Tip of the Week

Emotional Closeness of Conversation Partners and Emotional Control with Implications for Financial Services Professionals

Client meetings can be highly emotional events. Clients will often share some of their most positive and negative moments in life with a financial services professional. Emotions may sometimes be a considerable barrier to helping clients achieve their financial goals. Whether it is panicking and selling out at the bottom of a market downturn, actions influenced by deeply rooted emotional learning based on a financial trauma, or any other emotional barrier that interferes with making healthy financial decisions, emotions can endanger a client’s financial well-being. At other times, however, emotions can play an important role in helping clients achieve financial goals, such as motivating a client to save for a child’s education or facilitating the emotional activation that may be needed to engage in a therapeutic intervention aimed at ends such as emotional memory reconsolidation.

Consequently, financial professionals have an interest in cultivating an emotional environment that provides the best likelihood of fulfilling the objectives of a meeting. However, while many financial professionals adhere to practices, beliefs, and conventional wisdom with respect to how to best cultivate an emotional environment which facilitates good financial outcomes, little empirical evidence exists to guide professional decision making regarding the influence of an emotional environment on client behavior.

Results from an exploratory study were consistent with the hypothesis put forward by Adam Smith’s The Theory of Moral Sentiments in that the more  emotionally close we are to those in our presence the less we are able to compose our emotions.

Financial services professionals should be mindful of the ways in which their own relationship with clients and the presence of third-parties in a client meeting may influence the emotional environment of the client meeting.  Depending on the desired outcome of a meeting, more or less emotion may be preferred, so the emotional closeness of individuals included in a client meeting may be one factor that professionals can control to try and cultivate an emotional environment that promotes good financial outcomes for clients.