Many financial advisors find that expressing empathy can help them to bond with and strengthen their relationships with clients. Yet, while becoming emotionally invested in clients’ personal experiences can be an effective (and often enjoyable!) way for advisors to establish close relationships and friendships with them, when clients experience difficult and even traumatic experiences (e.g., panicking in response to extreme market volatility, or suffering from the loss or plight of a loved one), advisors may find themselves sharing the same emotions as their clients… such that they, too, suffer emotional distress, to the point that their own emotional well-being becomes jeopardized.
Notably, though, there are different forms of empathy, some of which don’t require experiencing the other person’s emotions. As while emotional empathy does involve personally experiencing the same emotions as someone else, cognitive empathy involves simply understanding the level and significance of someone else’s emotional experience, but on an intellectual level (sometimes referred to as ‘emotional intelligence’), without necessarily experiencing those emotions. And when coupled with compassion (which is a “concern to enhance the welfare of another who suffers or is in need” and which motivates us to take action to help someone), cognitive empathy can become a valuable tool for financial advisors to understand and help clients without experiencing the same emotional highs and lows their clients may be experiencing.
Another important caveat of emotional empathy is that it is often limited to individuals with whom we consider similar to ourselves; accordingly, if someone isn’t similar enough to us, we just might have less emotional empathy for that person. Which is important, as advisors who lead with empathy can unintentionally narrow their client base to only others who are similar to themselves, and actually make it more difficult to connect with other types of clients.
Advisors who want to connect with their clients, but reduce the emotional toll of an emotional empathy approach, and instead seek to implement more cognitive empathy and compassion into their client meetings, might consider exploring practices adopted from Compassion-Focused Therapy (CFT). What’s unique about the CFT approach is that it focuses on helping clients not just trace the past to how they arrived where they are, but instead to identify their strengths, current abilities, and their present opportunities, in order to identify ways to comfortably move forward through specific challenges they may be facing. Compassion-Focused Therapy can be especially helpful when working with clients in distress and is designed to support clients and accomplish change.
Ultimately, the key point is that advisors can employ cognitive empathy to connect with their clients by understanding what they feel, yet without necessarily experiencing the same emotions as their clients that can take a real emotional toll. And by practicing compassion, advisors can take the insights gleaned from cognitive empathy to take action to help and support their clients productively, with confidence that the help they are providing to their clients is not clouded by the emotional burdens they may have taken from their clients!
While empathy is widely considered a wonderful human trait to express, like all things, there are two sides to every coin, and anything in excess is often not ideal. In his book “Against Empathy: The Case for Rational Compassion”, Paul Bloom offers some nuanced considerations about using empathy, which can easily be applied to the relationships that financial advisors have with their clients.
To understand the limitations of empathy’s benefits, we must first get clear on what “empathy” really is. There are actually two (and some say more) types of empathy: emotional empathy (being able to personally experience the same emotions as someone you are engaging with; for example, when someone you know is sad and you then become sad, too), and cognitive empathy (being able to intellectually understand the level and significance of someone else’s emotional experience, sometimes referred to as ‘emotional intelligence’).
With emotional empathy, when we see someone in distress, we personally relate to the distress felt by the other person by actually feeling a version of that distress ourselves and then wanting to help them – and ourselves –to stop feeling that discomfort. On the other hand, with cognitive empathy, when we see another in distress, we understand that they are in distress, but we do not actually feel the distress ourselves. So then where does that desire to relieve pain come from? Compassion.
Compassion, which has been defined as a “concern to enhance the welfare of another who suffers or is in need”, represents the driver that spurs us from just knowing what someone feels to taking action to help someone… often in response to the distress we may observe through cognitive empathy.
In other words, emotional empathy involves feeling the pain of others and working from that emotional experience to alleviate the pain, whereas cognitive empathy is understanding the pain of others and using compassion to do something to help them cope through the situation (and doesn’t always necessarily involve taking the pain away).
Importantly for financial advisors, empathy can be a valuable tool to understand what clients are experiencing, and therefore to strengthen relationships with them. However, the nuanced differences between emotional and cognitive empathy can result in significantly different outcomes when it comes to relating with clients, which can impact the financial advisor’s objectivity and judgment, as well as their own emotional well-being.
