Working with the Emotional Investor: Financial Psychology for Wealth Managers

by Chris White, Richard Koonce, Bill Griffeth (Foreword by)

Overview

An invaluable resource for wealth managers advising individuals, couples, and families, this book explains why human emotions drive all investor behavior and makes a powerful case for why advisors need to be aware of such emotions in advising clients—especially in high-stakes situations.

Despite the fact that wealth advisors may employ algorithms, fancy financial models, economic theory, and predictive reasoning to forecast future investment returbans, according to seasoned wealth management advisor Chris White, people—in other words, clients—basically decide how much risk to take with their money based on emotional factors such as the love they received as children, early life experiences of loss and "imperfect love," psychic wounds, and family traumas. A must-read for anyone in the wealth management profession, including wealth advisors, financial consultants, certified financial analysts, and retirement advisors, this groundbreaking book offers a radically new and well-articulated framework for managing relationships with clients as well as the essential tools to advise, mentor, and guide clients in making financial management decisions.

Readers will understand how to recognize the emotional and psychological factors behind investor behavior and apply this insight to be a better wealth advisor. The author explains why early childhood experiences of love, joy, and loss and sometimes very subtle family dynamics play a key role in adult investor behavior; why being sensitive to an individual's unique psychological "systems" is key to being able to accurately assess his or her tolerance and acceptance of risk-taking as part of the wealth management process; what can cause a client's personality to change, especially in high-stress or high-stakes situations; and how to employ sophisticated client relationship management practices such as curiosity, appreciative inquiry, and powerful questioning to understand clients' needs at a deep psychological level.

Product Details

ISBN-13:	9781440845123
Publisher:	Bloomsbury Academic
Publication date:	08/08/2016
Pages:	240
Product dimensions:	6.20(w) x 9.40(h) x 1.00(d)

About the Author

Chris White, CFA, is an experienced wealth management advisor and strategist who has invested on behalf of hundreds of individuals, families, couples and institutions for more than 25 years.

Richard Koonce is an accomplished author, executive coach, and former broadcast jourbanalist based in Philadelphia, PA.

Table of Contents

Foreword Bill Griffeth ix

Preface xiii

Acknowledgments xix

Introduction xxi

Part I How Human Psychology and Client Emotions Drive Investor Behavior and Decision-Making 1

Chapter 1 Understanding a Person's Emotional Template 3

Chapter 2 The Psychology of Money and the Emotions of Investing 21

Chapter 3 Introducing a Conversational Model You Can Use with Clients 37

Part II Client Relationship Management 51

Chapter 4 Understanding Your Client's Engagement Style 53

Chapter 5 Heroes Rising: The Different Types of Clients That Emerge in High-Stakes Situations 67

Chapter 6 Advising Clients Who Are Fixers 89

Chapter 7 Advising Clients Who Are Survivors 109

Chapter 8 Advising Clients Who Are Protectors 125

Part III Nurturing Client Relationships for the Long Term 147

Chapter 9 Establishing Credibility and Building Trust with Clients of Any Type 149

Chapter 10 On Stewardship and Servant Leadership 171

Epilogue 181

Appendix A Thinking, Fast and Slow; The Differences in Two Philosophies of Trading 183

Appendix B Applying Principles of Behavioral Finance to Understanding the Ups and Downs of Stock Prices 187

Notes 191

Bibliography 199

Index 203

What People are Saying About This

Steve Rum

“Few things are as intimate and poorly understood as the emotions surrounding money. Drawing upon psychology, behavioral economics, and neuro-economics as well as his own experiences advising high net worth clients, Chris White lays out a path both to understanding the emotional factors at play when people confront major financial decisions and working with these influences to best serve the client or, in the case of development, the donor.”

Mary Hope Dean

“In the process of developing professional relationships with clients, Chris combines his knowledge of intelligent investing with a deep understanding of the human factors that can drive, enhance, and complicate what a client wishes to achieve. He is an attentive listener and creative thinker, skilled at attending to clients’ needs on many levels, and helping them to achieve their personal investment goals.”

Lee Hausner

“Our human capacity for emotions plays a crucial (though often not fully understood) role in all the significant decisions in our life. The manner in which money is used in our society and has been used in the lives of the clients we serve has imbued this neutral form of exchange with very strong emotional connections. Therefore in order for a wealth advisor to become a truly ‘trusted advisor,’ it is vitally important to understand the client’s unique emotional perspectives regarding financial choices. Working with the Emotional Investor provides a valuable resource for a wealth manager desiring to increase expertise in the intriguing field of behavioral finance.”

James Grubman

“Working with the Emotional Investor captures a wealth of information about the psychology of clients, markets, and the advising profession. Chris White draws on principles of behavioral finance, client psychology, personality theory, and emotional intelligence to emphasize a clear message: advisors need to truly understand their clients in order to serve them well. For the psychologically-minded advisor looking for a book that resonates, Working with the Emotional Investor is a gem.”

George W. Tall

“Working with the Emotional Investor provides useful tools to comprehend one’s true capacity for risk, and therefore pays the reader a great dividend!”

David Kantor

“Finally, a paradigm shift in investment counseling. An approach that takes investor dynamics into account along with market dynamics. Brilliant!”

Sara Hamilton

“Chris White gives us a treasure trove of well-researched advice on wealth owner behavior, advisor bias, and a process for building a strong relationship with our clients. This book allows you to explore in depth some of your intuition about the business and gives you keen insight into how to engage with different personalities in your day-to-day work. An excellent contribution to the field of private wealth for decades to come!”

William M. Crozier

“Noted investment advisor David Babson once said, ‘If your investments keep you awake at night, sell them!’ That’s sound enough advice, but in his book, Working with the Emotional Investor, wealth advisor Chris White takes the conversation far deeper. He explores the reasons why we behave as we do when it comes to investing and how an aware investor and his or her advisors can manage investments better when we understand the emotional basis of our decision-making.”

Eric Schultz

“I have watched Chris in action, expertly leading an endowment committee through the treacherous waters of portfolio management. But not until reading Working with the Emotional Investor did I fully appreciate his profound understanding of the dynamics at play. Chris demonstrates convincingly that in any investment discussion, the numbers are important but managing the underlying emotions associated with investment decisions is essential as well. A critical read for wealth advisors everywhere!”

James L. Joslin

“When managing other people’s money, constructing appropriate client portfolios is but one essential part of the advisory relationship. Building a strong psychological bond with the client is perhaps a more important factor in the advisor/client equation. In Working with the Emotional Investor Chris White illuminates the biases that investors often bring to the wealth management process and outlines powerful strategies that advisors can use to align investment goals with a client’s unique personality, priorities, temperament, and risk-tolerance.”

Arnold S. Wood

“Most successful investors have a contrarian streak. They buy when others are selling or, as Baron Rothschild put it, ‘when there’s blood in the streets.’ But, for the vast majority of investors—the frightened herd—waiting for the proverbial ‘marching band,’ embracing the status quo, or even selling out serves as an emotional refuge. In Working with the Emotional Investor, seasoned wealth counselor Chris White offers his fellow wealth advisors essential advice on how to deal effectively with either type of client and with everybody in-between! Indeed, he provides a critical roadmap to help advisors deal with investors who are influenced by a wide variety of conscious and unconscious emotions.”