how you use knowledge, skills and experience to interact with
others.
Goleman, Daniel, et al. Building Blocks of Emotional Intelligence. Florence, MA: More Than
44
Sound DBA Key Step Media, 2017.
89

Figure 16: The Domains and Competencies of Emotional and Social

Intelligence (ESI)
Source: Feloni, Richard, Samantha Lee and Áine Cain. “How to Dress Your Best in Any
Work Environment, from a Casual Office to a Boardroom.” Business Insider, May 16,
2018. www.businessinsider.com/how-to-dress-for-work-business-attire-2014-8
Each domain contains specific competencies that strengthen emotional and

social intelligence. Figure 16 describes these competencies.
Financial planners who are able to build their emotional and social
intelligence are more likely to achieve success in helping clients fulfill their
goals. Emotional and social intelligence skills are required at every stage of
the financial planning relationship, from building trust during the initial
engagement to making recommendations and handling the resistance of
clients who are uncomfortable implementing change.
Empathy
Empathy is a central theme in EI, SI and ESI models. Empathy is “the

action of understanding, being aware of, being sensitive to, and vicariously
experiencing the feelings, thoughts, and experience of another of either
90

the past or present without having the feelings, thoughts, and experience
fully communicated in an objectively explicit manner.”45 From an emotional
and social intelligence perspective, empathy “goes beyond the
conventional definition of having a feeling toward another person; here, it
means creating a mutual feeling between oneself and another person.”46
There are three kinds of empathy:
 Cognitive empathy
 Emotional empathy
 Compassionate empathy
Cognitive empathy refers to the ability of an individual to “know how

another person feels and what they might be thinking.”47 Financial
planners use this type of empathy when they sense a client’s facial
expressions or feelings (e.g., excited, scared or confused) while they are
delivering recommendations. In these instances, financial planners remain
detached from clients’ feelings so they can speak with them in an
appropriate manner.
Emotional empathy is at the other end of the spectrum. It refers to the

ability of an individual to “feel physically along with the other person, as
though their emotions were contagious.”48 Financial planners can easily
feel with a client, rather than remaining appropriately detached and feeling
45
Merriam-Webster Dictionary. “Empathy.” www.merriam-
webster.com/dictionary/empathy (accessed June 1, 2019)
46
Karl Albrecht International. “What Is Social Intelligence (SI)?”
47
Goleman, Daniel. “Three Kinds of Empathy — Cognitive, Emotional, Compassionate.”
Blog, June 12, 2007. www.danielgoleman.info/three-kinds-of-empathy-cognitive-
emotional-compassionate
48
Ibid.
91

for a client, because emotional intelligence is an automatic human

response and financial planners naturally connect with their clients.
Overall, financial planners need to ensure that they have strong self-
management skills to balance their cognitive and emotional empathies.
When one overshadows the other, the financial planner risks either being
too detached, becoming indifferent and losing the emotional connection to
the client, or feeling with the client too much, taking on the client’s
emotions and eventually experiencing burnout.
Financial planners also need to ensure that they have compassionate

empathy, which means that they “not only understand a person’s
predicament and feel with them, but are spontaneously moved to help, if
needed.”49
49
Ibid.
92

Table 8: The Emotional and Social Intelligence Competency
Competency Description Characteristics of People with the Competency

Emotional Recognizing your emotions  Know which emotions they are feeling and why
Awareness and their effects.  Realize the links between their feelings and what they think, do and
say
 Recognize how their feelings affect their performance
 Have a guiding awareness of their values and goals
Self-Awareness
Accurate Self- Knowing your strengths  Aware of strengths and weaknesses

Assessment and limits.  Reflective, learning from experience
 Open to candid feedback, new perspectives, continuous learning and
self-development
 Able to show a sense of humour and perspective about themselves
Self-Confidence A strong sense of your  Present themselves with self-assurance; have “presence”
self-worth and capabilities.  Can voice views that are unpopular and go out on a limb for what is
right
 Are decisive, able to make sound decisions despite uncertainties and
pressures
Empathy Sensing others’ feelings  Are attentive to emotional cues and listen well
and perspectives and  Show sensitivity and understand others’ perspectives
taking an active interest in  Help out based on understanding other people’s needs and feelings
Social Awareness
their concerns.
Organizational Reading a group’s  Accurately read key power relationships
Awareness emotional currents and  Detect crucial social networks
power relationships.  Understand the forces that shape the views and actions of clients,
customers or competitors
 Accurately read situations and organizational and external realities
Service Anticipating, recognizing  Understand customers’ needs and match them to services or products
Orientation and meeting customers’  Seek ways to increase customers’ satisfaction and loyalty
needs.  Gladly offer appropriate assistance
 Grasp customer’s perspective, acting as a trusted advisor
93

Emotional Self- Keeping disruptive  Manage their impulsive feelings and distressing emotions well
Control emotions and impulses in  Stay composed, positive and unflappable even in trying moments
check.  Think clearly and stay focused under pressure
Trustworthiness Maintaining integrity,  Act ethically and are above reproach
and Transparency acting congruently with  Build trust through their reliability and authenticity
your values.  Admit their own mistakes and confront unethical actions in others
 Take tough, principled stands even if they are unpopular
Conscientiousness Taking responsibility for  Meet commitments and keep promises
personal performance.  Hold themselves accountable for meeting their objectives
 Organized and careful in their work
Adaptability Flexibility in handling  Smoothly handle multiple demands, shifting priorities and rapid change
change.  Adapt responses and tactics to fit fluid circumstances
 Flexible in how they see events
Innovativeness Being comfortable with  Seek out fresh ideas from a wide variety of sources
and open to novel ideas  Entertain original solutions to problems
Self-Regulation
and new information.  Generate new ideas

 Take fresh perspectives and risks in their thinking
Achievement Striving to improve or  Results-oriented, with a high drive to meet their objectives and standards
meeting a standard of  Set challenging goals and take calculated risks
excellence.  Pursue information to reduce uncertainty and find ways to do better
 Learn how to improve their performance
Commitment Aligning with the goals of  Readily make personal or group sacrifices to meet a larger
the group or organization. organizational goal
 Find a sense of purpose in the larger mission
 Use the group’s core values in making decisions and clarifying choices
 Actively seek out opportunities to fulfill the group’s mission
Initiative Readiness to act on  Are ready to seize opportunities
opportunities.  Pursue goals beyond what is required or expected
 Cut through red tape and bend the rules when necessary to get the
job done
 Mobilize others through unusual, enterprising efforts
Optimism Persistence in pursuing  Persist in seeking goals despite obstacles and setbacks
goals despite obstacles  Operate from hope of success rather than fear of failure
and setbacks.  See setbacks as due to manageable circumstance rather than a
personal flaw
94

Inspirational Inspiring and guiding  Articulate and arouse enthusiasm for a shared vision and mission
Leadership individuals and groups.  Step forward to lead as needed, regardless of position
 Guide the performance of others while holding them accountable
 Lead by example
Communication Sending clear and  Effective in give-and-take, registering emotional cues in attuning their
convincing messages. message
 Deal with difficult issues straightforwardly
 Listen well, seek mutual understanding and welcome sharing of
information fully
 Foster open communication and stay receptive to bad news as well as
good
Influence Wielding effective tactics  Skilled at persuasion
Relationship Management
for persuasion.  Fine-tune presentations to appeal to the listener

 Use complex strategies such as indirect influence to build consensus
and support
 Orchestrate dramatic events to effectively make a point
Change Catalyst Initiating or managing  Recognize the need for change and remove barriers
change.  Challenge the status quo to acknowledge the need for change
 Champion the change and enlist others in its pursuit
 Model the change expected of others
Developing Sensing others’  Acknowledge and reward people’s strengths, accomplishments and
Others development needs and development
bolstering their abilities.  Offer useful feedback and identify people’s needs for development
 Mentor, give timely coaching and offer assignments that challenge
and grow a person’s skills
Conflict Negotiating and resolving  Handle difficult people and tense situations with diplomacy and tact
Management disagreements.  Spot potential conflict, bring disagreements into the open and help
deescalate
 Encourage debate and open discussion
 Orchestrate win-win solutions
Collaboration and Working with others  Balance a focus on task with attention to relationships
Cooperation towards shared goals.  Collaborate, sharing plans, information and resources
Creating group synergy in  Promote a friendly, cooperative climate
pursuing collective goals.  Spot and nurture opportunities for collaboration
95

Building Bonds Nurturing instrumental  Cultivate and maintain extensive informal networks
relationships.  Seek out relationships that are mutually beneficial
 Build rapport and keep others in the loop
 Make and maintain personal friendships among work associates
Team Capabilities Creating group synergy in  Model team qualities such as respect, helpfulness and cooperation
pursuing collective goals.  Draw all members into active and enthusiastic participation
 Build team identity, esprit de corps and commitment
 Protect the group and its reputation
 Share credit
Leveraging Cultivating opportunities  Respect and relate well to people from varied backgrounds
Diversity among diverse people.  Understand diverse world views and are sensitive to group differences
 See diversity as opportunity, creating an environment where diverse
people can thrive
 Challenge bias and intolerance
Source: Reproduced and adapted from The Consortium for Research on Emotional Intelligence in Organizations. “Emotional
Competence Framework.” http://kwhs.wharton.upenn.edu/wp-content/uploads/2012/02/Career-Development-
40_handoutA.pdf (accessed July 1, 2019) and Goleman, Daniel. “How Emotionally Intelligent Are You?” Blog, April 21, 2015.
www.danielgoleman.info/daniel-goleman-how-emotionally-intelligent-are-you
96

Creating a receptive atmosphere

Creating a receptive atmosphere means engaging in activities that foster
communication between the financial planner and the client. This requires
financial planners to make plans ahead of time and execute those plans
whenever and wherever they meet with a client. To create a receptive
atmosphere, financial planners can provide a professional welcome, set up
their workspace effectively, be of the right mindset and maintain an open
approach to discovery.
Provide a professional welcome
Providing a professional welcome helps set the tone for any client meeting.
People are used to opening up and communicating freely with
professionals such as doctors and lawyers. When a financial planner
welcomes clients in a professional manner, clients receive a signal similar
to the one they receive from their doctor or lawyer— namely, that this
person is a professional with whom they can safely and openly
communicate. A professional welcome includes:
 Dressing professionally
 Being punctual for the meeting
 Meeting the client at the front door or office reception area
 Using the word “welcome” as a greeting
 Shaking hands (or using a custom the client uses)
 Walking beside (or slightly behind and to the side of) the client while
directing him or her to the location where the meeting will take place
Dressing professionally involves matching appearance and attire to the

social norms of the role and workplace, as well as to client expectations.
97

With different styles of office attire ranging from business casual to

business professional, it can sometimes be difficult to determine how to
dress. At a minimum, clothes should be clean, in good condition, wrinkle-
free and tasteful. In North America, many financial planners wear business
suits to demonstrate their professionalism. Here are three rules of thumb
to consider:
 A financial planner may wish to dress with just slightly more formality
than clients to demonstrate professionalism without intimidating clients
 It is always better to be “overdressed” than “underdressed,” since it is

easier to remove a garment (such as a jacket or tie) to look more
casual than to add a garment to look more formal
 When it is unclear whether a specific outfit is appropriate, err on the

side of caution and choose something different
Figure 17: Professional Attire
Source: Reproduced from Manning, Gerald, Michael Ahearne, Barry Reece, and Herb
Mackenzie. Selling Today. Partnering to Create Value. Seventh Canadian Edition.
Toronto: Pearson, 2016.
Being punctual shows respect for the client’s time and makes a deposit to
the relationship’s trust account. As a client’s trust grows, he or she is more
likely to communicate openly with the financial planner.
98

Meeting the client at the front door or office reception area demonstrates
that the financial planner is ready and eager to help the client. People
generally want to work with others who are passionate and enthusiastic,
and this further encourages the client to communicate openly with the
financial planner.
When greeting a client, using the word “welcome” fosters a softer and
warmer feeling than the formal, harsher “hello,” its rushed equivalent “hi”
or other variants. “Welcome” also gives many people a mental picture of a
safe, secure and comfortable environment, allowing them to feel more at
ease with the requirement to open up and communicate their private
information.
Shaking hands when greeting a client is a custom that shows respect and
builds trust, making it more likely that both parties will communicate
openly. While it is common to shake hands in Western cultures
(particularly in North American business contexts), avoid assuming that a
client is experienced in, or prefers to use, this custom. The financial
planner should lead by extending a hand to shake the client’s hand, but
remain open to adapting his or her approach if the client engages in a
different greeting ritual.
Walking beside (or slightly behind and to the side of) clients while directing
them towards an office allows clients to feel that the financial planner is
with them every step of the way — either beside them in a partnership, or
letting them take the lead and helping to support them from behind. This
feeling provides clients with a sense of safety, allowing them to feel more
comfortable communicating openly with the financial planner.
99

