James Woodfall, founder of Raise Your EI, and Cliff Lansley of the Emotional Intelligence Academy underline why emotional intelligence is becoming a core professional skill in financial planning. As technology reshapes advice, they argue that advisers who can read, manage and influence emotions are better equipped to guide sound decisions, build deeper trust and deliver stronger outcomes for clients.
In an increasingly technology-driven industry, emotional intelligence (EI) is emerging as the essential human advantage in financial planning. No longer just a soft skill, it offers a tangible edge that helps advisers build trust, guide better client decisions, and meet Consumer Duty standards.
As the profession evolves, the modern adviser must be as emotionally literate as they are financially astute. Advisers who understand and manage emotions – their own and their clients’ – can reduce reactionary decisions, improve portfolio outcomes, and build lasting relationships. In short, EI translates emotional awareness into better financial outcomes for clients and more resilient practices for advisers.
Therefore, to mark one year of publication, this extract from “The Heart of Finance” by James Woodfall and Dr Cliff Lansley explores two of the biggest advantages that EI brings to advisers: helping clients make sounder decisions and building deeper, trust-based rapport.
How emotions affect decisions
When making decisions, consciously or otherwise, we might often predict how we may feel in the future and make our choices based on the avoidance of regret. This is not to say we need to keep emotions out of decision-making; it means that we need to understand how emotions can affect or bias our clients during the investment savings decision-making process.
Predictions your client makes will be influenced by their thinking and their emotional state. When we’re in a happy state or a positive frame of mind, we might more readily plan for the future and focus on the benefits of a given course of action. However, when we are anxious or in a pessimistic or negative frame of mind, we are more likely to focus on the present and the risks involved in any decision. These present-future time dimensions and risk-benefits analyses are core to financial decision making.
The emotionally intelligent financial adviser can read and influence the emotional state of the client to help them make the decisions needed to achieve their goals. You may, for example, want to suggest a break or to reschedule discussions that are crucial for the client to ensure the outcomes aren’t contaminated by inappropriate emotions or mindsets that they are currently experiencing.
It is also worth noting that when our physical, cognitive, and emotional resources are depleted, we are more likely to let our emotions drive our choices rather than use logic and reasoning. The figure below illustrates the competing demands for our resources.
Here, the individual’s resources are represented in each test tube by the liquid. We have limited resources, and we get daily draws on these depending on what is going on around us. The three tubes deal with:
- Cognition – our thoughts: Consider your client’s mindset, biases, and prejudices. Are time and place distractions competing for their thinking resources? The ‘Story 1 or 2’ concept from the Emotional Intelligence Academy reminds us that our initial interpretation of a client’s behaviour may be mistaken, there may be a ‘Story 2’ we haven’t considered. This reframing helps us stay curious rather than judgemental. Have they got a calm mind? Have you?
- Emotions – our feelings: Neuroscientist John LeDoux, in his book The Emotional Brain, notes that we react emotionally about four times faster than we think, so emotions often override reasoning. They are unbidden and automatic. If we can’t pause and reframe them, our decisions may be driven more by emotion than logic.
- Physical – what is happening to us physically: Is your client tired, hungry, or unwell? Such states can shape decisions through mood and emotion, leading to poor outcomes. As skilled observers, we may not know exactly what clients are thinking, but we can hypothesise about strong emotions and ask how these might be influencing their choices.
Research examples
In 2011, a study of 1,112 judicial rulings from eight judges showed how depleted resources may affect decision-making. The majority of the decisions in the study were requests for parole being heard in the court. What was interesting was that the time a decision was made affected the outcome. Each day, the judges had two breaks for food, which segmented the day into three distinct sessions. The researchers found that favourable decisions dropped gradually from around 65% at the beginning of the session to nearly zero towards the end. After the break, the favourable decisions returned to an average of 65%.
So, what was happening?
It’s difficult to say specifically, but we can hypothesise that hunger, toilet needs or fatigue may have influenced the judges’ decisions. The researchers themselves stated that they did not measure the judges’ moods or mental resources, but they agreed that it was likely that the judges were susceptible to psycho-physiological biases.
Thinking about the test-tube model when our physical or emotional needs demand our attention, that leaves fewer resources available for cognition. This, in the case of the judges, may have resulted in a bias in their decision-making.
Rapport and trust
The aim of rapport building is to create trust, and you need to think about this in advance of your first meeting with a new client. When we are careful with, and pay attention to, a response and the emotional needs of others, trust grows. When we don’t, it can damage trust. Trust can be defined as ‘a psychological state comprising the intention to accept vulnerability based upon positive expectations of the intentions or behaviour of another.’
Everything a financial adviser does for their clients is based on trust being firmly established. They are often relying on you to help them achieve their life goals, their dreams, their needs, and wants – they are entrusting everything they have to the investment solutions you are presenting to them.
So, rapport is important. It is useful to remember that we like people who are like us, so it’s always good to find a common interest. If you meet someone you have something in common with, you can leverage this to build a connection with them. It is important to pick up on this common ground early in your interaction with a client. This will help you build rapport. This common ground could be liking the same sports team, for example, so that you can talk about the game played at the weekend. Maybe you notice photographs, images, and trophies as you walk into their office or home that you can comment on. Maybe you both played hockey as teenagers, or you like pets, sailing or motorcycles. Once you find something you are both interested in, you become part of the same tribe. This is very powerful. The minute you have some common ground, it massively puts free credits into the trust account, and if you can do that early in the interaction, it sets you up for success.
We’ve all had that experience where you meet someone for the first time and, just in casual conversation, you realise you have lots in common and suddenly you feel like you are friends. It happens unconsciously. Identifying similar preferences, interests or values is powerful for relationship building. It is a way of introducing small talk, and finding common interests can be a lubricant for social communication and is a good method of building rapport.
Overall, it’s clear that EI shouldn’t be a “nice to have” for advisers; it’s a professional skill that strengthens judgment, trust, and performance. As regulation and technology reshape the profession, advisers who can connect on both a rational and emotional level will define the next era of trusted advice.
