Financial planners operate in a field where success is often measured in numbers, yet emotional intelligence (EI) consistently proves to be the cornerstone of high performance in this demanding field. Research shows that EI enhances interpersonal relationships, strengthens client trust, reduces adviser stress, and improves financial outcomes. Here, we explore the key studies illuminating the importance of EI in financial planning and why it is integral to success.

Understanding emotional intelligence and financial advice

Financial planners often address more than just financial concerns. Clients seek advisers for investment strategies, emotional reassurance, and guidance. Himawan (2020) highlights that clients who receive financial advice report improved confidence, greater control, and reduced stress. These non-financial benefits underscore the role of EI in meeting clients' emotional needs alongside their financial ones.

The science of emotional intelligence in client relationships

Effective client relationships hinge on trust and communication, deeply rooted in EI. Bennyhoff et al. (2018) emphasise that 53% of clients identify emotional needs being met as the most critical component of trust in their adviser. Advisers who demonstrate empathy and adapt their communication styles to fit clients' preferences foster more substantial, more lasting relationships. For instance, tailoring the frequency and format of communication for anxious clients can significantly enhance trust.

EI as a tool for behavioural coaching

Advisers with high EI serve as "behavioural coaches," guiding clients through emotional triggers that might lead to poor financial decisions. Bennyhoff (2018) explains that advisers can act as emotional circuit breakers, helping clients stay disciplined during market fluctuations. This role demands skills such as perceiving and managing emotions, core components of EI, to anticipate client reactions and mitigate biases.

Quantifying the impact of emotional intelligence

Studies consistently reveal a measurable impact of EI on financial performance. For example, Luskin et al. (2005) conducted a year-long EI training program for American Express's financial advisers. The program, which included workshops, individual development plans, and follow-up coaching, resulted in average sales increases of 25%, decreased stress levels by 29%, and improved positive emotional states by 24%. These findings validate that structured EI training directly correlates with improved performance and well-being.

Similarly, Enhelder (2011) found a significant relationship between advisers' EI and sales performance, suggesting that EI enhances immediate client interactions and long-term financial outcomes.

Handling complexity and stress

The financial advisory role ranks among the most cognitively and emotionally demanding professions. Hunter et al. (1990) note that high-complexity roles, like financial advising, exhibit the most significant variability in individual performance. This variability often stems from how well advisers manage stress and emotional demands. Gilboa et al. (2008) found a negative correlation between workplace stress and job performance, reinforcing that EI skills such as self-awareness and self-regulation are critical for managing stress effectively. 

Building trust and client retention

McCarthy (2020) demonstrated that EI enhances immediate client interactions and fosters long-term client loyalty. Advisers with high EI were found to secure more client referrals and achieve higher retention rates, ensuring a steady stream of income and a loyal client base. The ability to understand and respond to clients’ emotions strengthens bonds that go beyond transactional relationships. 

Human advisers vs. robo-advisers

In an era of automation, EI sets human advisers apart from their robotic counterparts. Zhang et al. (2020) found that clients overwhelmingly prefer highly competent human advisers over robo-advisers, even when the latter matches their competence. This preference underscores the value of human empathy, understanding, and reassurance, qualities that robots cannot replicate. 

Developing emotional intelligence for long-term success

While natural EI abilities vary, they can be cultivated through targeted training and practice. Goleman (2001) argues that EI competencies must be developed as practical skills to translate into job performance. Programs like those conducted by Luskin et al. (2005) provide a blueprint for how training can enhance advisers' emotional competence, leading to better client outcomes and personal well-being. 

Conclusion

Emotional intelligence (EI) is not a supplementary skill for financial planners, it is essential for high performance. From building trust and managing stress to enhancing client relationships and driving performance, EI is the differentiator that sets top-performing advisers apart. Financial planners can meet their client's emotional and financial needs by investing in EI development, ensuring long-term success in an increasingly complex and competitive industry.

References:
Bennyhoff, D. G. (2018). The Vanguard Advisor’s Alpha Guide to Proactive Behavioral Coaching. Valley Forge, PA: The Vanguard Group.
Bennyhoff, D. G., Kinniry Jr., F. M., & DiJoseph, M. A. (2018). The Evolution of Vanguard Advisor’s Alpha: From Portfolios to People. Valley Forge, PA: The Vanguard Group.
Enhelder, M. (2011). Emotional intelligence and its relationship to financial advisor sales performance. Ann Arbor, MI: ProQuest.
Gilboa, S., Shirom, A., Fried, Y., & Cooper, C. (2008). A meta-analysis of work demand stressors and job performance: Examining main and moderating effects. Personnel Psychology, 61(2), 227–271.
Goleman, D. (2001). An EI-based theory of performance. In D. Goleman & C. Cherniss (Eds.), The emotionally intelligent workplace. San Francisco, CA: Wiley.
Himawan, A. (2020). Peace of mind: Understanding the non-financial benefits of financial advice. International Longevity Centre. Retrieved from https://ilcuk.org.uk/wp-content/uploads/2020/11/ILC-Peace-of-mind-The-non-financial-value-of-advice.pdf
Hunter, J. E., Schmidt, F. L., & Judiesch, M. K. (1990). Individual differences in output variability as a function of job complexity. Journal of Applied Psychology, 75, 28–42.
Luskin, F., Aberman, R., & DeLorenzo, A. (2005). The training of emotional competence in financial advisers. Consortium for Research on Emotional Intelligence in Organizations. Retrieved from https://www.eiconsortium.org/reports/emotional_competence_training_financial_advisors
McCarthy, A. (2020). Exploring the relationship between financial adviser emotional intelligence and perceived client relationship markers. Capella University.
Van Rooy, D. L., & Viswesvaran, C. (2004). Emotional intelligence: A meta-analytic investigation of predictive validity and nomological net. Journal of Vocational Behavior, 65, 71–95.
Zhang, L., Pentina, I., & Fan, Y. (2020). Who would you choose? Comparing perceptions of human vs robo-adviser in the context of financial services. Journal of Services Marketing, 35(5), 628–640.