Set up work space effectively
Financial planners should position clients with a view of the exit and easy
route to the exit — preferably one that does not require them to pass the
financial planner. This set-up gives clients a greater sense of safety since
they have an unobstructed view and pathway to the exit should they wish
to leave. While clients are unlikely to use this escape route, simply having
the option puts their mind at ease and allow them to focus on
communicating more freely with the financial planner.
Financial planners can also physically set up their work space to ensure
they sit perpendicular to clients rather than parallel to and across from
them. Sitting across from clients can give a meeting an adversarial feel,
which is especially undesirable during discovery when clients face many
questions. In contrast, sitting perpendicular to clients sends the message
that the financial planner is open to collaborating. When the financial
planner chooses this seating arrangement to present his or her
recommendations, it helps clients feel they have a “guide on the side” who
will support them as they both move towards achieving their goals.
Be of the right mindset
Being of the right mindset when meeting with clients is integral to

providing a receptive atmosphere in which clients feel comfortable
communicating openly. Being of the right mindset has two main
requirements. First, financial planners must use their emotional
intelligence to understand what emotions they are feeling and why, and
then manage those emotions appropriately so they can give their full
attention to clients. Second, financial planners should practise a “benefit
mindset,” which focuses on “fulfilling one’s potential… in a way that
contributes to the well-being of others and society as a whole [and] doing
100

good things for good reasons.”50 By practising a benefit mindset, financial

planners demonstrate that they are “compassionate presences,
trustworthy companions and aware contributors… who are open-minded
and open-hearted,”51 all characteristics that give clients the urge to
reciprocate the openness by communicating with the financial planner.
Maintain an open approach to discovery
A financial planner’s approach to discovery can have a significant impact

on the client’s willingness to communicate, as well as the quantity and
quality of information the client provides. While it is common for most of
the discovery process to occur near the beginning of a financial planning
relationship, discovery also takes place any time the financial planner is
learning about a client. This happens throughout the relationship,
especially for financial planners who engage in rediscovery on a pre-
determined schedule or on an as-needed basis.
To encourage a client to communicate:
 Review the meeting agenda
 Confirm the time a client has available for the meeting
 Engage in active and empathetic listening
 Use a variety of open-ended and closed-ended questions
 Encourage elaboration
 Ask for feedback
50
Benefit Mindset. “About.” www.benefitmindset.com/about (accessed July 2, 2019)
51
Ibid.
101

 Be comfortable with silence
 Explore a client’s past, present and view for the future
Reviewing the meeting agenda enables the financial planner to confirm the
topics a client wants to cover. This makes it more likely the client will
discuss these topics openly.
Confirming the time the client has available for the meeting enables the
financial planner to set expectations for what topics can fit into that time
at the beginning of the meeting. When clients know exactly what time the
meeting will end, they can feel freer to communicate openly.
Engaging in active and empathetic listening (as discussed earlier in this

module) builds trust and encourages the client to communicate openly.
Asking open-ended questions motivates a client to communicate more

because they cannot answer using static one-word answers such as “yes”
and “no.” Open-ended questions require the client to provide longer and
deeper responses, helping the financial planner illicit important information
from the client. Good open-ended questions often start with “what” or
“how” — for example, “What is your first memory of money?” or “How do
you currently manage the risks your family faces with respect to death
and/or disability?” Alternatively, they may be expressed as a statement —
for example, “Please tell me about your hopes for your children’s future.”
Either way, open-ended questions give the client an opportunity to control
the direction of the response, providing insight into what is important to
them. Open-ended questions also help the discovery process feel more like
a conversation than an interrogation.
102

Table 9: Closed-Ended versus Open-Ended Questions

Closed-Ended Question Open-Ended Question
Question Have you been stressed lately? What keeps you awake at night
with worry?
Response Yes, Unsure, No. If I’ll have enough money to
retire when I want and what will
happen to my family if I die.
Generally speaking, avoid open-ended questions that start with “why.”

They may be interpreted as judgmental or confrontational and can make
people feel uncomfortable. For example, asking a client, “Why did you
decide to liquidate your assets when the stock market declined?” may
make the client feel that he or she did something wrong. Compare this to a
similar but differently worded question: “What factors influenced your
decision to liquidate your assets when the stock market declined?” This
second question is less judgemental since it focuses on the factors that
influenced the client’s decision and not the client’s decision itself. It also
prompts the client to share important information the financial planner can
use when working with the client going forward.
This is not to say that closed-ended questions are bad. Rather, financial
planners need to use them appropriately. They can help the financial
planner confirm what a client means — for example, “I heard you say that
you would sell your investment portfolio if it fell 20% in value. Is that
correct?” They can also enable the financial planner to acquire specific
quantitative data — for example, “How much is your home worth?”
103

Using a variety of open-ended and closed-ended questions helps a financial

planner obtain all information necessary to properly assess a client’s
situation and develop appropriate recommendations to help achieve his or
her goals, meet his or her needs and take advantage of opportunities that
benefit him or her.
Encouraging elaboration, asking for feedback and being comfortable with

silence can all help a client communicate with a financial planner.
Remember clients won’t always respond immediately to questions. They
may be considering their answer or they may prefer not to answer a
question. When this happens, it can be awkward or uncomfortable. The
human reaction is often to speak to avoid silence. Both the financial
planner and clients will feel the urge to do this; however, if the financial
planner can resist the urge to fill the dead air, clients will feel obligated to
speak, sometimes providing very important information.
Finally, exploring clients’ past, present and view of the future is an

effective way to prompt them to open up. Discussing different parts of
their past can provide insight into their motivations. Discussing their
present can shed light on their current worries. Discussing their view of the
future, particularly around goals and dreams, can reveal clients’ passion
and encourage them to communicate more openly and deeply.
Crafting and delivering messages that adhere to the

10 Cs of Communication
Ten words that begin with C describe the characteristics of effective
communication.
104

1. Complete
Effective communication is complete, containing all the information the

receiver needs. Complete communication answers these questions:
 Who?
 What?
 When?
 Where?
 Why?
 How?
Complete communication is FULL: factual, understandable, logical and

leading. It contains facts the receiver can easily understand because they
are presented in a logical manner, and it leads the receiver to respond to
the message by taking action.
2. Clear
Effective communication has a clear purpose. To help ensure a message is

clear, the language should be FACTUAL: familiar, appropriate,
conversational, tactful, unambiguous, accurate and logical. Familiar
language makes it easy for the listener to understand the words in the
message. Appropriate language considers receivers’ needs by
communicating the message in the format (and at the level) they can
understand best. Conversational language avoids jargon, allowing the
receiver to focus on the message instead of trying to decipher the words it
uses. Tactful language is respectful and takes into consideration receivers’
feelings, as well as the circumstances and context in which the
communication occurs. Unambiguous language uses short, simple and
familiar words, leaving no doubt about message’s meaning. Accurate
105

language is truthful and expresses the message with no hidden meanings

or ulterior motives. Logical language has a rational and sensible structure
for the circumstances in which the communication occurs. Working
together, these characteristics help ensure that the receiver does not tune
out the message and fully comprehends it.
3. Coherent
Effective communication flows in a coherent way that the receiver can

easily follow. Generally, it makes a main point, followed by supporting
evidence. Begin with information that is easy to understand or familiar to
the receiver, and end with information that is more difficult to understand,
such as new, technical or abstract information. Connect thoughts with
language that helps the receiver experience the journey of the message.
For example, when presenting an argument, it can help to use language
such as, “This is the most suitable recommendation for three reasons.
First,… , second,… and third, (or finally,)…”
4. Correct
Effective communication is not only grammatically correct, but also correct

for the audience and the circumstances. Correct communication bolsters
the credibility of the sender and the message and makes the message
more persuasive because there are no errors to distract the receiver.
Correct communication is right, in the sense that it delivers the right
message at the right time in the right way (considering medium, channel
and tone) given the circumstances. This combination of rights helps keep
the receiver open to receiving the message.
106

5. Considerate
Effective communication considers the audience by delivering the message

in a way that will appeal to receivers, connect with them emotionally and
motivate them to take action. It requires the sender to put himself or
herself in the proverbial shoes of the receiver to understand how the
message will be received and what potential impacts and interpretations
may occur. It requires the sender to draw on emotional intelligence and
use language that shows RESPECT: respectful, empathetic, soft,
personalized, emotional, courteous and time-saving. Respectful and
empathetic language ensures consideration of the receiver’s feelings when
receiving the message. Soft language allows the receiver to make his or
her own decision about the message without feeling pressured or forced.
Language should relate personally and emotionally to the receiver to help
him or her connect with the message. Courteous language ensures the
message focuses on helping the receiver, and time-saving language
delivers the message in as few words as possible.
6. Conversational
Effective communication is conversational. It avoids formality by using lay

terms instead of jargon and legalese. It ensures the tone of the message is
unpretentious so the receiver stays connected to and interested in the
message.
107

7. Courteous
Courteous communication is NICE: non-judgemental, interested in the

receiver, calm and emotion-focused. Communication that is non-
judgemental and demonstrates the sender’s interest in the receiver builds
the receiver’s trust in the sender. Keeping the tone calm and ensuring the
language considers the receiver’s emotional reaction enables the sender to
craft messages the receiver is more likely to accept.
8. Concrete
Effective communication presents the message concretely so the receiver

clearly understands it. Concrete communication is SOLID: specific,
organized, logical, inspiring and definitive. It avoids vagueness and
generality by using specific and definitive language. It uses facts and
avoids adjectives such as “good” and “bad.” Action verbs and language
that paints a picture in the mind of the receiver help connect the receiver
to the message and inspire them to respond by taking action.
9. Concise
Effective communication delivers a message in the most efficient way.

Thinking about the message before delivering it (even for a few seconds)
can help a sender determine the appropriate way to present it while
demonstrating respect for the sender’s time. Using language that is SHORT
(simple, helpful, organized, relevant and thought-out) helps ensure the
message is concise. Strategies to make communication concise include
using the smallest number of words that still ensure the receiver gets the
full message, using visuals instead of words, providing only relevant
information and avoiding repetition.
108

10. Compelling
Finally, communication should be compelling. It should use language that

will PUSH (persuasive, unapologetic, suggestive and help) the receiver to
take action. Compelling communication uses persuasive language that
resonates emotionally with the receiver and motivates him or her to take
action. In addition, it does not apologize when suggesting that the receiver
take action because it is resolutely focused on helping the receiver meet
his or her needs.
Minimizing noise
In a perfect world, communication would occur easily, quickly and without
issue. Unfortunately, the communication process is prone to disruption.
Often, noise distorts or prevents effective communication. Noise, which
“refers to any type of disruption that interferes with the transmission or
interpretation of information from a sender to a receiver,”52 can occur at
any stage of the communication process and can affect how effective
communication is to varying degrees. Common types of noise include
physical, physiological, psychological, semantic, syntactical, organizational
and cultural. Table 10 provides common examples of each of these.
52
Nordquist, Richard. “Noise and Interference in Various Types of Communication.”
ThoughtCo. Updated January 3, 2019. www.thoughtco.com/noise-communication-term-
1691349
109

