We now have definitive research indicating that a client’s trust in and commitment to their advisor has a strong statistical correlation to the advisor understanding their client’s personal values, goals, objectives, and priorities¹². In addition, this understanding also supported higher levels of client satisfaction, implementation of recommendations, and referrals to friends and family members. However, the same study also demonstrated a cavernous gap between the client and the advisor's perspectives on just how well the advisor is “hitting the mark,” as indicated in the chart below. Clearly this is an issue that will require some focused attention by all advisors.
As the financial planning profession slowly evolves toward a more client-centric approach, advisors have increasingly voiced their confusion with understanding precisely what values are and how to uncover and identify them in their client conversations. I believe it’s high time we take a deep dive into this topic in an effort to bring about more clarity to best practices for values clarification in financial planning.
So, what are values, anyway? Right out the gate, the Webster's Dictionary definition can add to the confusion for advisors because it covers a broad spectrum from monetary or exchangeable worth to the relative lightness or darkness of a color to that which is altruistically desirable to an individual. It seems as though the vastness of the term’s definition has led to a vague understanding of what exactly we’re looking for in regard to helping clients clarify their values. Let’s get specific.
Below are several types of intrinsic values that are important to getting to know and understand about your clients. Working to uncover these different types of values will not only assist you in developing customized financial planning recommendations and tailor communication to best suit your client, but it will also help your client to feel fully heard and understood, develop strong trust in and commitment to you, and build strong motivation to implement the financial strategies that you recommend.
Individuals are not born with values; they are developed over time through experiences and observations starting at a very young age. Click To TweetFor each category listed below, I’ve provided examples of my own personal values:
- Principles and standards: honesty, thoughtfulness, optimism, freedom, generosity
- What we hold most dear: family, friendships, health, learning, safety
- Intangible things that motivate: creativity, achievement, intelligence, balance, adventure, self-improvement
- Issues and causes: financial literacy, civil rights, environmental issues, social inequality
- Personal preferences: in-person communication, quality time (love language), alone time to process and create
- Tangible activities, people, places, or things: food experiences, photography, family mountain cabin, grandpa’s popcorn bowl
Individuals are not born with values; they are developed over time through experiences and observations starting at a very young age. Our values are influenced by how we were parented and educated and by the communities in which we lived. They are also influenced by our exposure to and awareness of national and global social, environmental, political, and economic events, as well as entertainment, media, and marketing.
Another important aspect to understand about values is that they are linked to positive feelings. You know you’ve identified a CORE value, when it evokes intrinsic feelings of conviction, love, motivation, excitement, or satisfaction. When individuals prioritize spending their resources, including time, money, energy, attention, skills, and talents, on their core values, they feel higher levels of life-satisfaction, fulfillment, and well-being. In addition, the more an individual has clarity about their values, the less anxiety and stress they will feel even when no action has yet been taken. In other words, simply clarifying what is most important to your client reduces their levels of anxiety and stress.
Clearly, understanding your clients’ values is important for many reasons. Stay tuned for more in this 3-part series that will include an exploration of why values can be nebulous and difficult to identify (“Why are Values so Tricky?”), and what methods can be used to uncover different types of values (“What are Best Practices for Values Clarification?”).
- Amy Mullen, CFP®
¹ Anderson, Carol A., and Sharpe, Deanna L. 2008. “Research: Communication Issues in Life Planning: Defining Key Factors in Developing Successful Planner/Client Relationships.” Denver, CO; FPA Press
² Anderson, Carol A., and Sharpe, Deanna L. 2021. “Research: Developing and Maintaining Clients in a Rapidly Changing Environment.” Denver, CO; Financial Planning Association