LO 2.2.1: Apply counseling theory principles and communication strategies to client engagements. Flashcards
Financial Counseling
is a process that helps clients change poor financial behavior through education and guidance; make adjustments so can achieve goals
- once clients gain knowledge and resources through financial counseling they can
- set realistic/achievable short- and long-term goals and
- make appropriate financial decisions
Economic and resource approach
clients are assumed to be rational, will change to the most favorable behavior if given appropriate counseling
- Financial planner is the agent of change
- Focus is obtaining and analyzing quantitative data (e.g. cash flow, assets, and debt)
Classical economics approach
clients choose among alternatives based on objectively defined cost-benefit and risk-return tradeoffs
- Increasing financial resources or reducing financial expenditures results in improved financial outcomes
- is logical.
Strategic management approach
client’s goals and values drive the client-planner relationship
- Conduct SWOT analysis (strengths/weaknesses/opportunities/threats) early in process
- Financial planner serves as consultant (rather than agent of change re: economic and resource approach)
Cognitive-behavioral approach
Client’s attitudes, beliefs, and values influence behavior
* Planners attempt to substitute negative beliefs that lead to poor financial decisions with positive attitudes and beliefs that lead to better financial results.
Psychoanalytic approach
Use of psychoanalytic theory such as Freudian or Gestalt theory
- Approach is not widely used; not many financial planners are trained psychologists or psychiatrists
- few studies have been conducted to address whether this is practical in the first place
Which of the approaches to financial counseling often involves the use of a SWOT analysis, which identifies strengths, weaknesses, opportunities, and threats
Strategic management approach
