Developing skills to work with clients more effectively

The following edited transcript is from “Are You an Emotionally Intelligent Adviser?” an InvestmentNews webcast held May 6. Deputy editor Evan Cooper and reporter Lisa Shidler were the moderators. InvestmentNews: What is driving the new interest among advisers in becoming “emotionally intelligent?” Mr. Walper: I'm going to share with you some research that we did in December and have updated throughout this year. The research focused on millionaire investors, both sitting down with them in focus groups in New York, Chicago, Palm Beach [Fla.], Los Angeles and Seattle the last two weeks in November and then a quantitative or pretty in-depth research with 750 millionaire households related to how they felt about the economic crisis. And frankly, as we learned from the research, their emotional perspective is quite different from what we've seen. We've been doing research like this for about 15 years, going back into the mid-'90s. Here, folks said they lost 30% of their net worth. Of course, if you rolled the clock forward to February and early March, that would have been even more significant. But the most critical factor we found is that we have never come across angry investors whenever we do our research. Maybe we just happen to talk to nice people, but the anger that came out of these millionaire investors is geared toward Wall Street and the government — the government being a proxy for Washington, and Wall Street, of course, being the financial services industry. Ninety percent of these folks, basically the entire country of wealthy investors, say that this is the most significant financial setback they've ever experienced. And a number of them wish, as I would wish for myself, that we had listened to our grandparents, who talked about the Depression, because maybe we would have been a little bit more prepared to see this significant of an impact.
Forty-five percent of people who said they were going to retire in the next five to 10 years — essentially the baby boomers — say they're delaying their retirement. And in some cases, they can't even speak to when they're going to retire. We have actually labeled these folks now the “panic boomers” because they don't have the time, in their minds, to recover these losses in terms of what's happened in their life. Financial services firms, essentially the bigger firms in the country, are viewed negatively by 90% of investors. When we compared very similar questions that we asked December [2007] to April of last year, in April, the industry was far more positive in terms of the perception. The relationship that they say they have with their financial services firm and the image is very negative. And perhaps the most critical factor is that given everything, this should be a time when millionaire investors and investors of all levels of assets and wealth should be looking to advisers for help because, frankly, they're not prepared to deal with what they're doing. And in fact, they're actually going out of their way not to deal with advisers. We always ask folks to describe the relationship that they want with advisers: Is it self-directed? Is it adviser-assisted? Do they only use an adviser during events? Folks are now saying, “I'm adviser-assisted and adviser-dependent and self-directed because I have to be.” That's really important. InvestmentNews: There seems to be a pattern sometimes of individuals saying that they really don't like Wall Street, but they like their adviser. Has there been any change recently in this? Mr. Walper: The answer is what I call an adviser head fake. They are extremely unhappy with their advisers, but they're not telling advisers this. Twenty-five percent to 30% are saying that they're unhappy with their adviser; they want to make a switch. But they're not going to make the switch right now, because they're concerned. If they work with a large firm, they feel as if the government will protect the large firm. They don't want to go to a small firm right now, because they feel the small firm may not be here in a year or so. It's the first time that people are very much unhappy with their advisers and the adviser firm, the provider firm. And we believe it's going to take three or four years before this relationship is more comfortable with the adviser. This is not going to be a sudden thing. People will be very cautious. We do similar research every month. The Spectrum Affluent Investor Index and the Spectrum Millionaire Index are published the first Wednesday of every month. The index numbers came out this morning [May 6]. The chart shows the trend of the last five years, and you see a significant downward trend in terms of the emotional outlook of these investors. This measures their attitude toward the economy, investing, their own business, etc. It's starting to move up the last couple of months as seen in the chart. But nonetheless, this is an investor who's not happy at all with the outcome of his or her life. Another chart really reinforces the idea that people have said their net worth has decreased. Most affluent households feel they have lost 20% to 30% of their overall net worth, with some individuals believing they have lost 40%. The average age of those folks was 57 years old. So they don't have time to recover. In another chart, 34% of respondents said they have to postpone retirement. There's just a huge impact there, both for themselves emotionally, and just corporate America and jobs because senior people are