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Establishing a solid relationship with clients based on trust is the key factor that will help you encourage them to make positive decisions about their investments without being held back by their emotions, said Frank Murtha, a behavioural finance consultant who spoke at the Portfolio Management Association of Canada’s national conference in Toronto on Tuesday.

“All obstacles to healthy investing are emotional in nature,” said Murtha, managing partner with Westport, Conn.-based consulting firm MarketPsych LLC. “A big part of what we need to with client management is find a way to disentangle the processes where emotions corrupt rational decisions we want our clients to make.”

There are three key ways of building a solid foundation of trust, Murtha said: establishing a strong interpersonal relationship with clients based on understanding their underlying emotional drivers; communicating your fundamental expertise with clients; and demonstrating your professionalism as a financial advisor.

“It is almost impossible to overestimate the amount of trust it takes for a person to take a massive sum of money, which is extremely personal [in meaning] to them, and then turn it over to you,” Murtha said.

Understanding the underlying emotional needs that drive your clients is vital to helping them see the bigger picture and overcome paralysis, or avoid poor decision-making.

Talking to clients about their long-term plans acts as a way of helping them see past the anxieties of today.

“Financial needs — performance, growth, income and consistency — are long term in nature,” Murtha said, “and the problem is that the hidden emotional needs — safety, freedom, self-acceptance — are short term.”

The next steps involve identifying and reminding clients about their goals, asking them to visualize their goal and, ultimately, encouraging clients to “stamp” their goals with an emotional tag by asking them what achieving their goals will mean for them.

“Ask, ‘Why is that so important to you?’,” Murtha said. “If you ask that question to, say, a family for whom you manage money, or a private individual, or even institutional investors, you will get some of the most amazing answers. And what it does is harness the power of emotion and stamps [that goal].”

As well as understanding emotions, it’s important to establish your value as an advisor, financial expert and professional in your clients’ mind.

Negative messages in the media about the financial services sector and financial advice have influenced many clients and prospective clients in recent years. Communicating your value to clients in a manner that they can understand and could repeat to someone they met is vital, Murtha added.

“Your never want to miss an opportunity to demonstrate that you possess expertise to clients,” Murtha said, noting that it’s important you make sure to do so in a way that is neither too technical nor too simplistic.

The highest degree of ethics and transparency is also fundamental, Murtha said, particularly in the area of fees. Advisors should be proactive in raising the subject of fees, communicating it clearly and giving clients some context as to how low or high those fees are compared to the overall market.

“Having a clear understanding of what you’re being charged means more to clients than the amount they’re being charged,” Murtha said.