Emotional Empathy Can Help Financial Advisors Deepen Relationships And Foster Trust With Clients… But At What Price To The Advisor?
The ability to have emotional empathy and feel what another feels is a hugely useful tool that helps us to create and deepen rapport with others. Being able to experience an event or a situation on an emotional level and through the eyes of another person not only can strengthen a relationship through the ‘shared’ bond that is created, but also can increase the understanding and connection between those individuals. Similarly, in the working world, being able to relate closely with others can make working with them easier (and more enjoyable) from the understanding and bonding that can often result.
Empathy also matters when it comes to clients – it’s not just important in the context of close friends and co-workers. For instance, a lack of empathy (at least as observed in the field of medical research) appears to be outright bad for business.
In his book, Paul Bloom discusses empathy research conducted by Dr. Helen Riess, the director of the Empathy and Relational Science Program at Massachusetts General Hospital. Riess observed how doctors interact with their patients and found that patients are distrustful, disgruntled, and less cooperative when there is a lack of empathy. Riess’ research also found that unempathetic doctors tended to be lonely, less effective, and burned-out.
Furthermore, empathy (both cognitive and emotional) is not just good for enhancing our social relationships with others, it can also benefit our own mental health by allowing us to feel socially connected and, in the case of cognitive empathy, by reducing stress and burnout. Additionally, it can be good for our physical health, too. Aside from the positive impact of long-term stress reduction on our physical health, empathy has been highly beneficial to our survival from an evolutionary perspective. By allowing us to recognize and feel fear or danger in others instead of having to wait for the source of the fear or danger to actually materialize in front of us, empathy has helped us respond and adapt to dangerous situations more quickly when it may have otherwise been too late to respond appropriately without cues received from empathetic connections.
Accordingly, empathy seems to be a pretty good characteristic not just for developing good relationships with those we work with – as co-workers and clients – but also for our own mental (and even physical) health. Yet, as we will see, empathy and its ‘goodness’ are nuanced. While it can foster and improve relationships, emotional empathy, in particular – and especially when used in excess – can also wear us down and detract from our own ability to give good advice!
Too Much Emotional Empathy May Lead Advisors To Give Short-Sighted Or Biased Advice And Result In Emotional Burnout
Despite the personal benefits of emotional empathy (e.g., actually feeling what others feel, in contrast to cognitive empathy that helps us to simply recognize and understand the feelings experienced by others) in developing relationships and maintaining good mental health, having more emotional empathy for clients won’t necessarily make you a better advisor, especially in the context of emotions involving distressing, acute situations. This is because when we feel the same pain, fear, or anxiety experienced by others, it is easy to get caught in a trap of proposing a quick fix to alleviate the suffering being experienced – both for the client and for ourselves, as we empathetically share in the pain being felt – which may potentially compromise sound, objective long-term planning advice.
For example, let’s say that a client is very scared about market conditions and, in response, wants to sell holdings from their portfolio as quickly as possible. If the client’s advisor is feeling emotional empathy, they will also feel the intense fear of that client. And it is only natural for the advisor to want to help the client feel better because they personally experience the same painful fear as their client. Accordingly, the advisor may be at risk of losing some degree of their own rational objectivity, and can be tempted to hop on the ‘sell bandwagon’ simply to calm the client (and themselves!) down…. a potential mistake they might not have made if they hadn’t had so much emotional empathy for their client!
Now some might be thinking, “Wait… but didn’t Dr. Reiss’ work suggest that a lack of empathy can bring about distrust and dissatisfaction? Don’t we want our clients to trust us in times of need? Do we not find empathy helpful to connect to our clients and deepen our relationships with them?”
Yes, yes, and yes. We do want clients to trust us in times of need, and empathy does help to build that trust. But it is important to recognize that trust does not come from emotional empathy alone.
Similarly, while we do (or could) use emotional empathy to find in our hearts the desire and motivation to help clients, Bloom offers a slightly different perspective, suggesting that there is more to trust-building and the morality of wanting to help others than emotional empathy alone. Which is important, given the potential short-termism in advice that high levels of empathy can unwittingly cause.
Emotional Empathy Is Not The Only Tool To Strengthen Relationships With Clients
Emotional empathy, feeling what others feel, is not the only factor that fosters trusting relationships and drives us to help clients. As simply put, feeling the pain, fear, and stress that others experience is not the only impetus that creates a desire to help others.