not going to retire. So the opportunity for younger people to move up in a traditional way is changed. The key is, these are clients who want their advisers to help them first on the emotional elements of their relationship with the adviser, meaning: I always talk to our clients right now, although everybody wants to talk about investing with their clients, the clients really want to talk about their life and the emotional challenges they're having with their life. And that's why it's so important to think about the hierarchy of needs, not just about investing but about the emotional perspective these clients are facing right now. InvestmentNews: That was a little cold water on everyone's face, but that's just a segue to what Doug is going to discuss. Obviously, investors are angry, hurt and annoyed. Tell us about advisers' stress and give us some insight into the EQ-i stress assessment test that we all took when we registered for the webcast. Mr. Lennick: One thing I just want to connect and pile on a little bit to something George said on the investor sentiment slide, at a time when investors should be turning to advisers, they are actually turning away. This is an important data point, and it reinforces what hopefully all of you who have chosen to participate in this call are becoming increasingly aware of. And that is, the value proposition that, as advisers, you present needs to be behavioral in focus, less investment in focus. And you heard a number of things that George just spoke about that deals with that. So the value proposition really has to change, and if you've positioned yourself as an asset manager, people are going to be more angry with you than if you have positioned yourself as a comprehensive adviser.
If you have positioned your value proposition as, “I will help outperform any particular number,” then you are going to be experiencing more upset clients. I would recommend that everyone on the call, if you don't now do so, make sure that you explain to your clients that your value proposition is to prepare them for the certainty of uncertainty. It's not about predicting the future; it's about preparing for the future. And by the way, people who are prepared tend to have less stress than those who find themselves unprepared. So your value proposition itself needs to change. Now the stress assessment — Shani has done this work with using the EQ-i as an instrument that our firms both respectively use — it is in fact, the most validated of the emotional-competency assessments. This particular assessment that 300 of you took up to two days ago — so I'm guessing that number has moved past that by quite a bit — was actually developed long ago. And it deals with one element of emotional intelligence, which is actually stress tolerance. And so here what we're looking at is your own stress scale. The instrument that you used is of public domain, so any one of you can access it. It was actually developed by Sheldon Cohen [of] Carnegie Mellon [University in Pittsburgh] and Tom Kamarck and Robin Mermelstein of the University of Oregon [in Eugene] going back to 1983. But what you did here was look at yourself, and part of what we need to also do is understand where our clients are at. But the scores that you were able to tally up and report, I will simply say — sitting here with a master copy of the 300 — that if you look at some of the particular areas, there are a number of you who are scoring very often or fairly often at a high level of stress. And that stress undoubtedly influences how you are handling yourself and therefore how you are leading your clients. So if you think of effective leadership of client behavior being primarily a function of effective management of your own [emotions], how well you deal with you, and therefore how well you deal with stress, will have everything to do with how effective you are at influencing your clients. And that starts with self-awareness. And so this gives you a sense of yourself, your own perceived stress. Now when you scored this, if your total score was under 18, then you actually are handling stress especially well. So the lower the score, the better — 18 to 22 is an average number. As you start to move above that, we're obviously going into a slightly elevated category from 25 to 28 and up to 30. Once you're scoring over 30, you're not coping very well. And so that is likely to have adverse effects on every dimension of your life — your home life, your professional life and the like. So that gives you a sense of the scores. We could examine any particular question that someone might be interested in, but that's the short of it. InvestmentNews: This is stress, and you mentioned that stress is one part of emotional intelligence. Could you just give us a thumbnail of what goes into emotional intelligence, in addition to stress management and awareness of one's own stress levels? Mr. Lennick: Emotional intelligence has a variety of different definitions, and we happen to be members of this consortium for research on emotional intelligence, and many of our listeners, I'm sure, have read Daniel Goleman's work [with Annie McKee and Richard E. Boyatzis, “Emotional Intelligence and Primal Leadership,” Harvard Business School Publishing, 2003]. And I worked closely with Dan Goleman. And we've evolved the definition to where we would say emotional competence and emotional intelligence really is this ability to stay focused on the goal in the face of competing in difficult-to-deal-with emotions. So in experiencing multiple and competing emotions — and by the way, our physiology allows us to do that — and being able to continue to do what must be done really well becomes challenging. What we talk about is trying to achieve sustainable optimal performance and emotional competence, and it's all about helping us optimize. By the way, moral competence is all about helping us have something sustainable. And our industry has gotten a little bit of a black mark relative to its moral compass. InvestmentNews: Let me turn now to Shani, who works with advisers very frequently and actually helps them implement some of the insights and findings once their emotional intelligence is assessed. Tell us a little bit about what you do and also some of the insights that you have that might be able to help advisers in this area.