Table 10: Types of Noise

Type of Definition Common Examples in Financial
Noise Planning Environment
Physical Any physical sound  Ringing or buzzing phone
that interferes with  Sounds from office heating and
communication. cooling ventilation system fans
 People walking, standing or talking
outside the office door or window
Physiological Any distraction  Deafness or blindness
caused by the  Physical ailments (e.g., headache,
sender’s or receiver’s gastrointestinal pain, illness, hunger)
body that interferes  Nervousness (resulting in speaking
with communication. too quickly or too slowly or
forgetting to pause)
Psychological Any distraction  Preconceived ideas (e.g., biases,
caused by the prejudices, presuppositions)
sender’s or receiver’s  Worries about money or life
mind that interferes  Feelings about people in the room
with communication. (e.g., attraction, dislike,
intimidation)
Semantic Any confusion of a  Technical jargon
message caused by a  Euphemisms
sender’s choice of  Use of words that have multiple
words. meanings
Syntactical Any confusion of a  Incorrect or missing punctuation
message caused by a  Omitted words
sender’s grammatical  Homonyms and homographs (e.g.,
use of language. there, their, they’re)
Organizational Any confusion of a  Presenting too many
message caused by recommendations at once
the structure of the  Unclear recommendations or
sender’s message. explanations
 Omitted information that is central
to understanding the rest of the
message
Cultural Any confusion of a  Mispronunciations based on accents
message caused by or second language learning
the sender’s and  Making assumptions based on
receiver’s different stereotypes
cultural backgrounds.  Use of gestures with different
meanings in different cultures (e.g.,
giving a “thumbs up”)
110

Financial planners can reduce noise that may interfere with their
communication by:
 Silencing all electronic devices
 Focusing on the client and not the computer
 Meeting clients at times when they are physically and mentally

prepared to focus
 Avoiding technical jargon, euphemisms and presenting too much

information at once
 Remaining cognizant of their own heuristics and biases
 Drawing on emotional and social intelligence to sense cultural

differences between themselves and their clients
Choosing appropriate messages, media and channels

Before communicating any message, a financial planner should give
considerable thought to the choice of what messages to deliver, how to
deliver them and why they are being delivered. Ensuring the what, how
and why are clearly defined will help the financial planner choose the most
effective medium and channel combination to deliver a message.
Recall that an individual’s voice comprises language, tone and kinesics

(body language). Language focuses on what is said, tone on how it is said
and kinesics on why it is said (since body language demonstrates feelings
and intent). To ensure effective communication, financial planners should
deliver only messages clients need and be mindful of the number of
messages they deliver at one time. Trying to cover too many points at
once (each one its own message) can overwhelm clients so they do not
recall any of the messages. This may happen when financial planners try
to deliver all of their recommendations during one meeting or try to
111

explain every advantage and disadvantage of a particular solution. While

financial planners may feel obligated to communicate all of their messages
at one time (to satisfy the client’s desire for advice related to all of their
goals, issues and opportunities, or because they want to “close the deal”),
this can be counterproductive.
Financial planners’ choice of medium and channel are also important as

they can help or hinder communication. Each medium-channel combination
has advantages and disadvantages related to effectiveness and efficiency.
Medium or Channel?
The terms medium and channel are often used interchangeably, particularly when
describing the delivery of a message. The medium is the form a message takes
(written, verbal or visual), while the channel is the structure that transmits the
message (report, telephone, television, internet or face-to-face encounter).
In many instances, medium-channel combinations are either described or implied —

for example, a written report, an oral telephone call, a visual and oral television
program, a written and visual website, or an oral and visual in-person conversation.
Written communication channels such as emails or reports can disseminate

information to a single person or a mass audience more quickly and
efficiently than calling each receiver. In addition, they can provide
substantial amounts of information that receivers can review and digest at
their own pace. This is particularly helpful when messages require context,
supporting data or detailed explanations. Many financial planners provide
their clients with written financial plans for these reasons. On the
downside, written communication channels can easily be misunderstood,
misinterpreted and misused. Depending on the level, variety and structure
of language in the written communication, the message sent and the
112

message received can differ substantially. Each person sees the world
through a unique spectrum of experiences and this may lead the receiver
to interpret the message in ways the sender does not anticipate.
Misunderstanding the message’s content or misinterpreting the message’s
tone occurs easily because there is limited opportunity to clarify, ask
questions, provide feedback or engage in dialogue about information
presented as written communication. Furthermore, many written
communication channels are easy to use (e.g., email) and this means they
are often misused (or overused). People tend to gravitate towards the
quickest and easiest methods of communication, even if they are not the
most effective or efficient.
Verbal communication channels such as telephone calls, teleconferences

and online audio presentations allow receivers to hear the content and
tone of a message, though they cannot see the sender’s body language.
Verbal communication channels can work better than written
communication channels when delivering complex messages that benefit
from an opportunity for dialogue between sender and receiver.
Visual communication channels such as television programs,

videoconferences and in-person meetings allow the sender and receiver to
hear the content and tone of a message and receive instantaneous
feedback through further discussion and body language. These channels
tend to be the richest form of communication. They can be especially
effective when messages contain substantially new, complex information
that requires discussion, has an emotional impact, aims to persuade the
receiver to make a decision or requires a participant to change his or her
behaviour. Many financial planners use in-person meetings to achieve the
benefits of visual communication channels.
113

Adjusting communication to a client’s communication style

An individual’s personality is the unique and enduring configuration of
thoughts, beliefs, feelings and actions that characterizes their adjustment
to life and is observable through their behaviour.53 Both biological and
environmental factors determine personality. These include “hereditary
and constitutional tendencies; physical maturation; early training;
identification with significant individuals and groups; culturally conditioned
values and roles; and critical experiences and relationships.”54
There are a number of human personality models. One of the most widely
accepted is the Five Factor Model of Personality Traits, which suggests that
it’s possible to describe any individual’s personality using the five broad
dimensions or traits described in Table 11. The traits are overarching
characteristics comprising a number of similar factors that explain
differences in the ways people act.
53
American Psychological Association. “Personality Definition.” APA Dictionary of
Psychology, 2018. https://dictionary.apa.org/personality
54
Ibid.
114

Table 11: Five Factor Model of Personality Traits

Trait Definition
O Openness to The tendency to be open to new aesthetic, cultural,
experience intellectual or emotional experiences
C Conscientiousness The tendency to be organized, responsible and
hardworking
E Extraversion The orientation of interests and energies towards the

outer world of people and things rather than the inner
world of subjective experience
A Agreeableness The tendency to act in a cooperative, unselfish manner
N Neuroticism The tendency to experience a chronic level of emotional
instability and proneness to psychological distress
Source: Author’s visual depiction of definitions from the American Psychological
Association Dictionary. https://dictionary.apa.org
The behaviours that reveal personality include the ways individuals choose
to communicate with others. Their preferred and usual way of using their
voice (including language, tone and body language) is their communication
style, and it may be Emotive, Directive, Reflective or Supportive. Each
communication style has a different mix of two important dimensions of
human behaviour: dominance and sociability.
115

Dominance refers to “the tendency to influence or exert one’s will over

others in a relationship.”55 This includes how driven a person is to influence
the thinking and actions of others: ‘‘Individuals with lower dominance tend
to relinquish control to others and are more passive, while those with
higher dominance prefer to maintain control and are more aggressive.”56
Sociability refers to “the amount of control one exerts over emotional

expressiveness.”57 Specifically, “individuals with lower sociability are more
likely to control their feelings and prefer to work alone. They tend to be
more reserved and formal when dealing with others. Individuals with
higher sociability are more likely to express their feelings freely and prefer
to work with others. They tend to be more unreserved and informal when
dealing with others.’’58
Every individual falls somewhere along the spectrums of dominance and

sociability. Figure 18 shows how an individual’s levels of dominance and
sociability indicate the communication style they are most likely to prefer.
55
Manning, Gerald, Michael Ahearne, Barry Reece, and Herb Mackenzie. Selling Today:
Partnering to Create Value, p. 102. Seventh Canadian Edition. Toronto: Pearson, 2016.
56
Partnering to Create Value, pp. 102–104. Seventh Canadian Edition. Toronto: Pearson,
2016.
57
58
2016.
116

Figure 18: The Communication Style Model
Emotive communicators
Individuals with higher dominance and higher sociability prefer an emotive

communication style:
Emotive communicators tend to be energetic, extroverted

relationship-building people who enjoy expressing themselves.
Their high energy helps them enjoy being active and busy. As
an extrovert with a high level of sociability, emotive individuals
enjoy building and maintaining social relationships with others.
As such, they generally initiate social interactions by
introducing themselves and starting conversations. They
attempt to move beyond formalities to engage in informal
interactions as quickly as possible. From the use of their voice
(language, body language and tone) to the environments they
work best in, they prefer the informality that makes social
relationships successful. Because of their expressive and
informal methods, they have no concerns with sharing their
thoughts, feelings and beliefs. Once recommendations have
117

been made to an emotive communicator, they will tend to be

ready to make a decision.59
Financial planners may have success asking emotive communicators to

take action immediately after presenting recommendations.
The emotive communicator

 Appears active and busy
 Initiates social interactions
 Encourages informality
 Expresses emotional opinions and feelings
Directive communicators
Individuals with higher dominance and lower sociability prefer a directive

Directive communicators tend to be more serious individuals

who prefer control, efficiency and formality. With low sociability,
they project a serious attitude and are task-oriented. With
higher dominance, they like to maintain control. Given their
preference for control, they tend to be busy people, as they
manage all the facets of their personal and professional life.
Such industriousness leads them to focus on efficiency; whether
it be avoiding small talk and getting down to business
immediately, or preferring to receive just the relevant facts and
not the extraneous information required to make a decision.
They prefer to talk rather than listen, and may give the
impression that they are indifferent to what one is saying when
they are actually listening intently and evaluating. Once
recommendations have been made to a directive
59
2016.
118

communicator, [he or she tends] to be ready to make a

decision in a short period of time.60
Financial planners may have success asking directive communicators to

take action shortly after presenting recommendations.
The directive communicator

 Appears busy
 Gives impression of not listening
 Displays a serious, impersonal and businesslike attitude
 Seeks to maintain control of situation
Reflective communicators
Individuals with lower dominance and lower sociability prefer a reflective

Reflective communicators tend to be reserved introverted

people who prefer structure and organization. [As introverts]
with low levels of sociability, reflective communicators are more
cautious and more likely to control their expressions, making it
more difficult to build relationships with them. This formality,
combined with their preference for order, structure and
organization, makes them appear more businesslike. As part of
their cautiousness, they collect and analyze all relevant details
before making a decision. Once recommendations have been
made to [reflective communicators], they will tend to want time
to consider the proposed plans.61
60
2016.
61
2016.
119

Financial planners may have success providing reflective communicators

with ample time to consider the proposed plan and scheduling a time to
follow up about taking action.
The reflective communicator

 Controls emotional expressions
 Prefers orderliness
 Seems difficult to get to know
 May be more formal
 Is detail-focused
Supportive communicators
Individuals with lower dominance and higher sociability prefer a supportive

Supportive communicators tend to be quiet reserved thoughtful

individuals who are good listeners and influencers. As more
quiet and reserved individuals, supportive communicators tend
to be empathetic and good listeners, helping them build
relationships. Given their penchant for building interpersonal
relationships, they prefer to influence others rather than
overpower them, many times using their personal power over
positional power to advance their agenda. Their listening skills
assist them in making thoughtful and deliberate decisions, as
well as building consensus among different stakeholders. Once
recommendations have been made to [supportive
communicators], they will tend to want time to consider the
proposed plans.62
62
2016.
120

Financial planners may have success providing supportive communicators

with ample time to consider the proposed plan and scheduling a time to
follow up about taking action.
The supportive communicator

 Is quiet and reserved
 Listens attentively to others
 Tends to avoid the use of power
 Makes decisions in a thoughtful and deliberate manner
No one communication style is preferable; each has advantages and

disadvantages and works effectively at different times. However, financial
planners must adjust their communication style to match the style of
clients they are advising. This avoids communication style bias, a state of
mind and type of psychological noise that negatively affects
communication between two individuals with different communication
styles. It is particularly important to avoid communication style bias in a
financial planning relationship because it can be detrimental to building
trust, collecting information and presenting recommendations that
motivate a client to take action. When financial planners are versatile and
adapt their communication style to each client’s style, both parties are
more likely to understand one another and cultivate a productive
relationship.
Determining an individual’s communication style is not always easy, since

many people demonstrate the characteristics of their preferred
communication style with low intensity. When people communicate with
greater intensity, it can be easier to identify their communication style.
121

Observing body language is also helpful, since body language is controlled

subconsciously and difficult to alter. Table 12 highlights body language
characteristics financial planners can look for as part of this process.
Table 12: Body Language Characteristics That Accompany Different

