The Psychology of Wealth Management

You’ve likely heard about the dangers of mixing emotions and investing. Experts will tell you that you need to be clinical and contrarian when evaluating opportunities and making decisions. The same instincts that often serve people well in fight-or-flight situations can and often enable poor investment choices. Excitement over recent performance might entice one to buy a stock at or near its high point. Anxiety over unexpected losses could well result in sales that inadvertently lock those in losses in.

Emotions may have no place in investing, but investing is just one part of wealth management. Like specific financial plans and strategies, investments are a means to an end. Wealth management is all about ensuring those tools work toward the life and legacy you want – for yourself and those you care about. Emotional stakes don’t get much higher than that.


It’s human nature to let emotions guide our decisions. The good news is those emotions not only have value in a functional wealth management relationship, they’re essential in setting the guide rails and goals that you and your Financial Advisor will work toward together.

This relationship begins during the initial discovery process. Before you ever talk about how much money you have and where it’s being held, your Advisor spends time getting to know who you are. You talk about your hopes and aspirations, what you care about and what keeps you up at night.

The understanding your Advisor gains from this process is the lens through which they’ll focus all of their financial expertise and resources, including collaborative planning experts and industry-leading investment research. Your very personal emotional context helps to identify and prioritize near- and long-term financial goals while providing insight into your beliefs, preferences and comfort with risk – all of which shapes the advice you receive and influences any specific recommendations your Advisor makes.


The discovery process is critical to successful wealth management, and it can’t be a one-time occurrence. Life and your feelings will change over time. Many of the changes that can have substantial implications for your financial life – the birth of a child, the death of a parent, starting a business or transitioning into retirement – carry strong emotional connotations as well.

These are the times when you need an Advisor who knows you well enough to understand what such changes mean to you. An Advisor who has remained in contact with you, checking in even when there isn’t significant news to report, will be in the best position to offer both compassionate counsel and objective advice when you need them most.


The nature and value of your Financial Advisor’s objectivity is important. Because while your Advisor couldn’t do their job without fully understanding and appreciating the way you feel about things, they wouldn’t be doing their job responsibly if they didn’t let you know when your emotions might be clouding your perceptions or leading you down a potentially unwise financial path.

This can involve difficult conversations, not unlike the kind that inevitably occur in any healthy relationship. There may be times when your Advisor has to tell you things you won’t want to hear. And for that important part of their job to be effective, trust is essential. They need to trust that you value their perspective enough to listen. You must trust that the advice they give comes from a place of expertise, understanding and genuine care for your best interests.

Article provided by Rebecca Ross, Vice President and Financial Advisor at Robert W. Baird & Co., member SIPC. She has 32 years of financial services industry experience, and can be reached at 239-541-9090 or rross@rwbaird.com.