Mr. Robins: Just dovetailing on some of the things Doug mentioned and even just looking at the EQ-i — the assessment for emotional intelligence — you have a few subscales that are very useful to keep in mind, because what we were looking at is skills that can be learned and practiced. So that's one of Daniel Goleman's contributions to the field that was very innovative and — among other people as well — that popularized this notion that these are things that [can be learned]. The common conception of intelligence in general is that you either have it or you don't. Emotional intelligence, on the other hand — things like stress tolerance, impulse control, flexibility, ability to adapt — those are kinds of things you can practice and learn. Things like optimism, where it seems like a personality trait, seems like something you may not be able to learn; you just have it or you don't. But that's a skill you can actually learn. So part of my task, part of my goals working with advisers and others is, what are some of the best ways of learning some of those things and other things as well? The field of psychology in general and consulting psychology has been around for half a century to a century, depending on which subfield you're talking about, and there are skills that go beyond that. For example, the part of what Doug was saying about being focused on the goal, that's definitely one of the subskills of emotional intelligence. But of course, that goes back centuries or longer in terms of issues like mindfulness — doing a meditation practice, for example, which doesn't take a lot of time. You could do it for two or three minutes a day, and if you have some good instructions for doing that, you can see results within weeks even. Where you find your attention is now suddenly honing in and zoning in on your tasks rather than being too distracted. Something else Doug mentioned that was very useful is that emotions take us into very different directions. We evolve to how the emotions redirect our attention, the so-called emotional hijack. So when we have a fight-flight response — we used to have it when lions and tigers were chasing us — we now have it when petroleum goes down 20%. And so the responses are very similar, and we've got that fight-flight response, and of course it's interrupting and interferes with judgment, decision making, problem solving and so on. So there are some things in environments we can control, some things we can't. So this is where some of the wisdom work comes in as well, being able to discern the difference and saying, “OK, the economy is taking a downturn. There are a lot of things I don't like about what's happening. Some of those things I can't control, but there are a few things here that I do have a lot of control over.” InvestmentNews: How do you teach yourself to become optimistic? Give us an example of how if you are feeling pessimistic or depressed over what is going on, you make yourself optimistic. Mr. Robins: The main response to that is practice — like, “How do I get to Carnegie Hall?” “Practice, practice, practice.” It's everything from standing in line waiting for a movie, and the tickets are sold out. What's your response to that? Well, I can do something else that will also make me happy. How adaptive am I to shifting some of the goals and priorities? If I practice shifting, if I practice flexibility, what I'll begin to notice is that my well-being and happiness are going up, and my productivity is also going up. It's a win-win situation all around. Once I'm doing that in little ways, the evidence starts coming in that, “Hey this is doable.” Even though I'm confronted with this challenge in front of me, I can actually meet that challenge, and there's the light at the end of the tunnel. Mr. Lennick: I would add to some of the practice, practice. It's such an important message that Shani is giving. It's useful to understand how our experience is stimulated. So first we need to understand our elements of reality. The reality of experience is really a combination of three things, and I don't have a slide for this, but anybody can draw this picture. Just draw a triangle, three circles and the circles include the elements of our experience. So part of our experience is cognitive, so put the initial C in that circle. And then in the lower left, put a circle and put the initial E that stands for emotions, which we're talking about. And then in the lower right put the initials P/A that stands for our physiology and our action. The interaction between those three circles defines human experience. It's very important for us to understand, whenever our real experience is stimulated from the outside in, it will always stimulate