Psychology of FP Flashcards
FC: Inadequate Communication
lack of communication regarding money and budgeting often causes financial conflict
FC: Family of Origin Treatment of Money
Parents’ financial circumstances and patterns may greatly influence their children’s beliefs about money and how they value it
FC: Different Risk Tolerance Levels
Different risk tolerance levels create an imbalanced or unacceptable investment portfolio. Often times, it is preferable for each spouse to invest according to their own individual risk tolerance
FC: Adult Children
Many parents do not agree about the amount or level of financial support they should be providing their adult children. Consider using written documents to create guidelines
FC: Blended Families
Couples who bring together children from previous marriages may want to consider a pre-nup agreement. Re-married couples should update estate plan docs to meet their intentions
FC: Cultural Differences
Cultural factors influence money conflict among families - paternalism, personals family structure, etc.
FC: Inheritance
Heirs to an estate can create conflict. Inequality of distribution can effect familial relationships both emotionally and psychologically
Social Penetration Theory
- Orientation
- Exploration
- Affective Exchange
- Stable Exchange
SPT: Orientation (1)
Goal is to determine if there is value in developing an ongoing relationship - develop general likeability. Communication is generally in a conversational manner - client may feel cautious at this time.
SPT: Exploration (2)
Discuss FP Process in more detail - this includes discussion of goals and objectives (all while learning more about the client.
Develop the foundation of trust, clients will begin to share their true beliefs
SPT: Affective Exchange (3)
The client/planner relationship becomes one of significant trust - becomes more of a friendship. Planner will deeply understand the client and how his life/experiences will add to the process
SPT: Stable Exchange (4)
Last step once a consistent and established pattern has been created. Planner’s begin to anticipate client needs - honesty, trust, and mutual benefit are hallmarks of this stage
SPT: Stable Exchange (4)
Last step once a consistent and established pattern has been created. Planner’s begin to anticipate client needs - honesty, trust, and mutual benefit are hallmarks of this stage
Non-Directive Counseling Skills
- Nondirectional - there is not a clear path forward in the conversation as established by the planner
- Client-centered - the client is taking the lead in the focus and direction of the conversation
Used to encourage clients to reflect and share their goals, beliefs, traditions, cultural background, feelings, and concerns in a thorough and open manner.
Types of Non-Directive Counseling Skills
- Clarification - used to reduce ambiguity
- Paraphrasing - restatement paraphrase (repeats what the client says) & meaning paraphrase (restates with what the client believes they mean)
- Summarization - Verify capturing the client’s key goals
- Reflection - mirroring the clients state or mood in words (best short and to-the point - helps work through challenges)
Directive Counseling Skills
FP directed - The planner takes the lead in how the conversation is directed. Typically needs to be done at some point in every relationship
Types of Directive Counseling Skills
- Interpretation - understanding using financial terms
- Reframing - Shift perspectives by considering circumstances, feelings, or thoughts from another POV
- Explanation - descriptive statement used to make things more clear
- Advice - direction to the client
- Suggestion - this includes helping clients choose a course of action through their own initiative - provides information, not advice!
- Urging - prompting client to take immediate action - more direct than other options!
Politeness & Sensitivity
Politeness & Sensitivity begin when planners understand who they are as people.
Sensitivity relates to planners’ ability to respond thoughtfully to clients (do not make assumptions)
Individualism –> Collectivism & Social Risk - Building Trust!
Individualism: tend to value independence and uniqueness - may desire equal power, and thus a collaborative process
Collectivism: Tend to value interdependence, social cooperation, conformity, and inclusivity. More open to hierarchal power dynamics and let the planner take the lead.
Social Risk - The level to which one is willing to engage openly with another person (remember at beginning of relationship)
Crisis Events:
Black Swan Event - unpredictable event that causes severe consequences and is beyond what constitutes a normal market volatility.
Financial & Economic Crises:
Endogenous Risks: Risks found within the financial system itself - herding as all investors make same mistake (like bailing on the market)
Exogenous Risks: Risks outside the financial system - terrorist attack, earthquake, etc.
Types of Changes to a plan
Incremental Change - Does not effect overall plan, just noise (10% increase in income)
Discontinuous change - Winning the lottery, economy tanks - represents a radical departure from a current trend or pattern
IPS Statement
Current market and economic decisions cannot be the basis for a FP. Without a policy and “long-term” positive bias, clients typically manage the short-term fluctuations that toss them about resulting in micro-managing
Helping Clients Navigate a Crisis
- The planner understands and emphasizes the long-term financial goals
- The planner maintains a consistent approach with the client
- The planner acts as the client expects, confident and with a plan
- Both the client and planner benefit from the relationship - will result in a closer bond between the two 8