Communication Styles
Emotive Directive Reflective Supportive
Posture Straight and Straight and Relaxed Relaxed
tall tall
Facial Match tone of Stoic, Stoic, pensive, Match tone of
Expressions voice (e.g., pensive, thoughtful or voice (e.g.,
happy, sad, thoughtful unemotional happy, sad,
fearful) fearful)
Physical Numerous, Limited, Limited, Limited,
Gestures vigorous controlled, reserved, controlled,
larger smaller smaller smaller
Voice Pattern Rapid, full Medium pace, Slower pace, Slower pace,
range of medium lower to lower volume,
volume, volume, medium informal
informal formal volume, language
language language formal
language
In extreme cases, such as when individuals are under stress, the

characteristics of their communication style become exaggerated63 and
communication strengths can become communication weaknesses.64 This
commonly happens when financial planners meet a client for the first time,
because many people seek support from a professional financial planner
when they are experiencing a stressful change. Table 13 describes the
behaviours individuals with each communication style may demonstrate
63
64
122

when they are under stress. Financial planners can use their emotional and
social intelligence at these times to ensure they remain calm and in control
of their emotional reactions.
Table 13: Communication Style Characteristics under Extreme and

Stressful Conditions
 Expresses highly  Gets impatient  Becomes stiff  Agrees with
emotional with the other and formal everyone
opinions person  Is unwilling to  Is unable to
 Stops listening  Becomes make a decision take a strong
to the other dictatorial and  Avoids stand
person bossy displaying any  Becomes overly
 Tries too hard to  Does not admit type of emotion anxious to win
promote own being wrong  Is overly approval of
point of view  Becomes interested in others
 Becomes extremely detail  Tries to comfort
outspoken to the competitive everyone
point of being
offensive
Source: Author’s visual depiction of communication characteristics from Manning, Gerald,
Michael Ahearne, Barry Reece, and Herb Mackenzie. Selling Today: Partnering to Create
Value. Seventh Canadian Edition. Toronto: Pearson, 2016.
Once financial planners have identified an individual’s communication

style, they can choose appropriate methods of communicating with them.
Table 14 highlights ways financial planners can communicate effectively
with a client based on his or her preferred communication style.
123

Table 14: Methods Financial Planners Can Use to Communicate

Effectively with Individuals with Different Communication Styles
 Hold their  Focus on business  Use a thoughtful,  Build a social
attention with and less on social organized relationship
the right pace aspects approach  Learn about the
 Be enthusiastic  Be efficient,  Be punctual and things that are
 Avoid formality organized and prepared important to
and stiffness disciplined about  Focus on business them (e.g.,
 Establish a time and less on social family, hobbies
social  Provide aspects and major
relationship appropriate facts,  Present interests)
 Reduce figures and recommendations  Listen to their
emphasis on success in slow and personal opinions
facts and probabilities deliberate way and feelings
details  Identify their  Provide  Be professional
 Support their primary supporting but friendly
opinions, ideas objectives and documentation  Provide personal
and dreams determine ways  Avoid pressuring assurance and
 Ask questions to support them for a quick support for their
about their  Ask specific decision views
opinions and questions, note  Avoid assertive
ideas responses and disagreement and
 Maintain good address them interpersonal
eye contact when making conflict
 Actively listen recommendations  Be patient and
allow time for
them to
understand
recommendations
Source: Author’s visual depiction of communication characteristics from Manning, Gerald,

Michael Ahearne, Barry Reece, and Herb Mackenzie. Selling Today: Partnering to Create
Value. Seventh Canadian Edition. Toronto: Pearson, 2016.
While identifying an individual’s communication style can help financial

planners decide how best to communicate with them, some people do not
fall into neat categories. Each individual is unique, with his or her own
preferences based on previous experiences. In addition, communication
style is only one aspect of what defines someone’s personality. Financial
124

planners must spend time discovering and understanding clients so they

can appropriately address their needs and wants.
Adjusting communication to the situation

Clients may use one of three communication tones:
 Passive
 Aggressive
 Assertive
As Figure 19 shows, these form a spectrum, so an individual may exhibit

characteristics from two adjacent communication tones.
Figure 19: Communication Tone Spectrum
Passive Assertive Aggressive
Source: Institute for Learning Styles Research. “Overview of the Seven Perceptual
Styles.” www.learningstyles.org/styles/index.html (accessed July 1, 2019)
Passive communicators
Passive communicators avoid conflict and yield to others’ needs and wants.
They hesitate to share their thoughts and feelings, or do so apologetically.
They tend to have low self-esteem, which makes them more likely to agree
with others, allow others to make decisions for them, and avoid, ignore or
leave any communication process where they face confrontation. They
demonstrate their reluctance to make decisions by asking for more and
more information, procrastinating and/or deferring the decision to
someone they trust more than they trust themselves.
125

Physically, passive communicators tend to:
 Stand or sit with a slumped posture that makes them look smaller than
they are (matching the inadequateness they feel inside)
 Tilt their head straight or diagonally downwards (showing

submissiveness)
 Twist or fidget (particularly when anxious)
 Make limited eye contact (and only quick glances when they do)
 Speak softly and try to hide their true feelings by maintaining straight,
unchanging facial gestures
For example, a passive communicator presented with a recommendation

might respond, “If you think that’s best, then I’ll go along with it.” When
presented with two options, a passive communicator might say, “Either of
those options is fine with me. You choose whatever you think is best.”
Aggressive communicators
Aggressive communicators force their ideas and needs on other people.

They monopolize the communication process by speaking more and
listening less. They tend to interrupt others and correct them, while
engaging in dominating, patronizing and belittling communication. They
presume their decisions will be followed and chastise those who do not
agree with them using a judgemental and condescending tone. Their
actions can be unpredictable and don’t necessarily align with the situation.
Physically, aggressive communicators tend to:
 Stand or sit very close to someone else’s personal space with a rigid
posture that makes them look larger and more powerful than they are
(to intimidate others)
 Tilt their head slightly upwards (showing overconfidence)
126

 Use large and fast gestures (such as pointing or shaking)
 Glare into other people’s eyes
 Speak loudly and squint as they intensely scowl
For example, an aggressive communicator whose portfolio has dropped

significantly in value because of a market downturn may blame and
threaten a financial planner by exclaiming, “This is all your fault! I’m going
to report you to your manager and the professional oversight body for how
incompetently you have handled my portfolio.”
Aggressive communicators may also have passive-aggressive or

manipulative tendencies.
Passive-aggressive communicators demonstrate passiveness externally,

while harbouring angry, resentful and aggressive thoughts internally. Their
thoughts translate into external behaviours that hint at their true feelings.
They may have an inconsistent voice — for example, using language that
agrees with the other person’s idea, but body language and/or a tone that
does not. Alternatively, they may have inconsistent actions — for example,
agreeing to proceed with a course of action but procrastinating, delaying or
avoiding the next steps. Other manifestations of passive-aggressive
tendencies include complaining, sulking, giving backhanded compliments,
using sarcasm or being silent.
Physically, passive-aggressive communicators tend to:
 Stand or sit within an individual’s personal space as they feign

personal connection
 Maintain an asymmetrical posture (e.g., hand on hip, or diagonal to

the other communicator)
127

 Use quick and sharp gestures
 Smile innocently and speak with a soft and sweet voice
For example, a passive-aggressive communicator might say to a financial

planner, “Personally, I think we should wait to sell our rental property, but
what do I know? I’m wrong all the time anyway, aren’t I?”
Manipulative communicators are cunning individuals who control others

through their insidious, fictitious behaviour. They feign emotions such as
sadness and use guilt to control others to meet their needs and wants.
They also tend to be patronizing and ungracious. They are hard to pinpoint
because they can feign emotions so well.
For example, a manipulative communicator might say to a financial

planner, “My father recently died and my spouse left me. I’m living
paycheque to paycheque now after paying the funeral costs and lawyer’s
bills. On top of it all, I can’t even afford to pay you for a financial plan to
help get me on the right path. What am I going to do?”
Assertive communicators
Assertive communicators present their ideas and needs directly, with no

hidden agendas. They communicate openly and honestly, considering the
needs and wants of all stakeholders. They are confident communicators
with high self-esteem, and they look for situations in which all parties
benefit. They are not afraid to make decisions and take responsibility for
the outcomes that arise from those decisions. They act with integrity and
strive to handle any situation as effectively as possible.
Physically, assertive communicators tend to:
 Stand or sit with a symmetrical, open and relaxed posture
 Tilt their head slightly as they listen
128

 Avoid fidgeting
 Make direct eye contact
 Speak calmly and clearly, varying the speed, pitch and tone of their
voice to match the situation, while using smooth and rounded gestures
For example, an assertive communicator might say to a financial planner,

“I appreciate the recommendations you presented to me. I can see how
they will benefit me now and in the future. I do have one concern about
making such a large contribution to my RRSP, however, particularly given
that I’m expecting some larger expenses this year and my income will
fluctuate depending on how business goes. I’d be more comfortable if we
started by contributing half of what you recommended and then see how
much I can afford to contribute later in the year.”
Impact of the client’s communication tone on the financial planner
When dealing with a passive communicator, financial planners may feel

frustrated by the client’s inability to make a decision or resentful because
the client fails to accept help. When dealing with an aggressive
communicator, financial planners may feel defensive and hurt as they
protect themselves from the client’s demanding and intimidating
communication. They may also feel resentful and perhaps vengeful as their
efforts to help the client are continuously rejected and degraded. When
dealing with a passive-aggressive communicator, financial planners may
feel confused, frustrated or angry at the client’s two-faced approach to
communication. When dealing with a manipulative communicator, financial
planners may feel guilty, frustrated, angry or irritated as they deal with an
individual whose communication is unclear or constantly changing.
129

Identifying clients’ communication tones helps financial planners use

emotional and social intelligence to recognize and name their own feelings
and to understand that those feelings are a reaction to client behaviours.
This helps financial planners maintain their composure and determine
appropriate next steps to manage the situation.
Communication tones for financial planners
Assertive communication is generally the most effective tone for client

conversations, as it builds trust between parties and fosters open, honest,
respectful and productive communication that strengthens the relationship.
However, financial planners may have to adjust their style and become
more aggressive or more passive at times.
A more aggressive approach may be appropriate when a client must make

a decision quickly, there is an emergency or it is critical to get something
right. For example, more aggressive communication may be necessary if a
financial planner has tried assertive communication and a client still wishes
to cash out a $1,000,000 RRSP this year to purchase a property. A more
passive approach may be appropriate when emotions are running high and
allowing the client to have his or her way will help deescalate the situation,
as well as when an issue is minor.
Financial planners should never resort to passive-aggressive or

manipulative communication. Not only will this hurt the trusting
relationships they have with clients, but it is also unethical.
Whenever financial planners tactically alter their communication tone, they

should return to a more balanced assertive approach as soon as possible.
130

Using a mix of modalities

One of a financial planner’s key roles is to educate clients to help them
make informed decisions and improve their lives. Education occurs mostly
when a financial planner presents recommendations to a client, but it can
also take place at any time throughout the financial planning process.
Given their role as educators, financial planners need to understand how
adults learn and use information.
Adult learners focus on obtaining relevant, practical knowledge and skills

that will immediately have an impact on their lives and help them solve an
issue they face. They are less interested in generic content that may be
useful in the future.65 As educators, financial planners need to ensure they
present information so clients can effectively take in, organize, process
and act on it. To accomplish this, financial planners should keep in mind
the seven learning modalities66 individuals use to learn, shown in Figure 20.
65
Schwartz, Michelle. “Engaging Adult Learners.”
www.ryerson.ca/content/dam/lt/resources/handouts/EngagingAdultLearners.pdf
(accessed June 1, 2019)
66
There are different modality models and many combine the seven modalities into a
smaller number of modalities. Common models include the V.A.K. model, which classifies
individuals as visual (including written words), aural and kinesthetic (including haptic and
olfactory) and the V.A.R.K. model, which classifies individuals as visual, aural,
reading/writing (which replaces print) and kinesthetic (including haptic and olfactory).
131

Figure 20: Learning Modalities
Modality Method by Which Information Is Received

Print Written words
Aural Verbal sounds
Visual Visual images
Haptic Sense of touch
Interactive Dialogue with oneself or others
Kinesthetic Movement of body
Olfactory Smell and taste
Source: Author’s visual depiction of the spirit of motivational interviewing based on

