The two aren’t in opposition with one another, so why not use both to drive the planning process?

In the original “Star Trek” television series, logic and emotion often found themselves in a state of tension. Captain Kirk, the all-too-human commander of the Starship Enterprise, understood that logic had its place in the decision-making process, but he also knew that emotion – his gut instinct – came into play, especially when going where no man had gone before. Mr. Spock, the captain’s trusty right-hand Vulcan, saw everything through the logic lens. Emotion had no place in making decisions. In the end, Kirk appreciated Spock’s ability to point out when the captain was relying too heavily on emotion, and Spock was able to see that even what he viewed as rash, illogical decisions could lead to a logical outcome.

So which of the two fictional characters would have made the better salesperson? The consensus likely lies with Captain Kirk and his ability to use both emotion and logic, his capacity to feel and present facts. Spock might make a few sales but would gain very few clients – most people would buy simply so he would release the Vulcan nerve pinch and stop calling them illogical.

Financial advisors in the real world are faced with the yin and yang of logic and emotion every day in the planning process. Emotion is what is going to make people trust an advisor enough to work with him. Emotion will be what convinces many people that they need to do the things necessary to protect their own future and that of their spouse, children and grandchildren. Logic is what will convince them they can’t afford to put off creating a plan any longer. Logic will assure them the plan put in place is the correct course of action.

“The emotional triggers have to be set,” says Wayne K. Maslyk Jr., CFP, vice president of Great Lakes Retirement Group ( www.greatlakesbenefits.com ) in Sandusky, Ohio. “Then the advisor can lay things out logically.”

Emotional rescue

The emotional triggers Maslyk talks about are useful in a couple of different areas. One of the areas is trust. Advisors have to make an emotional connection with people so trust is established. Nothing can be accomplished until one party trusts the other, even if the prospect is used to making cold, hard decisions.

Barron Fitz-Gerald, an advisor with Pro-Advisor Financial Group ( www.seniorestateadvisors.com ) in York, Pa., mostly works with affluent clients – average annuity case size of $400,000. He spends a lot of time working on the numbers with clients and prospects. He says, “People who have made a lot of money typically have made logical long-term decisions.” But even those people have an emotional decision to make. They have to ask themselves, “Do I trust this advisor? Do I like him?”

Only by answering yes to those questions can a person feel confident about moving forward with an advisor. So advisors who want a long list of clients instead of a history of making transactions need to view building the emotional connection as a valuable and desirable activity, not as a necessary evil before closing the sale.

Maslyk says the effort to build trust through emotions begins early in the planning process. He says advisors need to ask questions that get at what people want and need and at how they make decisions.

“Early on, ask questions like, ?How did you pick your last advisor?’ ?How did you decide he was right for you?’” Maslyk says. “If they had a bad experience, that is good for you; it means they are looking for a trustworthy advisor.”

Maslyk asks prospects how they met, and he builds them up based on the answers they give and the things they talk about. Once the emotions get rolling, they will talk about themselves, their past, their kids, their grandchildren, who and what they care about the most, and much more. It’s all part of really getting to know them on a personal level before ever talking about their money and the products you can offer.

“Once they see you are interested in them,” Maslyk says, “you can see the barriers collapse. They lean back with their arms unfolded.”

Advisor as catalyst

What Maslyk talks about fits into what Ray Sclafani sees as the real role of advisors in the 21st century: a facilitator. Sclafani, president and founder of Tarrytown, N.Y.-based ClientWISE ( www.clientwise.com ), says advisors must be facilitators, “not only in logical financial stuff, but also with life issues. They need to ask, ?What do you do with your time? What does the rest of your life look like?’”

Sclafani views advisors as facilitators, he says, because “the client possesses the wisdom. It is the job of the advisor to unlock that wisdom and make clients realize what they want retirement to look like.”
How heavily logic and emotion play into the process depends on the situation or product being discussed. With a product like long term care insurance, numbers and statistics should make the case, but if that were true, everyone would own an LTCI policy. Too many people are able to see that they have a one in two chance of needing long term care and still say, “Yeah, but?” For whatever reason, that is the case. It makes one wonder if they would even purchase homeowner’s insurance and auto insurance if those weren’t mandatory, since the chances of one’s house burning down are one in 1,000 and the chances of being liable for a major car accident are about one in 250.