In his book, Bloom describes seeing a child drowning. A bystander unrelated to that child does not need to feel the fear of that child, nor the distress of the child’s parents, to know that they should take action to save the child. In other words, it’s not empathy for drowning that leads us to save a potential drowning victim.
And the same holds true for financial advisors. Yes, clients may be afraid when their portfolio value drops, but the advisor does not also have to feel that same fear (and run the risk of making short-sighted suggestions to alleviate the fear as quickly as possible) in order to help clients. Instead, we can consider cognitive empathy as a means to recognize our clients’ stress as a signal that they need our help.
Another interesting consideration for leaving emotional empathy off the table is that it can potentially prevent the introduction of subjective bias (which doesn’t generally arise with cognitive empathy). For instance, research has routinely shown that empathy is easier to experience with someone else if we view that person as similar to us. Thus, if someone is not similar enough to us, we may tend to have less emotional empathy for that person!
This can ultimately lend itself to the emotionally empathetic advisor treating clients who have similar backgrounds or personal characteristics to the advisor in a different manner than those who have different backgrounds or characteristics because the advisor feels a deeper level of empathy for the former than they do for the latter… even though each of the clients faces a similar challenge they’re seeking advice about.
And while it’s very likely that advisors would not purposefully treat clients with similar circumstances differently, it may happen on a subconscious level simply because of how our brains work in response to emotional empathy.
If we advise clients with whom we experience emotional empathy, then, unless all of the clients are exactly alike and are just like the advisor, there is a greater likelihood that an advisor will relate better to certain clients because of shared similarities. And when an advisor feels they have a greater understanding of a client, they will naturally be inclined to treat that client with more responsiveness than a client who they feel is less similar (and thus relatable) to themselves. Or alternatively, may unwittingly only seek out clients very similar to themselves and reject others who need the advisor’s help as well (because those similar-type clients are the ones with whom the advisor feels the strongest empathetic connection in the first place).
And so the questions arise… is this really the behavior of a true fiduciary? Does greater emotional empathy really lead to consistently giving advice in the best interest of the client?
Another nuance suggested by empathy research is that, while cognitive empathy can decrease the risk of burnout, too much emotional empathy might actually be a contributing factor leading to burnout (in addition to the aforementioned concern of potentially resulting in giving short-sighted financial advice)!
For instance, we have written about how a certain amount of emotional activation can be a useful tool (e.g., by helping us to address our own irrational beliefs), but it is only good up to a certain point; going past that point can actually cause us to shut down. Said another way, emotional arousal can stir us to action, but when we become too emotional (emotional flooding), we tend to shut down and do nothing. Consider the following example.
Example 1: Sally, a long-time client who you adore, has just shared unexpected news with you that her husband Harry has been devastated by Alzheimer’s disease.
You feel Sally’s pain. You feel her fear. You feel her sense of ambiguous loss. And ultimately, while feeling all of these emotions that Sally is feeling does help you feel closer to her, you can’t help but wish for a few days off to cope with your own distress because you have become so emotionally invested in this situation that you have trouble concentrating on the financial planning advice Sally may need during this time, such as changes to her estate documents, not to mention your other clients’ needs.
Immediately after your emotionally tough meeting with Sally, you are scheduled to meet with a new client. When they walk in, they are ecstatic about the birth of their new grandbaby and joyously begin sharing some of their family stories with you.
You use your emotional empathy once again to pay attention, be present, and feel happy and excited to hear about their grandchild. But you are also still reeling from Sally’s news and you find it very difficult to transition so quickly between emotions of distress over Sally’s news, and joy over your new client’s news.
Accordingly, you are having a hard time genuinely sharing your new client’s high with them. In fact, you realize as they are leaving that you had wanted to discuss 529 Dynasty plans with them, but by the middle of the meeting you realized you were so caught up in the high of the good news that the discussion slipped your mind.
By the end of the day, you are burned out from living through all of the emotions that you shared with your clients, and you find yourself honestly questioning whether you provided them with your best ideas and advice.
If an advisor were to feel all the feelings of the clients in the example above (stress, fear, anger, jubilation, peace, contentment), they would inevitably feel as if they were on an emotional rollercoaster and would very likely need to shut down from their own emotional overwhelm at some point!