us emotionally first. So if on the upper left you wrote the word “stimuli” and drew an arrow into the E circle, that would help you understand that when your experience is stimulated outside in, it will stimulate you emotionally first. And I might just mention, since people want practical application, one of the things you might consider doing is, developing the skills. And we have a tool that we just call the four Rs. And we train advisers to train clients about these skills. It's actually one principle, two rules and four skills. The first R is to recognize, recognize what's going on in your experience, recognize what are you thinking, how are you feeling, and recognize what you are experiencing physiologically — the heart rate's picking up, the breathing pattern's becoming more shallow or whatever it happens to be. And what is it that you're actually doing? As advisers, by the way, you want to be able to not just recognize your own experience; you want to be able to recognize the experience of each client, which will be discrete. They will have their own experience. And then recognize what's stimulating it. So when markets are crashing or we've got things coming down — or as Shani said, the tiger scaring us — that's the stimulation that scares us. We've got headlines that say things are terrible; they're going to get worse. That scares us. That now stimulates this emotional hijack — the amygdala [the emotional part of the brain], the famous amygdala hijack. Well, that's a physiological response to those high-energy, negative emotions. But back in the '90s when we were experiencing what Alan Greenspan defined as irrational exuberance, the stimulation was this new economy. We had the Internet explosion; the dot-com era; the belief that companies no longer needed to make money, just their investors did; [price-earnings ratios] were completely out of whack; and we, the people, continued on. That was '96 when he said it, but it didn't change investor behavior. So on one side, you've got chemicals stimulating your rational anxiety; on the other, you've got irrational fear. Saber-tooth tiger, a bear, a lion — any of that — that's still worthy of being afraid of. The second R is to reflect, the third R is to refrain, and the fourth R is to respond. Those are all skills you can practice, just to pile onto the practice comment. InvestmentNews: Doug, getting to the part about refraining, it seems that a lot of what triggers the emotions is happening so quickly that we don't realize what is happening. We are telling ourselves something as this is going on, as emotions are happening. So that if the stock market goes down, for example, the thoughts are racing in our heads, “This is terrible, and I'm going to be poor, and I'm stupid, and why did I do this?” Those things are going on faster than we probably can process it. Is that true? Mr. Lennick: Yes, they are going on, and absolutely, you get stimulated, you get scared. The amygdala gets agitated, and it starts sending out SOS signals. That happens in 12 milliseconds. The prefrontal cortex doesn't get the message for 40 milliseconds. Now we're talking very fast, but by the time that the prefrontal cortex gets the message, it's already been hijacked. And so we have to have better response patterns. And we can practice this. And the four Rs, incidentally, are all about learning to change the source of stimulation from outside in to inside out. So what Shani said earlier about being mindful and practicing, you can actually practice reflecting on your values, you can practice reflecting on what really matters. You can practice reflecting on what you're grateful for. All of those things help you feel better — not necessarily optimistic, but better. InvestmentNews: How long would it take to implement these changes? Mr. Robins: You can get changes in weeks. If you look at the literature and you combine the most effective techniques, put those all together so you live in the economy, the behavioral works, the reframing, you're doing some mindful meditation even five minutes a day. You practice focusing on the problem at hand for mindfulness. What am I doing right now? Even in little ways, like you mentioned optimism. What's the other framing? How might the markets change over a few years? I know it looks dismal now, but how might it change? So some optimism there — empathy, compassion, which translates to loyalty. Optimism translates to perseverance and so on. As our anxiety and anger comes down, our focus that used to be on ourselves, very self-focused, suddenly shifts, and we're able to give more to the client. But you know the old joke of: “But enough about me; let's talk about you. How do you feel about me?” And that's unfortunately how some of the conversations go. When we have an emotional hijack, when we're anxious or we're angry or frustrated, half of our attention or more can be directed on how we're doing and how we're feeling, rather than giving that to the client. InvestmentNews: I imagine that if investors felt that they got the undivided attention of an adviser, they would probably feel a lot better too. Mr. Walper: We talk to investors about this exact issue, not with as eloquent terms, because we're not the expert. But what investors say about the relationship with their adviser is that they wish their adviser would show empathy, and they wish their adviser would relate to them on an emotional level, and not on a technical investment level. To both Doug and Shani, I wonder if you could help the group