Teaching Clients Financial Literacy

When people think of financial planners they often associate them with investing. While that remains a large part of the financial planner’s job, a large portion of their role includes making sure clients are properly educated on the ins and outs of finances. Financial literacy, a skillset that enables someone to make knowledgeable and constructive financial decisions, plays a big role in a planner’s ability to develop an effective relationship with a client.

A recent Forbes article breaks down the importance of financial literacy in the planner/client. Quoting blogger Maria Popova, they ask, “Are you an Explainer, an Elucidator or an Enchanter?” The writer goes on to explain the differences between the three categories. Explainers are able to communicate concepts in clear and defined ways that are easily understood by their audience. Elucidators take it a step further. They are able to make the audience truly understand what they are saying by expanding the concept into recognizable contexts and scenarios. Enchanters are the ideal though. They are able to spawn wisdom by empowering the audience to draw their own connections.

So, what does this have to do with financial planning? Everything. While financial planning is often all about the numbers on a spreadsheet, the relationship between planners and clients is anything but black and white. At the heart of advising on investments, retirement planning, and life insurance are very deep concepts surrounding the importance of family and the impermanence of life. Not to mention the fact that finances are an incredibly large source of stress and anxiety in people’s lives.

The ability to take that spreadsheet and communicate it to clients in a way that they can understand is an underrated one. In a new report by Morningstar which polled investors and planners alike, a majority of investors indicated that they were least concerned with their planner’s ability to help them stray from irrational investment decisions. At the top of their concerns was an advisors aptitude for helping them maximize returns.

It’s easy to see why this is the case, but maximizing returns and meeting financial goals can be difficult for a client if they are not financially literate. Hasty decisions can ruin careful planning if a client doesn’t understand the wealth is a long-term game. While it may not be the most essential aspect of a financial planner’s job, helping clients understand the basics of finance, and that patience is necessary, should be undervalued.

Chris Jacob is a Registered Representative with Saxony Securities, Inc. Securities offered through Saxony Securities Inc. (SSI). Member FINRA, SIPC. Non-security products and services or tax services are not offered through SSI. Cadeau is not affiliated with SSI.

This post was originally published on ChristopherJacobMissouri.com on April 3, 2019.

Categories Christopher Jacob Missouri, Personal Finance
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