And advisors are not the only ones prone to these situations. One study mentioned in Bloom’s book also found that nursing students who were highly emotionally empathetic with patients deliberately spent less time caring for their patients, presumably because of how difficult they found it was to cope with the suffering they were observing (and empathetically experiencing themselves). Instead, they spent more time seeking guidance from other workers to help them get their assignments done.
Yet, don’t lose hope in the value of empathy just yet! Bloom’s book discusses how Buddhist philosophy supports the idea that we can’t, nor do we need to, feel what everyone feels to be ‘good’ and to be helpful. Instead, we can use cognitive empathy (i.e., recognizing the suffering) to be compassionate (i.e., responding to the suffering we observe arising from a general concern we have for the welfare of others), ultimately leading to understanding and responding to the painful feelings of others without actually feeling the pain ourselves.
As when we experience emotional empathy, we tend to think with our System 1 brain, the part of our brain responsible for fast and instinctive responses. If we instead act with compassion and use cognitive empathy, we tend to use our System 2 brain, which is involved in slower, deliberative, and logical thinking processes. And it is with careful, deliberate, and logical thinking – rooted in cognitive (but not emotional) empathy – that financial advisors can give the best financial planning advice for their clients!
The Benefits Of Cognitive Empathy And Compassion For Advisors
Given the challenges of emotional empathy, it is important for advisors to recognize when they are practicing cognitive empathy and acting with compassion versus when they may be expressing emotional empathy for their clients Because again, with emotional empathy, we are best at experiencing the feelings of others with people who we perceive to be similar to us (as it helps us to relate to them and their pain in the first place) – which leaves those not so similar to us at a potential disadvantage, or certainly left with different treatment.
Additionally, the extent to which we can personally experience feelings is limited by our own emotional capacity. Thus, emotional empathy has a very narrow limit on the scope of people with whom we can express it and can be difficult to express with the same level of equanimity for all clients.
Conversely, by recognizing distress through cognitive empathy (without personally experiencing that distress) and acting with compassion (in response to the inherent concern we have for others and the desire to help those in distress), we have the capacity not just to understand the pain of many, but also to have compassion for them. There is no requirement for others to be like us to practice cognitive empathy or compassion, nor are we limited by our own emotional capacity. Thus, cognitive empathy and compassion tend to have a much broader scope than emotional empathy.
Distinguishing Between Emotional Empathy, Cognitive Empathy, And Compassion
In his book, Bloom describes a thought experiment to make the distinction between emotional empathy (which emphasizes feeling the emotions of others), cognitive empathy (which emphasizes understanding the emotions of others), and compassion (which emphasizes caring for others, but without necessarily experiencing their emotions).
The thought experiment goes something like this:
Close your eyes and imagine feeling empathy for one of your clients. Now feel that same level of empathy for another. Now another.
Now try to feel empathy for all individuals of the world who struggle with their finances.
We can’t do it. We can’t feel empathy for that many people; we can’t feel the fear of everyone all around the world, concerned about retirement. It would be crushing.
We can, however, understand that many, many people do seriously worry about retirement (cognitive empathy), and we can have compassion (we do not mirror their feelings, but we care that they are having them, and want to do something about it) for them.
What is more, not only do cognitive empathy and compassion make it possible for advisors to help clients without losing their trust, they also offer better strategies to maintain a strong relationship with clients on a long-term basis, as they do not result in the same problems that arise with emotional empathy (e.g., short-sightedness, unconscious bias, and burnout). Let’s return to an example:
Example 2: Leroy, a client, is coming in today to talk to you about the fact that his wife has passed away.
Thankfully, you recently read the Kitces blog article on empathy and decide to engage cognitive empathy instead of using emotional empathy.
Leroy can really benefit from empathy (the cognitive kind) and level-headed advice (which is actually possible with cognitive empathy and not with emotional empathy) and through compassion you can provide both.
As Leroy enters the room, you thank him for coming in and then take a few moments to share a couple of fond memories about Leroy’s wife. It is obvious to you that Leroy is in immense pain and feeling tremendous grief, but instead of being down in the emotional quicksand with him, you use compassion to help him. You recognize that nothing in this moment will stop Leroy’s pain, but that by simply spending time with him and showing him kindness does, in fact, help him endure his pain.