Garrity, Karen. “Motivational Interviewing,” July 2014.
https://dbhdid.ky.gov/dbh/documents/ksaods/2014/Garrity3.pdf
The modality financial planners choose when presenting information can

have a substantial impact on how effectively clients receive the information
and learn.67 Furthermore, presenting information using multiple modalities
can bolster and expedite an individual’s learning.68 For example, it is
difficult to learn how to swim if one only hears verbal instructions. Adding
a visual element in the form of a demonstration makes it easier. Going
further and adding an opportunity to be in the water and try it out (using
the kinesthetic modality) is an even better recipe for successful learning.
Financial planners commonly combine the aural, visual and interactive

modalities when presenting their recommendations. They verbally explain
what they are suggesting, illustrate certain points with images and engage
67
Chick, Nancy. “Learning Styles.” https://cft.vanderbilt.edu/guides-sub-pages/learning-
styles-preferences (accessed July 2, 2019)
Edutopia. “Multiple Intelligences: What Does the Research Say?” March 8, 2013.
68
www.edutopia.org/multiple-intelligences-research
132

in dialogue with clients to get their thoughts and feelings on the plan. They
often follow up with a written financial plan (the print modality), which
clients can review to learn further details about the recommendations.
Every individual uses each modality in varying amounts in different

circumstances. While people may have modality preferences, matching the
modality to a specific client’s learning style has no significant impact on his
or her learning.69 Instead, the content and circumstances should be the
driving forces behind a financial planner’s choice of modalities. As
mentioned previously, the content associated with teaching an individual
to swim dictates appropriate modalities. In a circumstance where a
financial planner is presenting recommendations to a client who is deaf or
has difficulty hearing, it makes sense to emphasize the print and visual
modalities over the aural modality.
Presenting information using a client’s learning style

preferences
While matching a modality to an individual’s learning style is not
necessary, people do have learning style preferences. They like to obtain,
take in, organize and process information in specific ways.70 Financial
planners can align how they present information to client preferences to
make learning easier and more effective for clients.
When adults receive information, they process it on four continuums. As

with learning modalities, individuals use these learning style preferences in
varying amounts at varying times.
69
University of Waterloo Centre for Teaching Excellence. “Understanding Your Learning
Style.” https://uwaterloo.ca/centre-for-teaching-excellence/teaching-resources/teaching-
tips/tips-students/self-knowledge/understanding-your-learning-style (accessed June 8,
2019)
70
Ibid.
133

According to the Soloman-Felder Index of Learning Styles, the four

continuums are:
 Visual to Verbal — how an individual prefers information to be presented

 Sensing to Intuitive — how an individual prefers to take in information
 Sequential to Global — how an individual prefers to organize information
 Active to Reflective — how an individual prefers to process information
Table 15 describes each type of learner’s preference, as well as the actions

financial planners can take to help learners obtain, take in, organize and
process information.
Table 15: Actions Financial Planners Can Take to Aid Individuals

with Different Learning Style Preferences
Type of Preference Actions Financial Planners Can Take to Help
Learner These Learners
Visual Prefer to see  Use presentation software (e.g., PowerPoint) to
Learners information present financial plan
presented  Use charts, graphs and pictures to show
using imagery financial projections and results
 Use charts or flowcharts to present action plans
 Provide videos and infographics about financial
topics
 Avoid talking at length about a topic; let images
do the talking
Verbal Prefer to hear  Provide clients with a written financial plan
Learners or read  Use written or verbal descriptions to describe
information financial projections and results
that contains  Use written or verbal instructions to present
words action plans
 Provide books, articles and opportunities to
attend seminars about financial topics
 Engage in dialogue about financial topics
Sensing Prefer  Use facts, figures and details to support
Learners information recommendations
that is practical  Link projections and results to real-world
and proven outcomes
134

Intuitive Prefer  Use theories to support recommendations

Learners information  Link projections and results to the big picture
that is abstract
and grounded
in theory
Sequential Prefer to  Present information in a structured way (e.g.,
Learners organize linear, chronological or based on cause and
information in effect)
a structured  Explain detailed steps for processes (e.g.,
way explain the financial planning process before
engaging in it)
Global Prefer to  Present big picture first, followed by details

Learners organize  Present many recommendations at a time to
information allow clients to connect them together
holistically
Active Prefer to act on  Provide an object (e.g., written financial plan,
Learners information pen, product literature, marketing giveaway)
clients can touch, hold and focus on during
meetings
 Schedule meetings in an active setting (e.g.,
while walking, at a golf course)
 Give clients an opportunity to express their
thoughts and feelings about recommendations
by talking through them
 Ask clients to try out recommendations, even on
a small scale, to observe the results
 Encourage questions and provide ample time to
answer them
Reflective Prefer to think  Provide clients with time to reflect on
Learners about recommendations before acting on them
information  Schedule meetings in a quiet place
 Pause throughout the presentation of
information to ask clients what they think and
how they feel about what they have heard so far
 Ask clients to summarize their understanding of
the information and recommendations presented
 Encourage clients to review information and ask
questions
Source: Adapted from University of Waterloo Centre for Teaching Excellence.
“Understanding Your Learning Style.” https://uwaterloo.ca/centre-for-teaching-
excellence/teaching-resources/teaching-tips/tips-students/self-knowledge/understanding-
your-learning-style (accessed June 8, 2019)
135

Motivation
Motivation is the driving force that directs an individual’s behaviour
towards satisfying needs or wants. Whether taking the initial step of
meeting with a financial planner, paying down debt, saving for retirement,
obtaining insurance, rebalancing a portfolio, drafting a will or choosing to
maintain the status quo, motivation prompts an individual to take action —
which can include taking no action at all.
Change
Financial planners presenting recommendations face a challenge in that
they are generally asking clients to make a change. The change could be
small, easy and easily accomplished, or it could be more monumental,
difficult and felt more personally because it requires clients to alter their
behaviour. Regardless of the type of change, how financial planners handle
the situation can have a substantial impact on clients’ current and future
motivation, as well as the success of the recommendation.
Recall that people tend to prefer the status quo over change. Whether
change prompts loss aversion, regret aversion bias or any other thought
process, it scares many people because it requires them to step in to an
unknown, unfamiliar and potentially uncomfortable future. When a
financial planner makes a recommendation, a client’s mind may begin to
race with thoughts and questions such as, “You want me to change? But I
like how things are now. What if I make the wrong decision? What am I
going to lose by making the change?” The challenge for the financial
planner then becomes how to motivate the client to change.
136

The first step is determining the individual’s readiness to change. For any
change to occur, three conditions must be present:
1. The individual must perceive a need to change

2. The individual must possess the motivation to change
3. The individual must perceive that they have the ability to change
The Transtheoretical Model of Change shown in Table 18 describes the

process of change in more detail. After determining whether the right
conditions are in place for change to occur, financial planners can identify
the stage a client is in and take appropriate action to support him or her.
Table 18: Transtheoretical Model of Change (TTM)

Stage Description Financial Planner
Action
1. Pre-contemplation  Denial or ignorance of Refrain from attempting
need to change to persuade client
 Not thinking about
change
2. Contemplation  Ambivalence towards Refrain from attempting
change to persuade client
 Thinking about change
3. Preparation/Planning  Identifying goals Help client plan for
related to change change (goals,
 Preparing plan of action motivations, tasks,
obstacles, success
measurements)
4. Action  Implementing the steps Help client take action
to achieve change
5. Maintenance  Maintaining new Help client stay motivated
behaviour or action and remove obstacles
that could cause relapse
6. Termination/Relapse  Regressing to previous Help client deal with
behaviour or action failure and gain insight
 Gaining insight into how he or she could
handle change differently
next time
137

In the pre-contemplation stage of change, people may explicitly or

implicitly express that they are not ready to change. Making
recommendations at this stage demonstrates a severe lack of listening and
can harm the trust clients have in their financial planner.
Once the financial planner can ascertain that the client is not opposed to
changing or is considering a change, he or she can make
recommendations. At this point, the client is in the right frame of mind to
receive them. A client who is in the preparation/planning stage of change
can use a financial planner’s help developing and documenting a plan to
change. Components of a plan to change include:
 Goals for change
 Motivations for change
 Tasks required to achieve change
 Potential obstacles that may prevent change or cause a relapse
 Measurements to determine whether change occurred and was

successful
Understanding goals and motivations for change is important to help a

client progress from one stage of change to the next. Recall that many
people seek the support of a financial planner when they are dealing with
life transitions such as changes in family, employment, relationship and
wealth status. They look to the financial planner for assistance in reducing
complexity and time commitments, help making better trade-offs and
decisions, and encouragement and support in persisting with a decision or
change.
Financial planners must not inhibit an individual’s motivation to change by

lecturing, admonishing, scolding, ordering, blaming, warning, threatening,
138

judging, criticizing, moralizing, preaching and/or shaming. In addition,

financial planners should avoid setting deadlines for change, over-praising,
victimizing or sympathizing, and trying to persuade with logic. Each of
these actions can get in the way of the client’s motivation and
unintentionally backfire, making the client more resistant to the proposed
change.
Setting deadlines for change can be detrimental because, while pressure to

meet a deadline may prompt change in the short term, it damages long-
term adherence. Praising too much sends the signal that the individual
doesn’t need to change and can reduce his or her current and future
motivation to make changes. Victimizing or sympathizing suggests the
individual’s decisions have no impact on the outcome of the situation,
reducing his or her motivation to engage in change. Finally, while trying to
persuade a client with logic may seem like a recipe for success, it rarely
works; change and motivation are inextricably linked with emotions rather
than reason.
Financial planners can also play an important role in helping clients take
steps to change during the action stage, keeping clients motivated to
maintain the change and removing obstacles that could cause a relapse.
Finally, in the termination/relapse stage, financial planners can either
celebrate success or help clients deal with the setback after a relapse.
They can help clients identify the positive aspects of the experience and
insights they can use in their next attempt at change.
Using their knowledge, skills and abilities related to communication,

relationships and the change process, financial planners can facilitate
change by helping clients progress through the change process.
139

Motivating change
Factors that may influence someone’s motivation to change include:
 An individual’s emotions, feelings, knowledge and understanding of the

current situation
 The change being recommended (or experienced)
 The expected outcome
 The level of risk or uncertainty in making the change
 The perceived benefits, costs and value of making the change
In many cases, it’s possible to quantify the benefits, costs and value using
variables such as dollars or time. However, this can be more difficult when
commitment requirements or emotional impacts are part of the equation.
People tend to be motivated to make changes that are quickly and easily
decided by the human brain’s System 1. Financial planners will generally
have more success getting clients to adhere to recommendations with the
characteristics described in the left column (rather than the right column)
of Table 16.
Table 16: When Adherence to Change Is Most and Least Likely

Changes to which adherence is Changes to which adherence is
more likely less likely
 Require a single behaviour change  Require broader lifestyle changes
 Require a short-term commitment  Require a longer-term commitment
 Relieve immediate pain  Focus on prevention
 Are simple and easy to implement  Are painful and complicated to
 Are accompanied by a high degree of implement
supervision and support  Are heavily reliant on will power
140

To further help motivate an individual to change, financial planners should

establish a structure for change, encourage a future orientation and
establish pre-commitment strategies.
Establishing a structure for change
Financial planners can establish a structure for change by creating a

financial plan for the client, offering step-by-step guidance on how to enact
the change and providing ongoing support throughout the change process.
Encouraging a future orientation
Encouraging a future orientation requires financial planners to help clients

become more patient. Recall that System 1 is motivated by emotion,
focused on the present (since it ignores absent evidence, including
information about the future) and fears loss. As a result, people tend to
prefer current consumption over future consumption (e.g., buying a new
car or going on vacation now versus saving for retirement), since they
want instant gratification, are unsure of what the future holds and don’t
want to miss the opportunity in front of them. This also explains why it is
difficult to lose weight, stop smoking and reduce spending.
Adopting a future orientation depends on altering preferences so clients

forego current consumption in favour of future consumption. This requires
System 1, which is emotionally driven, to decide it would rather give up
what it has today for what it could potentially have in the future. System 1
will make this decision if it perceives a future need it wants satisfied as
stronger than a current need.
141

The importance of storytelling in motivating an individual

“Neither revolution, nor reformation can ultimately change a[n] [individual]; rather you
must tell a more powerful tale, one so persuasive that it sweeps away the old myths
and becomes the preferred story, one so inclusive that it gathers all the bits of our
past and our present into a coherent whole, one that even shines some light into the
future so that we can take the next step… If you want to change a[n] [individual], then
you have to tell an alternative story.”
— Ivan Illich
One of the best ways to appeal to System 1 is through storytelling: “[The

human] brain has been evolutionarily hardwired to think, to understand, to
make sense, and to remember in specific story terms and elements.” 71 The
human brain possesses a Neural Story Net that turns all of the sensory
information it receives (from an individual’s five senses) into a story that
makes “sense” to the person based on his or her memories and previous
experiences.72 If the Neural Story Net cannot make sense of the random
sensory information it receives, it disengages with the information and
repudiates it.
Financial planners must ensure their message is both understandable by a

client’s Neural Story Net and becomes the preferred story for the client.
Then it can motivate the client (via System 1) to alter intertemporal
consumption preferences.
Haven, Kendall. “Applying the Science of Story to the Art of Communication.”