with two broad questions. My question is, number one, clients can read this — these sort of stress levels within all of us, people can read stress levels. But what we see in our research is that the client sees the adviser can't help them and can't help them solve their life problems, that's when this disconnect to the relationship starts to occur pretty quickly. But secondly, can't some of these tools that the advisers can learn from what you are recommending, they also can help their clients, which would be a pretty amazing change in a relationship between an adviser and an investor? Mr. Lennick: Yes, absolutely. I'll just say one thing about empathy. First of all, there's some incredible research that's been done. Carl Marci and colleagues at Harvard University [in Cambridge, Mass.] have done this extraordinary re-search on empathy, physiological empathy. And I'll just give everybody one really quick idea, which is, if you maintain good eye contact with someone — and we've seen when looking at monitors when you look at brain and heart monitors, you can literally track the empathy start to occur physiologically — physiologically, you can actually see it. So I've seen the research. And the simplest thing you can do is look in their eyes. Look in their eyes. And if you have a hard time doing that, take a few minutes, look at somebody's eyes and count the number of times they are blinking. It requires that you look in their eyes. That's a very simple tool. But the recognition piece — don't just pretend to care if you don't care if these things don't work. But if you actually genuinely do care and you look in someone's eyes, you will begin to resonate with one another physiologically. You will begin to experience physiologically the emotions, which is why when someone who's very emotional is talking to you and you're looking at them and they're tearing up, it's pretty hard for you not to tear up. And I might also point out that, in fact, Fred Luskin, who works with Shani at Stanford [University in Palo Alto, Calif.] and was, along with my partner Rick Aberman, one of the founders of [Maximize Your Talent Group LLC in New York]. And they both will teach you that you can, in fact, as Shani knows, put a thought in your mind and focus on it for a while, and it will change your emotional state. So anybody who wants to practice this can put a thought in their mind. Think of something that has angered you, and pretty soon, you will find your heart rate picking up; your physiology will begin to change. Similarly, you can put a thought in your mind where you reflect on what you really care about. You might reflect — you might see if you have unconditional love for family members, look at them, see them in your mind. Think of the things that you're grateful for. You will begin to see physiological change on the spot. This will happen within minutes. And so as you master this, and this reinforces what Shani said earlier, if you practice this frequently over time, this becomes something you can do automatically. And in our work with behavioral advice, we integrate traditional finance, behavioral finance and neuroscience. And in neuroscience, you're really dealing with the brain itself. And what we now know through the research in neuroplasticity is that with mindfulness, with deciding what to think, you can actually enhance your physical brain. And that's where practice comes in. So you can gain empathy; just look at people's eyes. Don't avert their eyes. Ask them how they feel. Let them talk. InvestmentNews: So what you're saying, Doug, is, some people may say, “Well, I can't control my emotions.” The emotions bubble up out of some place, and that's what they are. So how could I talk myself out of being annoyed or angry or scared? Mr. Lennick: You're not actually talking yourself out of it. You're thinking about something that makes you feel better. That's all. We think very fast. So smart people, by the way, don't get more thoughts, they get smarter thoughts. Everybody gets one thought at a time. Emotionally, we're more complicated. We're allowed to experience multiple emotions at once. But in the core of our brain is our automatic-response patterns, and that's a place called the basal ganglia. And you've got automatic-response patterns associated cognitively, emotionally and in our motor skills with other technical terms that I won't bother people with in the brain. And so we need to understand that. And so you can decide what to think. Everyone on this call can decide what to think. And based upon that decision, you will influence both how you feel and what's happening with you physiologically. InvestmentNews: We have a couple of questions from the audience about the stress test, and they want us to repeat the scale again. And how did the 200 or 300 people who took the test from our group do in general? What was the general number? Mr. Lennick: I didn't look at an overall average score, but what we found is that a fairly good number of people here were in the average area. So you would look at a number of people who were placing between 20 and 26 or 25, so average. And then what we also saw, if you look at the particular questions, there's a couple of them that are worthy of our attention. For example: “In the last month, how often have you felt nervous or stressed?” The people who answered “fairly often” or “very often” were more than a third, and the people who answered “sometimes” were almost a half. So what you have just right there is, more than 80% of everybody