You walk through the information you prepared to share with him, knowing that you are helping him get through a difficult time. Leroy leaves the meeting with a hug and clear guidance on moving forward.
When your next client, Mary, arrives, she talks about the vacation she has been planning and she’s positively thrilled about it. You are able to connect with Mary and feel glad to help her make plans, supporting her with as much compassion and level-headed advice as you were able to provide for Leroy.
By the end of the day, you feel proud of how you were there for both Leroy and Mary, not just connecting with them, but also providing the advice that they needed in an effective and efficient way. By using cognitive empathy, instead of emotional empathy, you weren’t scaling an emotional mountain – peak to valley, peak to valley – and are eager about meeting with more of your clients tomorrow.
With cognitive empathy and compassion, we do not necessarily feel what others feel, and thus we are not drawn to execute on short-term loss or pain. Because the scope of cognitive empathy and compassion is much broader than that of emotional empathy, we are not prone to treat different people differently. And compassion, as it turns out, is often what clients really want when they say they want empathy from their advisors.
Because when we use cognitive empathy to invoke compassionate behavior, clients can feel our warmth and our kindness, and they can sense that we understand them (which makes them feel heard and understood; this is also part of the value of emotional empathy – without the less useful aspects of it).
Take, for instance, our research on the personalities of financial planners. We found that many ‘successful’ advisors tended to score lower on traits associated with neuroticism (such as tendencies to be anxious or easily upset). Now, this could be because clients actually prefer advisors who are able to employ cognitive empathy and compassion (which goes hand in hand with a low neuroticism score), over those who tend to be more emotionally empathetic (which would also be quite stressful for advisors, especially when they have higher neuroticism scores). And, not surprisingly, most clients would not want to work with advisors who are just as emotionally riled up as they are!
On the other hand, it may be possible to explain the research findings that correlated low neuroticism scores with ‘successful’ advisors by the possibility that advisors who are more prone to using emotional empathy might simply be burning out – perhaps they have become so exhausted after each emotional client meeting that they just never really grow their client base and become ‘successful’ advisors.
Nonetheless, the key point is that financial advisors who are able to remain calm and collected when a client is nervous or distressed does not necessarily mean that they are unempathetic! Instead, it can demonstrate competence, professionalism, and, when done with compassion, respect for the client and what they are going through.
As an example, consider mental health therapists who work with highly distressed patients. These therapists tend to use cognitive empathy and cultivate compassion, instead of expressing emotional empathy. Therapists don’t have to be depressed or feel suicidal themselves in order to understand and help a person feeling depressed and suicidal. Similarly, financial advisors don’t need to feel the same feelings as their clients, but they should be interested in what their clients’ feelings are and know how to use compassion and cognitive empathy to understand, have patience with, and respond to that person.
How Financial Advisors Can Apply Principles From Compassion-Focused Therapy With Their Clients
For advisors looking for ways to implement more cognitive empathy and compassion into their client meetings – and perhaps trying to dial back the level of emotional empathy they feel and the emotional rollercoaster they may find themselves on from one client meeting to the next –there is an emerging movement called Compassion-Focused Therapy, which originated amongst the therapeutic community, but is very applicable to financial planning as well!
Compassion-Focused Therapy is a strengths-based approach like positive psychology and solution-focused therapy, which does not require a deep and intensive review of painful events in the past (as is the case with some forms of psychotherapy). Instead, Compassion-Focused Therapy focuses on compassion for oneself, non-judgment, cognitive empathy, care, and well-being. It is meant to help clients feel safe and comfortable discussing their strengths, current abilities, and the present, and to help them move forward through specific challenges they may be facing.
To get an idea of how Compassion-Focused Therapy might be applied, consider an example that illustrates how a follow-up meeting with Sally, whose husband has been diagnosed with Alzheimer’s disease (from Example 1) might go:
Example 3: Sally is back in your office today. It has been two months since your last meeting with her, when she revealed that her husband Harry has been deteriorating from Alzheimer’s disease.
It is apparent that Sally has not followed through on any of her financial planning tasks and is in the exact same place as she was before. She has not touched her to-do list.
You recognize that Sally is likely suffering from depression and grief. However, you also know you are not a grief counselor and you are not trained to handle depression.