71
www.kendallhaven.com (accessed June 24, 2019)

72
Stanford University Graduate School of Business. “Science of Storytelling.” June 26,
2017. Video, 5:16.
www.youtube.com/watch?v=dIA2vxqvn04&list=PLxq_lXOUlvQA3QmMA51Dtb1zR-qd-
YVx9&index=10
142

The Neural Story Net is most likely to understand messages that are
relevant and engaging and that have the ability to transport and
influence.73
Making a message relevant is the first step in ensuring that a client will
listen to and accept it. If the story the financial planner delivers has little
or no relevance to the client, the client will reject it, disengage and ignore
or look to refute the message. On the other hand, if the story is relevant to
the client, the client will accept it, engage and seek information to support
the message and refute challenges.
Engagement requires financial planners to use their voice (language, body

language and tone) effectively to connect with the client by smiling,
making eye contact, maintaining an open body stance, using symmetrical
gestures at navel height, pausing effectively and emoting an appropriate
tone.74 Smiling helps disarm clients and make them feel at ease so they
are more receptive to hearing the story and associated messages. Making
eye contact helps increase connection between financial planners and their
clients, making clients more likely to accept the content of a message.
Maintaining an open body stance sends the signal that the financial
planner is open to communicating. Using symmetrical gestures at navel
height ensures the client can focus on the story without being distracted
by the financial planner’s gestures. Because people have trouble listening
and thinking at the same time, it is important to pause throughout a story
to give clients time to think, process and use the information they are
receiving. These pauses may be as short as one second or longer if the
financial planner senses that a client would benefit from more time.
73
Ibid.
74
Ibid.
143

Regardless of duration, a pause signals that the point the financial planner
just made was important. Finally, financial planners need to ensure the
story’s tone is appropriate. Many times, conflict arises because the tone is
wrong. Financial planners must ensure that their tone of voice is congruent
with the message they want to deliver. Combined effectively, a financial
planner’s voice and story can motivate a client to take action.
Transporting clients requires financial planners to engage System 1

through visual imagery, props and location. The goal is to help clients
visualize and contextualize the plotline of the story.75 Using visceral
imagery,76 props or settings that have an impact on clients’ emotions can
help financial planners alter intertemporal consumption patterns and
motivate clients to save towards future goals. To help clients develop or
strengthen this future orientation, financial planners can ask them to
envision a future goal they wish to achieve. Having clients create a mental
image using their imaginations helps them transport themselves to the
future and connect emotionally with how they will feel when they achieve
their goal. This experience engages System 1 and helps spark motivation
to begin working towards achieving a long-term goal. To further boost
client motivation, financial planners may want to ask clients to identify an
image, draw a picture, create a collage or use any other physical method
to visualize a goal.77 Clients can use the physical representation continually
to maintain their connection to and motivation towards achieving the goal.
75
Ibid.
76
James, Russell. “This Is Your Brain on Finances: Advising Imperfect Humans.”
Presentation, May 6, 2011. www.slideshare.net/rnja8c/behavioral-finance-for-financial-planners
77
Horowitz, Edward, and Brad Klontz. Title unknown. Presentation, February 21, 2019.
CFP Board Academic Research Colloquium for Financial Planning and Related Disciplines,
Arlington, Virginia.
144

Determining what motivates an individual is not always easy. In some

instances, financial planners can identify an individual’s motivation
proactively through effective discovery or by observing a client’s reaction
to a proposed recommendation. However, it may remain hidden —
particularly for clients who haven’t yet figured out their motivation.
In any case, it can be helpful to determine whether an individual’s

dominant motivational focus is promotion or prevention:
Promotion focused individuals tend to focus on the potential

rewards that can occur under a scenario and what they can do
to ensure they achieve them. They hate missing opportunities,
especially those that result in a gain, and tend to use optimistic
language and like to take chances. Prevention focused
individuals tend to focus on potential losses and what they can
do to avoid them. They hate to make mistakes and tend to use
pessimistic language and are more risk averse.78
Being focused on promotion or prevention can depend on the situation, but

most people have a dominant focus. If the financial planner can determine
which influence is stronger in a given situation, he or she can potentially
motivate the client using appropriate language (see Table 17):
 For individuals focused on promotion, use optimistic language that

concentrates on the potential benefits of taking action or the potential
lost opportunity from failing to take action
 For individuals focused on prevention, use pessimistic language that
concentrates on taking action to avoid risk or the certainty of a loss from
failing to take action
78
Halvorson, Heidi Grant. “Are You Promotion or Prevention Focused?” Psychology Today,
March 7, 2013. www.psychologytoday.com/us/blog/the-science-success/201303/are-you-
promotion-or-prevention-focused
145

Table 17: Promotion and Prevention Focused Language

Influencing Promotion Influencing Prevention
Focused Individuals Focused Individuals
Potential “How would you feel if your “How would you feel if your loved
Language loved ones could maintain their ones couldn’t maintain their
standard of living if you died?” standard of living if you died?”
“By obtaining insurance, your “By foregoing insurance, your

loved ones will have the loved ones may not have the
resources they need to maintain resources required to maintain
their lifestyle in the event of their lifestyle upon your death.”
your death.”
Rationale When positively framed, people When negatively framed, people

will prefer the sure gain (obtain will prefer the probable loss (pay
insurance and loved ones will premiums for insurance and not
have resources required to use it) to the sure loss (loved
maintain lifestyle) to the ones will not have resources
probable gain (forego insurance required to maintain lifestyle).
and take risk that the client
does not die prematurely).
Establishing pre-commitment strategies
Pre-commitment strategies focus on influencing the client’s motivation and

behaviour by addressing the client’s System 1, which is emotional, focused
on immediate gratification, dislikes losses and prefers to exert the minimal
mental load required to make a decision. Pre-commitment strategies
include using peer pressure, social proof and altering the immediate
payoffs and losses felt by an individual when taking action.79
Applying peer pressure and providing social proof influences the emotional
decision-making of a client’s System 1. Institutions use this strategy to
alter the behaviour of their employees, particularly when encouraging
79
146

individuals to save more money towards their retirement. Financial

planners can also apply peer pressure and social proof with clients by
sharing the benefits other clients (their peers) experienced when they
undertook the same recommended action. The draw of being part of the
crowd (known as herding behaviour), coupled with loss aversion (in this
case, the fear of missing out), may help motivate an individual to conform
to the actions of others.
Altering the immediate payoff associated with a future choice can alter
clients’ desire and motivation to take action. For example, increasing the
immediate benefit associated with a positive choice80 can motivate a client
to choose that course of action. Financial institutions may, for example,
offer clients an immediate monetary reward for investing towards their
future (e.g., invest $1,000 and receive $100). Conversely, reducing the
immediate benefit associated with a negative choice may stop a client from
choosing that course of action.
Altering the losses an individual feels can also significantly affect

motivation and decision-making.
Increasing feelings of loss can help motivate someone to refrain from

engaging in a negative choice.81 For example, paying with cash instead of
a credit card can reduce spending and consumption patterns.82 Paying
upfront for purchases means parting with money before receiving a good
or service, and the act of giving up cash is felt as a loss and may make an
80
Positive in this case is defined as an action that will benefit a client’s future financial
circumstances.
81
Negative in this case is defined as an action that will hurt a client’s future financial
circumstances.
82
147

individual question whether the value received is worth that loss. Other
examples include investing in illiquid investments such as real property,
contributing to tax-deferred registered savings plans such as RRSPs and
purchasing investments with pre-maturity penalties such as a locked-in
guaranteed income certificate.83 In all three cases, if a client wishes to
withdraw funds (a negative choice), losses felt through taxation or
penalties may deter them from proceeding. One final tactic is to have
clients save money in a bank or investment account earmarked for a
specific goal.84 Earmarking the account puts an invisible wall around it,
helping to protect it from client withdrawals.
On the flipside, reducing feelings of loss can help motivate someone to

engage in an action. Examples include pre-paying for services and paying
oneself first through automatic and pre-authorized savings and investment
plans.85 Another opportunity is to ask clients to commit to saving a portion
of any increase in income, cash flow or tax refund or saving coins receives
as change from purchases.86 In each case, clients’ pre-commitment to a
strategy serves as a contract with themselves. When the time comes for
the action to occur (for example, a bi-weekly transfer from a paycheque to
a retirement savings fund), they view cancelling the action as a potential
loss to their future self, which motivates them to maintain it.
Another effective approach financial planners can take is to decrease the

number of points at which clients have to make decisions to engage in a
positive action and increase the number of points at which clients have to
83
Ibid.
84
Ibid.
85
Ibid.
86
Ibid.
148

make decisions to engage in a negative action.87 Clients will tend to choose

the route that requires fewer decisions, because System 1 prefers to
expend as little mental effort as possible on making decisions.
Resistance
Recall that change requires an individual to move into an unknown,
unfamiliar and potentially uncomfortable future. It’s no surprise then that
many people’s first inclination is to resist change. This resistance may be
rooted in a perception that there is no need for change or their motivation
to maintain the status quo may outweigh their motivation to make a
change. Financial planners must determine whether an individual is
resistant or ambivalent to change. Resistance is “the refusal to accept or
comply with something; the attempt to prevent something by action or
argument.”88 Ambivalence is “the coexistence within an individual of
positive and negative feelings towards the same action, simultaneously
drawing them in opposite directions.”89
To determine whether an individual is resistant or ambivalent to change,

financial planners should observe a client’s language and actions.
Individuals who are resistant to change generally use harder language and
definitive phrases, while individuals who are ambivalent to change use
softer language and indefinite phrases. Furthermore, individuals who are
resistant to change tend to engage in avoidance or procrastination
techniques, while individuals who are ambivalent to change tend to engage
in hesitation-related actions. Table 19 provides examples of client
language, client actions and techniques financial planners can use to
87
Ibid.
88
Lexico.com. “Resistance.” www.lexico.com/en/definition/resistance
89
Dictionary.com. “Ambivalence.” www.dictionary.com/browse/ambivalence
149

manage the client and the relationship through the first two stages of
change, when resistance and ambivalence tend to occur.
Table 19: How Clients Show Resistance and Ambivalence to Change

Stage of Reaction Client Client Actions Financial
Change Language Planner
Actions
Pre- Resistance “I don’t want  Failure to seek  Refrain from
contemplation to reduce my advice attempting
spending.”  Refusing to persuade
engagement client
“I am not  Missing  Engage in
going to appointments reflection-
save more  Failing to return related
money for communications activities
my (i.e., phone calls, and/or
retirement.” emails, mailings) motivational
 Failing to complete interviewing
paperwork
 Short attention
span
 Closed language
 Short responses to
questions
 Superficial
responses to
questions
 Failure to disclose
information
 Omission of
information
150

Contemplation Ambivalence “I don’t  Agreement, but  Refrain from

know if I can failure to act attempting
reduce my  Ambivalence to persuade
spending.”  Arguing client
 Closed body  Engage in
“I want to language reflection-
retire when  Denying related
I’m 60 years  Defensiveness activities
old, but I  Interrupting and/or
don’t know if  Ignoring motivational
I can afford  Negating interviewing
to save  Reluctance
enough  Resignation
money by  Rationalizing
that time.”  Rebelling
Resistance is normal at the starting point of the change process. It signals

that the individual is not yet ready to change. When financial planners
determine that clients are resistant or ambivalent to change, they should
acknowledge this and stop attempting to persuade those clients. Not only
will the action be futile, but it could also cause irreparable harm to the
relationship.
People tend to demonstrate two types of resistance: issue resistance and

relational resistance. Issue resistance is resisting an idea or action and
may occur because of thoughts, beliefs and feelings that arise based on
previous experiences. Financial planners can identify issue resistance by
listening to clients’ statements, which may contain incomplete or incorrect
information. It is very important for financial planners to handle client
resistance appropriately:
Discounting, dismissing, or immediately correcting the client’s

statements in an attempt to handle their resistance can cause
the client to experience competency face loss or autonomy face
loss. Competency face loss occurs when an individual is
immediately corrected. Autonomy face loss occurs when an
151

individual is told what to do when they are not ready to do it.