was between “sometimes” and “very often” feeling nervous or stressed. We also see: “In the last month, how often have you felt that you were unable to control important things in your life?” Twenty percent of the people there are either “fairly often” or “very often” unable to control important things in their lives. And then 41% are “sometimes” — that's a very high percentage of people that are feeling largely out of control. When you get into some of that data, you begin to realize, “Wow, we have some opportunities.” “In the last month, how often have you felt that things were not going your way?” Again, nearly 20% of the people are “fairly often” or “very often.” So there are a number of you on the call who will benefit from practicing recognition and reflection. These are skills. That's what was said earlier and is very important. Emotional competency skills can be developed over time. Our IQs aren't going up. All of us on this call I'm pretty sure are past the point where our IQs are going up. Our EQs can go up. Our moral and emotional competencies can go up. And they do require that we actually practice things that help that happen. So you can take this [test] from time to time just to see your stress scale is improving. And those who want a more comprehensive assessment of their total emotional competence certainly should consider using the EQ-i or another instrument. There are three that are very valid. But the EQ-i is the one created by [Dr.] Reuven Bar-On and is the most validated. It happens to be what we use. Dan Goleman uses the [Emotional Competence Inventory] that he developed. And then there's one that Peter Salovey [of Yale University in New Haven, Conn.] and Jack Mayer [of the University of New Hampshire in Durham] developed that's called [Mayer-Salovey-Caruso Emotional Intelligence Test]. But all those tools could be used so that you would be more self-aware. And then because you are more self-aware, you're in a position to become more effective at managing yourself. And as you get better at managing yourself, your relationship effectiveness with everybody in your life will improve. InvestmentNews: We have lots of great questions coming in from the audience. For example, “What is the relationship between how investors assessed risk and emotional intelligence?” Mr. Lennick: What we've learned in behavioral finance is, traditional finance suggests that people will make rational decisions without bias based on some sort of a risk tolerance. Well, in fact, what we learn about life, in real life, all of us have is: a) people aren't rational; b) people are biased, they're not unbiased and; c) it's not so much about risk tolerance; it's about loss tolerance. So the issue is loss tolerance. People are totally comfortable, and every client we all have had over our careers have been comfortable taking risks, provided they work. The issue is loss tolerance. Mr. Robins: And I would just add to that. If you think about the skills associated with being a financial adviser, they're numerous, but the emotional component associated with just intellectual skills has to do with fear and anxiety. If the fear and anxiety are high, then that's going to feed into risk assessment and many other things — not the least of which will be communicating that fear to the client. There's lots of research showing that there are a lot of verbal and non-verbal cues that get communicated to clients over the phone or in person, particularly ones that we're not even aware of. And so part of this work is not just the things that we're aware of. We need to do this in a genuine way where we're working on our own fears, and that will get communicated directly and indirectly to the client. As we all know, there's no fooling clients even if we wanted, and it's not a great idea to go down that route anyway, because it usually doesn't work as well. We know from research that when this work does get done, not only does our anxiety, fear and anger go down, and stress go down, but the quality of life and physical vitality goes up. And of course, the bottom line: We found about a 25% increase in sales when people do this work even for about two to three months. And so it's very effective in a relatively short period of time. And of course, if you continue this work, this is where there's increase in wisdom, not just emotional intelligence, which I consider one component of wisdom. And you look at people that are 70, 80, 90 years old, and you look at whether people around them describe them as wise old men and women, versus bitter old men and women. Some of the things we're talking about here are the crossroads where we make those decisions. When I have a difficult experience, do I curse it and see it as a huge problem that I didn't deserve? Or do I see it as a life challenge that I will meet and build skills to address? Those kinds of decisions are very explicit and make all the difference in whether we go down the wisdom path. Mr. Walper: I think I'll add one more thought on this risk question relative to investors — and it's been said, but I'll say it differently relative to the research we do. Everybody describes, defines, risk differently. Most investors don't think of risk in the same way that their adviser does. So when we ask them things such as: “How do you feel about investing in alternative securities?” an investment professional thinks of alternative securities — the risk, the reward, the asset class, etc. Sometimes investors think alternative investments are real