psychology for financial advisors

Psychology for Financial Advisors

Understanding human thought and behavior is a major part of being a successful financial advisor. Psychology is part of every aspect of your business from your marketing to managing clients. You don’t need a psychology degree, but knowing how and why people make decisions is valuable. Finance is rational, and that reinforces the belief that people make financial decisions with a rational mind. That assumption is false, and it’s up to you to understand what drives people’s choices. Here is some basic psychology for financial advisors. 


Humans are emotional and irrational by nature. Translation: Your client knows that the decision they’re making is wrong, but that’s not enough to stop them from doing it. Their emotions override their knowledge, and you have to find an appropriate way to intervene. The moment you take their call or agree to meet, you become their therapist. You are there to help them work through the emotion, so they don’t make any rash decisions. Once you get to the “why”, you can use what you know about the client to guide them toward a better option. 


Another way that psychology plays into your level of success is in your marketing. Aspects of your marketing such as colors, words, and images depend on knowing what draws people in. You wear professional clothing in photos because potential clients connect your visual presentation with authority. From an early age, most people learn that people in suits are professional and professional people are trustworthy. That knowledge follows people into adulthood, so they connect you in your suit to you being trustworthy. They don’t make that connection if you trade your suit for shorts and a tank top. 

When financial advisors understand the psychology behind people’s decisions, it’s much easier to work with them. By developing a basic grasp of human psychology, you can improve the success of your business. 

For more ways to grow your business, download our free checklist 10 Things to Grow Your Financial Advisor Practice.