LTCI is more weighted toward the emotional side because most people need to experience a long term care situation before they understand how difficult it can be on everyone involved.

“Logically, they see they need it,” Maslyk says. “But some kind of life event has to happen to get their emotions pumping. In order to get folks moving on LTCI, you need to show the emotional side.”

In their roles as facilitators, advisors need to be ready with stories to stir the emotions, to get prospects interested in protecting their nest eggs and their family members. Advisors should listen to what the person across the table wants and needs and then be able to provide the solution that satisfies. And to arrive at that solution, the numbers eventually have to come into play.

Elementary, my dear Watson

Once the emotional connection has been made – the one that tells the prospect he trusts the advisor and can work with him – seniors want to know their money is going to last. That takes some number crunching. It’s where the logical side of the brain gets engaged and starts putting the puzzle together to meet what Fitz-Gerald sees as one of the senior population’s biggest emotional triggers: fear of loss. As Fitz-Gerald mentioned, seniors who have accumulated a lot of money have spent their lives making logical long-term decisions, so they appreciate the same sort of thinking from their advisor.

“We’ll show them solutions ranging from 10 to 25 years,” he says. “We show them the logical, mathematical side. That way, they aren’t going to have buyer’s remorse. Show it to them in black and white.”

Again, it is a logical approach, but it puts to rest the emotional trigger of running out of money. Fitz-Gerald says that using this heavily mathematical approach – even using a conservative rate of return – has allowed him and other advisors at Pro-Advisor Financial Group to increase their case sizes because prospects feel so comfortable at the end of the process. Plus, he adds, “I typically get three or four [quality] referrals.”

And referrals come when clients trust their advisor and see he has done a good job, when he has met the three conditions Sclafani says seniors are looking for in an advisor:

1. Leadership
2. Relationship
3. Capability

The first two satisfy the emotional side of the equation. Leadership provides direction, and the relationship provides confidence. Capability is the logical condition seniors look for. Capability, Sclafani says, “is the creative genius advisors can provide.” It is the ability to lay things out in a manner prospects not only understand but also feel comfortable with. It’s providing a plan that ensures a client will have his money with him until the end and still be able to provide for his children and grandchildren, if that is what he wishes to do.

In reverse

Maslyk, who is a big believer in meeting the emotional triggers first and then showing the logical side of things, says the process can sometimes work in reverse with annuities, especially when working with stretch or multigenerational IRAs. He says (citing the new law that allows distributions to be spread among beneficiaries of different generations) it’s always satisfying to be able to run tax software that shows a client he can have his IRA pay out to children and grandchildren, and yet the value still grows.

An example he uses is a 10-year-old grandchild who only has to take 1 percent per year in distributions and keeps earning 5 percent to 8 percent.

“Once I show them the numbers, the emotions start kicking in,” Maslyk says. “They see that they can leave a legacy. They see how their $500,000 IRA can leave a family $6 million to $7 million over their lives.”
Since to some those kinds of numbers defy both logic and emotion, Maslyk says he keeps Internal Revenue Service Publication 590 tabbed and highlighted so he can show seniors what the IRS says. (That may not convince many people that the IRS is logical, but it does show the stretch is legal.)

It’s obvious in talking to advisors and sales coaches that to ignore either logic or emotion in the sales and planning process is to handicap oneself needlessly. Both are necessary to long-term success. Transactional sales can be made by bombarding seniors with statistics or worst-case scenarios based on scare tactics instead of real-life experiences they may have had. Every advisor out there has access to the same products and statistics. It’s the professional planner who can connect emotionally and inspire logically who will succeed. In other words, advisors who are able to master the balance between logic and emotion will find that they have careers capable of living long and prospering.

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