Both losses of face lead to greater issue resistance, and worse,
relational resistance.90
Relational resistance refers to clients digging in their heels and becoming

resistant to anything a financial planner says simply because the financial
planner failed to address the client’s original reason for the resistance.
Motivational interviewing
When clients are experiencing change, financial planners have an

opportunity to help them through it “so they can feel more settled as a
result.”91 One way to do this is to employ motivational interviewing (MI).
Motivational interviewing is a method of interacting with clients. It uses a

collaborative conversation style focused on exploring the possibility of
change through a supported reflection on clients’ motivations and
resources. The goal is to help clients resolve their ambivalence and commit
to moving forward.92,93 The financial planner’s role in motivational
interviewing is to facilitate, act as a guide and support clients so they can
“articulate their reasons for changing and, in doing so, strengthen their
intention to change.”94
90
Berger, Bruce. “Motivational Interviewing, Resistance and Face Loss.” LinkedIn, April
24, 2016. www.linkedin.com/pulse/motivational-interviewing-resistance-face-loss-bruce-
berger
91
Somers, Moira. Advice That Sticks. Great Britain: Practical Inspirational Publishing,
2018.
92
Garrity, Karen. “Motivational Interviewing.” July 2014.
93
Mead Johnson Nutrition. “in2action! Motivational Interviewing Toolkit™.”
www.meadjohnson.com/pediatrics/us-en/sites/hcp-
usa/files/10%20in2A%20Action%20Booklet_0.pdf
94
Ibid.
152

Motivational interviewing has five aspects:
 Spirit of motivational interviewing

 Guiding principles of motivational interviewing
 Approach to motivational interviewing
 Core skills of motivational interviewing
 Change talk
Figure 21: Spirit of Motivational Interviewing
Source: Author’s visual depiction of the guiding principles of motivational interviewing

based on Mead Johnson Nutrition. “in2action! Motivational Interviewing Toolkit™.”
The spirit of motivational interviewing has as its foundation the idea that
the financial planner and the client are partners who, through
collaboration, can determine the pathways the client can take to achieve
change:
While the [financial planner] is an expert in [financial matters],

the [client] is the expert in knowing what is important to them
and what they want to do… Instead of imparting wisdom and
insight to the [client], the [financial planner] elicits and draws
out these things from the [client]. The overall goal is to build
intrinsic motivation so that change arises from within rather
than being imposed from without.95
95
Ibid.
153

Financial planners must accept clients for who they were, who they are
and who they would like to become. This requires financial planners to
suspend judgement and exercise compassion towards clients — both
required ingredients for establishing and cultivating trust. With trust
established, financial planners can engage clients in exploring their own
motivations, resources, plans for and commitment to change.
Figure 22: Guiding Principles of Motivational Interviewing
Source: Reproduced from Bethea-Walsh, Angela.

“Continuing Down the Path: Advanced Training in Motivational Interviewing.”
https://dbhdd.georgia.gov/sites/dbhdd.georgia.gov/files/related_files/site_page/Continuin
g%20Down%20The%20Path%20Advanced%20Training%20in%20Motivational%20Intervi
ewing.pdf (accessed June 24, 2019)
The first guiding principle of motivational interviewing is that financial

planners should resist and override their natural urge to help clients by
immediately correcting them or telling them what they should change.
When people are on the receiving end of the paternalistic behaviour known
as the “righting reflex,” they tend to take the opposite side of the
argument. In these cases, that translates into resisting change and
maintaining the status quo.96 Financial planners are experts who want to
help clients avoid painful or problematic outcomes, so there is often a
strong reflex to right client behaviour. Examples include trying to
96
The Change Companies. “Righting Reflex.” January 5, 2011.
https://vimeo.com/18469694
154

persuade, convince, rationalize, inform or in any other way alter client

behaviour. To help stop the righting reflex, financial planners should
maximize the questions they ask and minimize the statements they make.
This helps ensure clients do most of the talking and financial planners
reduce their risk of trying to fix a problem before clients have identified it
and approved a solution for it. If financial planners realize they have used
the righting reflex, they should apologize and direct the conversation back
to clients’ exploration of their own motivations and resources for change.
The second guiding principle of motivational interviewing is that financial

planners must understand the client’s motivation. Motivation is internal,
and nothing financial planners can do will motivate clients to change if they
do not possess that internal motivation. When uncovering client
motivations, financial planners should avoid explicitly or inadvertently
judging motivations — for example, by asking questions such as, “Why is
that important to you?” Learning to articulate non-judgemental curiosity
helps reduce clients’ defensiveness and contributes to healthy and open
relationships with clients.
The third guiding principle of motivational interviewing, listening with a

client-centered approach and empathy, helps ensure that trust builds
between the two parties. Only when trust is established will clients feel
comfortable sharing their thoughts, feelings and beliefs with the financial
planner. Listening empathetically also allows financial planners to hear
what is and what isn’t being said — both of which are important to know to
deal effectively with resistance and ambivalence.
The final guiding principle of motivational interviewing is empowering the

client to change. Financial planners can accomplish this by supporting self-
efficacy, which is “an individual’s confidence in their ability to accomplish a
155

particular goal.”97 Self-efficacy is the most important predictor of

sustainable behaviour change, because when someone “believes they can
be successful at something, then they will be more motivated to try it and
work hard to accomplish it.”98 Financial planners can promote self-efficacy
by providing “hope, vicarious experiences, and opportunities to accomplish
a goal.”99 Through their language, financial planners can give clients hope
and encouragement to believe they can achieve success. Using success
stories (social comparisons) about others facing similar issues, financial
planners can share vicarious experiences to give clients confidence they
can change their situation successfully. Finally, financial planners can guide
clients towards making decisions that are likely to result in
accomplishments (small wins) to help build their confidence and a track
record of successes.100
97
Letkiewicz, Jodi, Chris Robinson, and Dale Domian. “Behavioural and Wealth
Considerations for Seeking Professional Financial Planning Help.” Financial Services
Review, 25 (2016): pp. 105–126. www.fpcanadaresearchfoundation.ca/files/financial-
services-reveiw-publication.pdf
98
Ibid.
99
Ibid.
100
Ibid.
156

Figure 23: Approach to Motivational Interviewing
Source: Author’s visual depiction of the core skills of motivational interviewing based on
The approach to motivational interviewing involves engaging, focusing,

evoking, planning and sustaining. It focuses on getting to the behaviour,
supporting the behaviour change and sustaining the behaviour change.
Guiding a client through motivational interviewing requires financial

planners to first establish a mutually trusting and respectful relationship
that prioritizes helping the client.101 Financial planners must also ensure
that there is a focus to the conversation. Setting an agenda helps direct
the conversation,102 and many financial planners ask clients to set the
agenda with questions such as, “What motivated you to see me today?” or
“What concerns do you have with the recommendations I have
presented?” As part of the conversation, financial planners can evoke
clients’ motivations for change through open-ended questions, reflections
101
Bethea-Walsh, Angela. “Continuing Down the Path: Advanced Training in Motivational
Interviewing.”
102
Ibid.
157

and summaries.103 They can also facilitate clients’ development of their

own plan for change, including making a commitment to change by
creating an action plan.104 Finally, financial planners can help clients
sustain change by asking them to identify triggers and obstacles that may
cause them to revert back to their previous behaviour and discussing ways
to mitigate those risks. Importantly, they can provide the supports clients
need — for example, help removing triggers or obstacles and ongoing
reviews and follow-up.
Figure 24: Core Skills of Motivational Interviewing
Source: Adapted from Bethea-Walsh, Angela. “Continuing Down the Path: Advanced
Training in Motivational Interviewing.”
Motivational interviewing requires four core skills: asking open-ended

questions, affirming, reflective listening and summarizing. These skills
move the conversation forward towards “change talk,” at which point
clients believe they can make a change and plan to and commit to take the
steps to change.
103
Ibid.
104
Ibid.
158

Open-ended questions get clients talking and sustain dialogue between

financial planners and clients. Through them, clients can identify what’s
important to them and uncover their own motivations. Open-ended
questions also help financial planners move the conversation in the
direction of change.
That said, motivational interviewing uses a mixture of open-ended

questions and statements. Questions may include: “What would you like to
discuss?” or “How does that make you feel?” Statements may include: “It
sounds like you feel anxious about that change.”
Affirming reflects clients’ positive traits back to them to instill self-

confidence and self-efficacy, so clients believe they can achieve change.
Affirmations positively recognize clients’ efforts, achievements and
behaviours.105 Examples include: “This is hard work you’re doing” or “It
took a lot of courage for you to try to reduce your spending.”
Reflective listening involves restating clients’ words back to them,

sometimes including a conjecture about what clients meant or felt when
they made their last statement. Allowing clients to hear their own words
and attitudes reflected back to them has three intended outcomes:
 It lets clients work through what they mean and what they feel when
they confirm or deny the financial planner’s reflection; this helps avoid
the resistance that can occur if the financial planner argues for change
while the client defends the status quo
 It continues the forward momentum of the conversation, since

reflections are statements that elicit further responses from clients
105
159

 It helps clients identify their personal motivations, the gaps that exist
between their current and preferred states, and any discrepancies
between their current behaviour and the behaviour required for them
to meet their goals; these realizations can help clients become more
open to change as the financial planner “helps evoke the client’s own
reasons for and against change while resisting coercion”106
The reflective listening techniques financial planners use in motivational

interviewing help clients uncover their own motivations and resolve their
own ambivalence or resistance. Table 21 lists some of these techniques.
Using a range of different techniques in a conversation keeps the flow of
dialogue moving and helps financial planners avoid sounding robotic or
staged. When engaging in motivational interviewing, financial planners
may have to provide multiple reflections to help clients move forward.
Hearing one’s own voice tends to carry greater weight towards changing
than hearing another person’s voice.107 Nevertheless, clients may need to
hear their own voice multiple times before they recognize the issue and
move forward.
Summarizing helps ensure clients have had an opportunity to fully explore

a particular topic before moving on to the next topic or step in the process
of change. Summaries often contain statements that focus on attitudes
and are followed by a clarifying question (e.g., “What I hear you saying is
that you feel helpless to control your spending. Are there other feelings
you experience when your spending is high?”). This approach signals to
clients that the financial planner hears and understands them and provides
106
107
The Change Companies. “Righting Reflex.” January 5, 2011. https://vimeo.com/18469694
160

an opportunity for them to add other information they feel is necessary.108

Summaries can also shift the dialogue towards change109 (e.g., “It sounds
like you’ve decided that controlling your spending is necessary for you to
be able to retire when you’re 60.”).
Financial planners should be careful not to use summaries prematurely to

move the dialogue towards change. If the client is not ready to advance,
moving too quickly can derail the conversation and significantly reduce
progress made to that point. Financial planners should listen for change
talk, a “mention and discussion of the client’s desire, ability, reason and
need to change, leading to a commitment to change, [activation], and
taking steps to change.”110
108
109
Ibid.
110
161

Table 20: Reflective Listening Techniques

Action Description Example of Example of
Client Financial Planner
Statement Response
Simple Repeat what the client “I want to stop “You want to stop
Reflection: said verbatim, adding no spending so spending so much
Repeat additional meaning or much money.” money.”
emphasis.
Allows clients to hear

and confirm that their
statement accurately
depicts their feelings.
Simple Paraphrase what the “I want to stop “Spending less
Reflection: client said, adding some spending so money is important
Rephrase meaning or emphasis. much money.” to you.”
Allows clients to hear

and begin to uncover
their motivation.
Amplified Reflect what the client “I am only here “That’s the only
Reflection said, exaggerating an because my reason why you’re
element of it. wife wants us here.”
to spend less
Elicits the other side of money.”
clients’ ambivalence.
Double- Reflect both sides of the “I don’t like “On the one hand,
Sided client’s ambivalence. having little to buying clothes
Reflection no money in makes you feel
Allows clients to hear my bank good, and on the
and confirm both sides account at the other hand
of their ambivalence. end of the having little to no
month, but I money at the end of
like how buying each month causes
clothes makes you stress.”
me feel.”
162

