Principles of communication and counseling
The CFP Board’s requirement goes beyond a theoretical understanding to requiring proficiency. The role of communicating effectively with prospective and current clients permeates the financial planning process. Consider the CFP Board’s standards related to professional conduct and fiduciary responsibility, disciplinary rules and procedures, and practice standards. According to the CFP Board, practice standards are intended to:
1. Assure that the practice of financial planning by CFP® professionals is based on established norms of practice
2. Advance professionalism in financial planning
3. Enhance the value of the financial planning process
Practice standards apply to all CFP® professionals and those studying financial planning in a CFP Board Registered Program. The standards, however, also serve as a foundation for professionalism within the broader financial services profession. Practice standards were first developed in 1987, updated in 1994 by CTB/McGraw-Hill, an independent consulting firm, and again in 1999 by the Chauncey Group. These standards, tied directly to steps in the financial planning process, are shown in Table P.1.
TABLE P.1 The Financial Planning Process and Related Practice Standards
Source: CFP Board, 2016: www.cfp.net/for-cfp-professionals/professional-standards-enforcement/standards-of-professional-conduct.
What is important to remember, from the perspective of this book, is the role communication and counseling skills play at each step in the financial planning process. Imagine how challenging it might be for some financial planners if they needed to meet a prospective client who is unsure of his or her need for financial planning because of cultural or ethnic barriers. Without a systematic approach that can be used to build rapport through questions, feedback, and encouragement, this meeting could end up being a lost opportunity for both the client and the financial planner. Not only could the financial planner lose a potential client, the prospective client may shy away from needed behavioral change. The importance of applying appropriate communication and counseling techniques at each step of the financial planning process is just as important. As it turns out, not only are communication and counseling skills important attributes of professionalism, these skills often determine who has the greatest likelihood of becoming a client’s most trusted adviser.
Five communication tasks —or functions every financial planner needs to perform – have been linked in the academic literature directly with the CFP Board’s practice standards6:
1. Mutually defining the scope of an engagement before providing financial planning advice
2. Helping clients identify meaningful personal and financial goals
3. Applying a systematic communication and counseling process that helps clients clarify their financial and life goals
4. Taking time to explore and learn about each client’s cultural background, personality, attitudes, beliefs, and family history and values
5. Explaining how financial advice aligns with each client’s unique values, goals, and needs
Financial planners who embrace these five communication tasks with each client report greater client retention, higher client satisfaction, greater client cooperation, more openness in discussions, greater client disclosure, and more referrals.
While it is true that the CFP board requires all financial planning professionals who hold the CFP® marks, as well as those studying for CFP® certification, to exhibit communication and counseling proficiency, the purpose of studying communication and counseling is much more profound. Essentially, the manner in which a financial planner reaches out to others determines, to a large extent, that professional’s effectiveness in helping clients make life-changing decisions. We are not talking about helping salespeople sell one additional product or service as the end result, but rather, facilitating the growing professionalism of financial planning in the marketplace. Just as attorneys, accountants, and physicians must employ communication and counseling skills on a daily basis, the same is true for professional financial planners. An important outcome associated with reading this book, watching the accompanying videos, and practicing each chapter’s techniques should be a greater appreciation on the fundamental skill sets needed to be a competent financial planner in the twenty-first century.
COMMUNICATION: WHAT IS IT?
Before moving forward, it is worth pausing and clarifying exactly what this book is all about. The word communication is very broad and used in multiple ways in the financial planning profession. Communication can be broken down into four domains:
■ Communication methods
■ Communication tasks
■ Communication topics
■ Communication skills
Much of the financial planning literature relative to communication really focuses on methods of communication, such as using a phone, email, blogs, face-to-face meetings, newsletters, mailers, social media, and group functions. All of those elements are important to client engagement, but there is much more to becoming a truly proficient communicator. Communication tasks encompass a variety of procedures and practice standards (for example, explaining how advice matches a client’s goals and objectives). It is important to note that communication topics can vary from client to client, including conversations about a client’s values, for example, to discussions regarding specific products and procedures. While these three elements of communication are very important, this book is focused more intently on the purpose of communication and communication and counseling skills (e.g., verbal, nonverbal, and spatial skills). Table P.2 illustrates the difference between communication tasks and communication and counseling skills. As noted earlier, the focus of this book is squarely on the skills needed to be an effective financial planner.
TABLE P.2 Communication Tasks and Skills Compared
Source: Adapted from Sharpe et al. (2007).
Even though this book only tangentially touches on methods, tasks, and topics of communication, the research surrounding the usefulness of these communication elements is astounding and worth reviewing. When asked, nearly 50 percent of practicing financial planners have historically indicated that they spend between 9 and 14 hours per week communicating with clients.7 Financial planners who claim the greatest success in growing their practice, however, report communicating directly with clients at least 30 to 34 hours per week. The most popular (not necessarily the best) methods of communication include the telephone, email, face-to-face meetings, and newsletters. The reasons for communicating are diverse, including reviewing a client’s goals, evaluating portfolio performance, providing advice, discussing life events, staying in touch, providing market commentary, and educating clients. Some financial planners also use methods of communication to ask for referrals.
The number of hours successful financial planners spend communicating with clients sometimes surprises aspiring financial planners. It is a common belief that financial planners spend the majority of their time devoted to evaluating quantitative data.