estate. So it's always important when you're thinking about this risk, and the emotional part of risk, to realize that it's also a self-defined topic. It's not only about investment quantitative risk. And that often brings a disconnect in the conversation with clients around risk. InvestmentNews: If an adviser were to become more emotionally intelligent and aware of these things and actually got better at it, how receptive would investors be? What should an adviser do? You said that the investors are so angry and turned off that it might be hard to break through. What would be an effective way to break through to the investor resistance and say, “I'm different; I can help you?” George Walper: The No. 1 thing investors are saying right now that what they want from their adviser is — even though they don't use the words — “I want an emotional relationship with my adviser.” But what they're really saying is, “My adviser does not relate to my life problems. My life problem is, I just lost my retirement. I no longer can pay for my grandchild's education that I planned on paying for college next year.” Those are big issues for people. That's what they want to talk with their adviser about. That's what they want their adviser to help them with. And this advice we're receiving from Doug and Shani, if we think about it in the context of first managing our own emotional issues and challenges, and then help connect with our clients on the same sort of emotional connection, that elevates a relationship with a client from a product or an investment decision to helping them solve their life. And that's what they want from advisers right now. So it's a very interesting way to rethink the relationship between two human beings. Because that's kind of what we're dealing with. You sort of take off these terms “investor” and “adviser,” and it's two human beings sitting down in a very, very difficult time. It's emotional; it's not quantitative. And I think that's really hard sometimes for folks who like to deal in a very quantitative investment world, which is supposed to be orderly. InvestmentNews: And also from what you're saying, it doesn't sound that that ability lends itself to a sales approach, such as, “Trust me, I'm emotionally intelligent,” or, “I empathize with you.” That's a turnoff if somebody comes out and overtly says it. Mr. Walper: It sounds fluffy, but in reality, what you're really doing is, if you behave that way and you demonstrate and reach out to the client that way, the rest becomes a lot easier. The other thing that we like to add on to this is, this also becomes easier when you think about the fact that clients want to interface with advisers, touch advisers at least weekly — not necessarily face to face, not by telephone, but reaching out. But the more often advisers reach out and start thinking about their clients this way and the relationship with clients this way and are touching them weekly, that sort of steps up the relationship they have with the clients. That's really important. InvestmentNews: Do you think emotional intelligence or this way of behaving can be translated into the written word or e-mails and other kinds of documents so that people feel it in print if they are being touched through those kinds of media? Mr. Lennick: Yes. Mr. Robins: Yes, absolutely. I mean there are numerous books out there that don't just have the theory of emotional intelligence but have concrete exercises. Ideally, there are some interactions with a mentor or a coach, but you can look through a very vast array of books. Daniel Goleman has a good one, Fred Luskin actually has a great one, “Forgive For Good” [HarperCollins Publishers Inc., 2002]. So there are lots of books out there that give you step-by-step exercises. There are numerous websites, there is [Doug's] website, maximizeyourtalent.com. There are lots of step-by-step instructions, and you can actually do very, very practical things — 30 seconds of deep breathing, two minutes of gratitude practice. And so there's kind of an appreciation of some of those things in everyday life where we practice the gratitude, we practice two or three steps of doing that, we practice the empathy. We ask these simple questions like: “I wonder what the other person is thinking and feeling right now.” In everyday life — not just our clients — but we need to practice it when we're ordering coffee at Starbucks; we need to practice it when we're talking to our loved ones about simple things. What do you want to do today? What did you do today? And so on. And if we do that every day — on a daily basis, within weeks, it starts to become so automatic, then we can't help but do it with our clients, and it's very genuine. Mr. Lennick: You know one thing I would also add is for those who decided to draw that triangle I pictured for you, realize this is true, sometimes we are the stimulated. So something is happening outside of us, and it's stimulating us. Sometimes we are the stimulator. And so one of the things we can consciously do when preparing for an interaction with a client is to ask yourself, “How do I want my client to feel? What do I want them to think? And what do I want them to do after and during my interaction with them?” And so one of the things that you might want them to think is: “My adviser is on top of things. My adviser didn't predict this, but my adviser helped me prepare for this.” And then you might want them to feel grateful because of that and feel a lot less anxious than they would have felt if they