So what can you do? Use simple strength-based exercises and coach Sally to reach out for help from a counselor.
Instead of simply reminding Sally that the paperwork she hasn’t completed is important, you choose to use cognitive empathy to connect with Sally, recognizing her grief and pain, yet at the same time using tools from Compassion-Focused Therapy to take a small step forward.
Your conversation goes as follows:
You: Sally, thank you for coming in today. I know just being here and talking to me is really hard. You could have chosen not to come in at all, and I want you to know I value that you are here.
- You express sensitivity, empathy, non-judgment, and care for Sally’s well-being.
Sally: Thank you. I am a mess. I can’t imagine these changes and I don’t even want to start because it makes me realize that what’s happened to Harry is real, and I just fall apart all over again. I can’t. I can’t do this. I can’t say goodbye to him.
You: Sally, I hear you saying you can’t do this, but you are here today. We are doing something. And I want to assure you that I am with you and that we will go as slowly and steadily as you need. Tell me, can you remember another time when we worked through something difficult?
- You recognize Sally’s distress and accept it. You also help Sally see her behavior in a new, optimistic light, by helping her realize that her choice to come into the office represents a positive decision to move forward.
Sally: Well, when I had cancer…that sucked.
You: Yes, I agree. Tell me, what was something about that time and the way we got started that helped you?
- You are helping Sally generate ideas and identify what worked for her, letting the ‘answer’ come from her.
Sally: I remember how we scheduled multiple meetings that were close together, and how I just came here to do paperwork and planning. Just being here really helped… I think maybe that's why I came today. I still don’t know what to do or where to start, but being alone with all of these decisions is a huge obstacle.
You: That’s right, I remember how you put forth so much effort in those meetings. We can do that again.
- You are helping to instill courage in Sally.
Sally: Okay. I can try.
You: Great, we’re taking a step forward. We have a plan. Another thing we have not mentioned that comes to mind… during the time when you had cancer, you were also regularly meeting with a cancer support group. You know I care about your emotional health just as much, and really more, than your financial health. Let’s take our remaining time today to find a couple of support groups or counseling options and set an agenda for those upcoming meetings. How does that sound to you?
- You warmly assure Sally that you are there to support her and also express that you consider her emotional well-being – not just her financial well-being – as a top priority.
In the above example, the advisor used Compassion-Focused Therapy and does not have to talk about the pain or fear of cancer. Instead, the advisor had Sally decide on a strength, process, or ability that worked for her to overcome and move forward through a horrible time in the past.
Additionally, knowing what Sally feels worked for her effectively helps the advisor do even more of that to help Sally. There is no psychoanalysis going on here, nor does the advisor aim to push Sally into doing anything she is not ready to do. The advisor does not address the grief or depression in order to change it – only acknowledges it and coaches the client toward getting help from a trained professional.
The use of Compassion-Focused Therapy is an especially effective framework to use with clients who are in distress and, like the Transtheoretical Model (TTM) of Change, illustrates how change happens, how people work through change, and how people need to be supported while they work.
Everyone changes, everyone grows, and everyone runs into emotionally rough spots. These are simply normal processes, so why not use methods, tools, and models to work with people more effectively when they are going through these everyday things?
Yes, both Compassion-Focused Therapy and the Transtheoretical Model of Change come from therapy, but both can be used by financial advisors to simply connect better with and care for clients and loved ones. You can be therapeutic – and genuinely help clients – without doing therapy.
And perhaps the best feature of Compassion-Focused Therapy is that it demonstrates how to grow our compassion. By understanding how it organizes the relationship between the therapist and patient (which is translatable to the advisor and the client), people can be more compassionate, spreading more of what people need and not burning out in the process.
While empathy is generally our ally, the key point to remember is that there is more than one type of empathy. Importantly, cognitive empathy may be most effective at ensuring sound advice in client-advisor relationships.
Cognitive empathy allows us to understand and help others, and it does not require that advisors, who need to be clear-headed and relatively calm, experience the same emotional highs and lows with their clients.
Advisors can ensure they are giving sound, objective advice and supporting healthier relationships with their clients when they can harness the positive powers of cognitive empathy and, at the same time, are able to sidestep the problems posed by emotional empathy.