The Role of Emotional Value in Client Relationships

In a nutshell, our work at Money Quotient focuses on identifying both the subjective and objective factors that either enhance or hinder an individual’s financial and life satisfaction.  Therefore, rather than using net worth as a snapshot of a client’s “true wealth,” we promote a more holistic approach to measuring financial health and maximizing quality of life.

This underlying philosophy is expressed by the attached graphic.  In this equation, MQ (Money Quotient) represents an individual’s “real” financial well-being.  It is comprised of two essential components: EQ (Emotional Intelligence) and IQ (Financial Knowledge).  

Because most financial professionals have focused on supporting the financial knowledge side of this equation, they are often less equipped to help their clients successfully navigate the emotional terrain of their financial and life journeys.  

Nonetheless, a bevy of recent studies point to the need for financial advisors to take this aspect of developing successful client relationships more seriously.  One example is a research report released by Vanguard earlier this year.  It covered the results of a survey conducted to understand the emotional components of perceived value in client/advisor relationships.  

In contrast to “portfolio value” and “financial value,” “emotional value” is tied to a client’s peace of mind.  The Vanguard report further explained: 

Underlying elements include trust (in the institution or advisor), the investor’s own sense of confidence, the investor’s perception of success or accomplishment in financial affairs, and the nature of behavioral coaching such as during periods of market volatility.

Analysis included multiple factors, and results clearly pointed to overwhelming evidence for the importance of “relationship with a trusted advisor.”  This factor includes emotional attributes such as trust, personal connection, and proactive outreach.  In addition, it includes more functional attributes such as expert perspective, constant plan monitoring, and visibility of portfolio changes.  

After controlling for demographic and attitudinal characteristics, the relationship with a trusted advisor accounts for a full 72% of perceived value.  As a result, the researchers concluded:

We believe that, going forward, assessment of the value of financial advice should include an evaluation of the emotional value it provides investors.

—Carol Anderson

Note: To download a copy of the Vanguard study “The Value of Advice: Assessing the Role of Emotions,” click here.