Shyamal Banerjee/Mint
Shyamal Banerjee/Mint

Why financial planners need soft skills

Soft skills can be termed as the ability to explain risks associated with each financial decision

Getting the right financial planner can set your money life on track. How do you get one? By asking about her credentials, expertise, past performance and fees. But did you know that along with technical knowledge, financial planners need soft skills?

Often neglected, this skill is a key determinant of how satisfied you are with your planner. The Financial Planning Symposium 2013-2014 organized by Financial Planning Standards Board (FPSB) India in Mumbai on Monday discussed this topic earlier this week. What are soft skills and how do you know if your planner is on the right track? Read on.

What are soft skills?

Soft skills are nothing but the ability that a financial planner needs to have to serve her client well. Says Amy Jo Lauber, owner, Lauber Financial Planning in New York, “For me it is about talking to people and helping them solve their problems." Soft skills can also be termed as the ability to explain the risks associated with each decision. Mukesh D. Dedhia, certified financial planner and managing director, Ghalla and Bhansali Securities Pvt. Ltd, said, “Soft skills for me is not just about understanding the client but making them understand what they have financially. Many times individuals don’t know what they need." Dedia gave the example of a client who had 5 crore as net worth in his business. When asked if something happens to him, would his wife inherit the money, his answer was no. It turned out that he had never been advised properly to ask this very basic question. Soft skills often go beyond the credentials and academic qualifications.

Says Susanna Tang, chairperson, Silicon Valley Chapter of the Financial Planning Association, USA, “For a financial planner it is important to not only use her technical knowledge, excel sheet and number crunching ability, but also to understand the client’s needs. A financial planner should be able to work as a partner." Agreed Vivek Rege, managing director, V. R. Wealth Advisors Pvt. Ltd, who said that soft skills are a combination of attitude, communication and emotional quotient.

When are soft skills most critical?

There was consensus among the financial planners on the fact that soft skills are crucial to the financial planning process. Sometimes soft skills actually means a hard conversation with the client and tell them they will not reach their goal unless there is a course correction. Says Lauber, “A couple came to me for an early retirement financial plan. The husband didn’t want to work in the organization as he had a bad boss so he decided to retire early. From the data available I figured that they could retire early but their standard of living would much lower than reasonable. So in my presentation, I had to ask them to see a counsellor to figure out how to deal with the boss than leaving the job. I explained through math that if he stayed for a few more years his pension would double. He did see a psychologist and his financial plan is on track now. It is a very delicate issue if you have to suggest someone to see a psychologist." There have been instances where soft skills have come more handy than technical knowledge.

Dedhia said, “I had one client who was a habitual speculator and he used to lose 50 lakh annually. I allowed him to continue doing it on the condition that he should keep me informed. Though he continued to lose money, it came down to 5 lakh. He finally understood that it doesn’t make sense and he has stopped speculating. So it is not that you go hard on them. You can’t act like a parent as they won’t like it. Somewhere you have to put your point across to them as if it’s a very rational thing to do. So you have to nudge them into doing the right things."

Financial planners say that you can’t actually teach soft skills. Says Lauber, “Soft skills are something that is built in you and is part of your personality."

Agreed Dedhia: “Financial planners need to be students of psychology and learn behavioural finance. As planners have to deal with the financial market where stocks go up and down every day and individuals will react, you should be calm and composed."

As an investor you need to consider if your planner is right for you. An overtly stern or conservative approach that is in opposition to your basic way of living may indicate a financial planner who is not using empathy and understanding the way she should be. Finally it is about being comfortable with your money decisions and if the meeting with the planner fills you with dread, the problem may not be with you but with the soft skills of the planner.

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