didn't believe that and think that. That's what my adviser did for me. And what do you want them to do? You might want them to either retain an investment that they're in, move an investment, add money. You might want them to give you a referral. So think about how it is you have to manage yourself in order to stimulate the desired experience in your client. And that's about self-awareness first and then self-management second. So being a strong developer of emotional intelligence will be absolutely on your side. And make sure that you have the moral and emotional competencies that you can in turn demonstrate to your client. InvestmentNews: One of the questions from the audience was about breaking the bad news to clients. And they specifically ask, “What do you tell a client if you have to tell them that they have to work longer or they have to significantly cut their living expenses?” That seems to be something that the adviser potentially feels guilty or embarrassed or frightened to say. Mr. Lennick: Well, one of the things that I would suggest is, we talk about one principle, the principle of responsibility and then the two rules. Rule one is: Always prepare yourself for the certainty of uncertainty. And rule two is: Always make your financial decisions after first reflecting on your values. And one of the things that you can do with your clients when you have to deliver to them the bad news is to remember that as advisers, you function as a chief financial officer for your clients. Many chief financial officers of companies have had to look hard and have had to offer recommendations to cut expenses. And so you might help your client see you as this chief financial officer. And the [chief executive] might not be excited, the CEO is the client, you are the CFO. But the CEO might not be excited to hear: “We're going to have to trim our expenses because our balance sheet isn't what we want it to be. Our revenues on our [profit and loss statement] aren't what we want them to be.” So one of the things we can control here on the near side and be responsible for is reducing our expenses. And we might also have to work a little longer, which is on the revenue side. Mr. Robins: I agree with Doug, and what I would add to that is there is the light lifting and the heavy lifting. Some of the things that we would want to definitely do is take responsibility immediately. We don't want to shrug that off. And we don't need to. But something in addition to that, which would really work well, is, we need to work on our own sense of attachment. If I go home at night and I have to have my big house and car and swimming pool and second house in Hawaii and all the rest, I'm going to communicate that implicitly or explicitly to my clients. And so there's overwhelming evidence from the research literature on well-being and happiness that the correlation with happiness and money is zero. It's not even low; it's absolutely zero. And so what that means is that there are a lot of the people who assume that they will be happy as soon as they get X, as soon as they get to six or seven figures and then to eight figures and so on, then they'll be happy. That treadmill, there's overwhelming evidence that it simply doesn't work. Now we can't sit on the phone and tell them, “You lost half your money, but heck, don't worry about it. You can be happy anyway.” So that's not very empathetic, but the reality of the situation is, if you are not happy without the money, then you won't be happy with the money. And the nice thing about that is, it works the other way around. If you're the kind of person that is relatively high in happiness and well-being, the research shows that you can lose a great deal of your money and still be happy. There are literally thousands of studies showing that. So what that means is that we as individuals and as advisers, we ourselves need to live that reality. That's the reality of the situation. If we assume that's not the case, we'll communicate that to the clients. Now how that gets communicated, that's very tricky. But what we can communicate to them is, for example, you can say simple phrases like: “There are ways of cutting back and still maintaining a great deal of well-being” — and I've known a lot of people who have done that and there are thousands of research studies, thousands of examples of people doing that — “but here are some ways of doing that.” We can say that with a lot of confidence because the research is out there. And the key, though, is not to just say it intellectually; the key is for us to live it ourselves. When we go home at night, we can't say, “I need the pool and the yacht to be happy, but I'll convince my clients that they don't.” That just won't work. So once we're convinced of that and looking at the research, it's very easy to be convinced of that. We need to live that out — and so this notion of so-called non-attachments to some of those things and living in that way where we still go for the nice things. I enjoy the toys as well as the next person, but as soon as I'm attached to that and I say to myself, “I can't be happy unless I have that,” that's where I go astray. And so part of the recipe here is living that myself — realizing that I don't need to have [financial] well-being, even when I'm very aggressively going after it. InvestmentNews: Well, that's a very emotionally intelligent and wise way to end this webcast. Audio available online The full audio webcast and slide presentation are archived on investmentnews.com/eq.