Reframe Look at the situation “I’ve tried to “You are persistent,

from another limit my even though you
perspective. spending so have not been able
many times, to stop spending
Provides perspective to but I just can’t yet. This change
clients and can redirect seem to stop must be really
negative statements and myself.” important to you.”
pessimistic attitudes to
positive statements and
optimistic attitudes.
Agreement Reframes the situation “I can’t “You can’t live your
with a Twist and prefaces it with a imagine not life without
statement that sides being able to shopping. It’s such
with the client’s feeling. buy the things a part of who you
I want. It’s are that you will
Elicits the other side of how I feel keep shopping no
clients’ ambivalence or better and matter the cost.”
the limits of continuing manage my
with the status quo. stress.”
Side with the State the negative side “My spending “There’s no reason
Individual’s of the client’s isn’t that bad.” for you to be
Argument ambivalence. concerned about
Against your spending.”
Change Elicits the positive side
of clients’ ambivalence.
Sit with Acknowledge that the “I’m not ready “I understand that
Ambivalence client is not ready to to stop you’re not ready to
change and then inquire spending yet spend less money
about his or her feelings since I’m right now. How do
about maintaining the stressed out you feel about
status quo. and eating out continuing to spend
and buying what you are
Elicits the positive side clothes reduces currently spending
of clients’ ambivalence. my stress each month?”
levels.”
Evoke Ask the client to identify “I can’t stop “What is preventing
Ambivalence the obstacles standing in spending. It’s you from stopping
the way of achieving his just too hard. spending?”
or her goal.
Lead discussion towards

methods for removing
obstacles.
163

Roll with Restate obstacle as “I can’t stop “It’s hard to reduce

Resistance opportunity and spending your spending given
encourage the client to because my the convenience
identify other debit card that a debit card
alternatives or gives me provides. Are there
viewpoints. constant other ways you can
access to my think of to reduce
Demonstrates to clients money.” the convenient
that they can view access you have to
roadblocks differently. your money?”
Helps remove fear and
defensiveness about
change.
Avoid Restate the client’s “Yes, I can try “I think what you’re
Argument argument (“Yes, but…”) to reduce my trying to tell me is
to reason why they’re spending, but I that you’re not
not ready to change don’t think I’ll ready to do this
(“No, because…”) be able to because you fear
because I’ve how hard it might
failed in the be to try again.”
past.”
Shift Focus Shift focus of “You probably “It’s hard to
conversation away from don’t know imagine how I could
financial planner. how I feel possibly
given that understand.”
Ensures that the you’re good
financial planner does with money.”
not become the problem
clients focus on and
diffuses discord in the
relationship between
clients and the financial
planner.
Emphasize Emphasize the client’s “I really want “Saving is really
Personal ability to control the to save more important to you.
Control situation. for my You’ll start when
retirement, but you’re ready.”
Reminds clients they can I’m not ready.”
make their own choices
and they are responsible
for deciding to proceed
with change.
164

Change talk indicates that clients have moved towards being ready to
change. To help promote change talk, financial planners can ask leading or
guiding questions that test whether clients are ready to move forward.
Table 21 provides examples of guiding questions, as well as change talk
financial planners may hear from clients.
Table 21: Change Talk

Type of Change Guiding Question Change Talk Cues
Talk
D Desire “What would make you want “I want to…”
to…?” “I wish…”
A Ability “How might you go about…?” “I can…”
“I might…”
R Reasons “How might you benefit “I will be able to…”
from…?” “I will benefit by…”
N Need “How important is it for you “I have to…”
to…” “It is important that
I…”
C Commitment “What do you see as your “I will…”
first step in…?” “I am going to…”
“I intend to…”
“I plan to…”
A Activation “How will you know when “I’m ready to…”
you’re ready to…?”
T Taking Steps “What are ways you are “I started…”
taking steps to…?”
Source: Author’s visual depiction of change talk reproduced and adapted from Bethea-
Walsh, Angela. “Continuing Down the Path: Advanced Training in Motivational Interviewing.”
ewing.pdf (accessed June 24, 2019) and Mead Johnson Nutrition. “in2action! Motivational
Interviewing Toolkit™.” www.meadjohnson.com/pediatrics/us-en/sites/hcp-
Eliciting change talk is very important to the process of change. Research

shows that change talk predicts behaviour change.111 Table 22 describes
methods for eliciting change talk.
111
165

Table 22: Methods for Eliciting Change Talk

Method Potential Questions
Ask Evocative  How important is it for you to…?
Questions
Ask for Elaboration  How would you… if you decided to…?
 In what ways could you…?
Ask for Examples  “What were ways you used to…?”
 “When was the last time you…?”
 “Give me an example of how you feel different when
you are/are not…?”
Use Extremes  “What do you think would be the worst thing that
would happen if you didn’t…?”
 “What do you think would be the best thing that would
happen if you…?”
Look Back  “What was different when you were…?”
 “How were things different before…?
Look Forward  “If you were successful in…, what would be different?”
 “How would you like to see your life in five years?”
Explore Goals  “How does not…fit with your goal to…?
Use a Position Ruler  “On a scale of 1 to 10, where 1 is not at all important
and 10 is very important, how important is it for you
to…?
Elicit Problem  “What problems have arisen from not…?
Recognition  “In what ways does not… concern you?”
 “How would you like things to be different?”
Elicit Concern  “What would need to happen for you to…?
 “I sense you are feeling unsure. What would make you
more positive about…?”
Elicit Optimism  “What do you think would work for you if you decided
to…?”
 “How would things be different for you if you…?
Source: Reproduced from Mead Johnson Nutrition. “in2action! Motivational Interviewing
Toolkit™.” www.meadjohnson.com/pediatrics/us-en/sites/hcp-
As clients express change talk, financial planners can respond by

continuing to reflect and ask open-ended questions that guide clients
towards change. At some point during the motivational interviewing
conversation, clients will need information or explanations. They are in
control of planning for and implementing their change, but they require
support from a trusted advisor with specialized knowledge and skills they
166

do not have. Financial planners should only start providing information and
explanations when clients are ready to hear them and after asking for and
receiving permission112 If financial planners start providing information and
explanations too soon, clients may return to a mode of resistance.
When informing clients, financial planners can use the elicit, permission,
provide, elicit (EPPE) approach. With this method, financial planners start
by asking clients what they already know about a topic. Then they ask
permission to share more information. If clients grant permission, financial
planners provide it. Then they elicit from clients their thoughts and feelings
about what they heard. Financial planners can continue the conversation
by asking more open-ended questions, affirming the individual, and
providing reflections and summaries to help clients move closer to change.
If successful, the conversation eventually moves towards planning for

change. As clients develop a plan for change, financial planners can help
them SOAR, as Table 23 shows.
112
167

Table 23: Planning for Change

S Set Goals Help clients determine which goals are important to them
and which goals they are motivated to achieve.
O Option Sorting Use the elicit, permission, provide, elicit approach to
ensure clients have all necessary information to sort
options and make informed decisions.
A Arrive at a Plan Help clients envision the enactment of the plan by
thinking through steps required, supports required,
obstacles and risks that may pose challenges to adhering
to the plan, how they will handle these roadblocks and
how they will measure success.
R Reaffirm Ask clients to rate the importance of achieving their goal
Commitment and their confidence level in following the plan.
Source: Reproduced from Mead Johnson Nutrition. “in2action! Motivational Interviewing
Toolkit™.” www.meadjohnson.com/pediatrics/us-en/sites/hcp-
Ensuring long-term adherence to the behaviour focused on achieving the

goal is an important facet of motivational interviewing. Recall that ongoing
support from financial planners can increase clients’ ability to sustain a
change. Financial planners should continue to engage in motivational
interviewing with their clients as part of the follow-up and review process.
Affirming client efforts, behaviour and achievements is important to ensure
the motivational interviewing process continues and cycles back to
engaging the client.
When clients succeed in meeting a goal, financial planners may want to

ask if they would like to focus on another goal or issue, starting the
process again. When clients falter in their efforts to achieve a goal, it is
imperative for financial planners not to disengage from clients or ignore
the failure. Instead, financial planners should ask if clients would like to
explore the issues that arose to prevent them from achieving the goal.
That way, the setback can become a learning experience and launch pad
from which clients can redouble their efforts to meet that goal and set
themselves up for success meeting other goals in the future.
168

HUMAN BEHAVIOUR
Financial Services professionals are expected to possess knowledge related to how the
brain works and makes decisions, including the values, heuristics, emotions and disorders
related to money that an individual brings to the decision-making process.
Professionals should understand the stages of individual change and what may motivate or
inhibit an individual in making change. They should also understand how their actions and
communications may garner or hinder trust.
Human Behaviour is one of twelve modules in the Advocis Core Curriculum Program for
CFP® and QAFP™ Certification.

FP922 - Human Behaviour

Uploaded by

Copyright:

Available Formats

You might also like

FP922 - Human Behaviour

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

FP922 - Human Behaviour

Uploaded by

Copyright:

Available Formats

Advocis Core

Advocis Core Curriculum Program for

About the Advocis Core Curriculum Program

Working with industry experts, Advocis has developed an FP Canada

Copyright © 2020 The Financial Advisors Association of Canada

Certification is offered through 12 distinct modules, aligned with FP

About the Certified Financial Planner (CFP) Certification

Qualifying to take FP Canada’s CFP Examination is a demanding process,

This Advocis Core Curriculum Program is an accredited qualifying program

Copyright © 2020 The Financial Advisors Association of Canada

Advocis Core Curriculum Program, 2020 Edition

Copyright © 2020 The Financial Advisors Association of Canada

First Edition, 2020

Ryan Laverty, CFP®, FCSI, CIM, CIWM, PFP®, MBA, B.COMM

Copyright © 2020 The Financial Advisors Association of Canada

Copyright © 2020 The Financial Advisors Association of Canada

Evolution of the technical knowledge topic of Human Behaviour ...... 2

Future of the technical knowledge topic of Human Behaviour .......... 4

Sub-topics of the technical knowledge topic of Human Behaviour .... 5

Caution related to the technical knowledge topic of Human

DECISION-MAKING AND BEHAVIOUR ............................................... 7

The brain .......................................................................................... 8

Heuristics and biases ...................................................................... 14

Values, attitudes, emotions and disorders related to money .......... 49

Copyright © 2020 The Financial Advisors Association of Canada

Motivation .................................................................................... 136

Copyright © 2020 The Financial Advisors Association of Canada

List of Figures and Tables

Copyright © 2020 The Financial Advisors Association of Canada

Table 12: Body Language Characteristics That Accompany Different

Copyright © 2020 The Financial Advisors Association of Canada

The first section of the module explores decision-making and behaviour. It

 Explain, in a non-scientific manner, how the human brain functions in

 Use effective behaviour and communication strategies to foster

 Motivate an individual to engage in appropriate actions that facilitate the

Copyright © 2020 The Financial Advisors Association of Canada

Evolution of the technical knowledge topic of

Copyright © 2020 The Financial Advisors Association of Canada

by Noble Prize-winning psychologist Daniel Kahneman and his partner

Figure 1: Homo Economicus versus Homo Psychologicus

 Dispassionately pursues  Ill-defined desires,

 Makes unbiased  Judgements and choice

 Effortlessly implements  Subject to self-control

Source: Lewis, David. “Behavioural Economics.” Presentation, September 17, 2018.

Much of the initial work in behavioural “Behavioural economics studies the

Copyright © 2020 The Financial Advisors Association of Canada

finance knowledge for financial planners by making it the 11th technical

In 2017, members of the financial planning profession recognized the

Future of the technical knowledge topic of Human

Copyright © 2020 The Financial Advisors Association of Canada

Figure 2: Much Remains to Be Discovered about Human Behaviour

Just as we can see only a minimal portion of the volume and

Source: Clevenger, Ralph A. The Essence of Imagination. Composite Image, 1999.

Sub-topics of the technical knowledge topic of

 Decision-Making and Behaviour

Decision-Making and Behaviour focuses on how individuals make decisions

Copyright © 2020 The Financial Advisors Association of Canada

Caution related to the technical knowledge topic