The Intersection of Psychology and Financial Planning

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What do psychology and financial planning have in common?

That sounds like a joke, but it isn’t; there is no punchline. Believe it or not, the two fields overlap in ways you would not expect. In fact, psychology is playing an increasingly valuable role in the financial planning profession. It is worth looking at how a study commonly associated with Freud and Jung can assist you in dealing with the clients whose wealth you manage.

It is said that financial advisors spend 20% of their time with clients discussing their finances and 80% being their therapist. And there’s a lot of truth to that, for good reason. Investors have genuine concerns about “scary money stuff.”

When you chose a career in wealth management, you probably never imagined one of your core job duties would be serving as a life coach. Money coach, yes; but life coach, too? It’s true, because that is what you are to your clients when major decisions are being made.

A conversation about charting a course to pay for their children’s college tuition can turn into them sharing frustrations with a rebellious son or daughter. Plotting their income trajectory has the potential for them to wind up grieving over an earlier job they lost. Even sharing visions of a beach house or retirement property can produce more insights into marital strife than you would care to hear.

But, as they say, it goes with the territory.