We all understand how our regular bank account works. We save up money, make deposits and withdraw it whenever we need the money. An emotional bank account (“EBA“) on the other hand, is defined by Dr. Stephen R. Covey, the author of The 7 Habits of Highly Effective Families, as an account of one’s relationship with another. He explains the concept of EBA with a metaphor, “by proactively doing things that build trust in a relationship, one makes deposits.”

An EBA is an account of trust instead of money. It’s an account based on how safe you feel with another person. The concept of an EBA, is one of the most relatable concepts to date on building relationships based on trust, time and effort. The basic tenet of this principle is that we maintain an emotional bank account with anyone who works or relates with us. It is a dynamic at play in every relationship – both personal and professional.

Drawing a parallel example from a traditional banking structure, banks draw segments between the services they provide in different tiers. Clients with a high savings deposit account will receive more premium and preferential service (i.e clients with $350,000 or more as deposits are treated as privileged clients in a number of local banks). Some banks even include free airport lounges and limousines airport transfers for privileged clients! Alternatively, a client who only deposits $10,000 in their account would have to stand in long queues while waiting to deposit a cheque while a privileged client can simply stride in their premium lounges to do the same. An EBA, although not as quantifiable in numbers like traditional bank accounts, shares the same unspoken rule as the bank accounts that we use for transactions. It is operated on the concept of trust and not in monetary values. As such, the concept is of paramount importance because it gives the necessary expectation to both clients and the financial advisors representatives (“FAR”).

Advisory firms and their FARs do not usually earn a basic fee unless an advisory is charged under a recommendation. One has to realize that time and resources are limited and one must consider the withdrawal from the EBA. Most FARs are remunerated through a commission-based structure. This structure entails payment to the FARs only when they sell a financial product to clients and they do not receive a basic salary per month. On the other hand, there are a smaller group of FARs who are fee-based. FARs who charge on the fee-based structure are remunerated on the same flat fee for their financial planning services regardless whether a transaction is completed. Depending on the engagement, they may provide limited or comprehensive advice. Engagements may be one-time or ongoing. Hence, differential and curated service may be dependent on the balance of the EBA.

At this juncture, it will be important to talk about crediting and debiting to an account. We make deposits and withdrawals with a bank account understandably, but we have to establish what specifically constitutes deposits and withdrawals from an EBA. If a person buys you a meal, spend time with you or provide research, these can be considered EBA deposits. On the other hand, failed promises, unmet expectations and social engineering tactics to solicit services without paying remuneration (ie getting freelancers to work for experience) can be considered EBA debits. It is important to have a common understanding on this, because misunderstandings can happen when one party does not deem an action to be an EBA debit while the counterparty does.

When we take more than we give from a relationship over the long-term, then we shouldn’t be surprised if the relationship suffers. At the beginning, this account begins on a neutral balance and it increases or decreases in value based on emotional units. One prime example given is that when time progresses, the more time the FAR has spent during research, advising on the client and helping the client in their decision-making process, the greater the withdrawal from the EBA of the FAR. On the other hand, when clients start purchasing the products, this will be considered as a deposit to the EBA. This will subsequently help to sustain a healthy relationship between the FAR and the client. Hence, it can be said that the amount of the EBA is proportionate to the sustainability of the relationship between the FAR and the client. To be fair, it works both ways too. If client expectations on the value and level of service delivered goes unmet for an extended period of time, the business gets taken elsewhere since the EBA is running a deficit for some time.

An EBA is not quantifiable like your typical bank accounts and we cannot expect a 1:1 ratio of deposits to withdrawals. Sometimes we see lapses of human behavior (appointment no show without explanation) being brushed aside more easily for some than others. At times, the explanation lies in the differences in the EBA balances between persons. In other words, with a huge EBA balance, you may take some liberties of debits so long as the EBA remains well funded.

It is therefore crucial to build an emotional reserve over time with clients (works both ways). During the process, it is also important to be aware that individuals have their own unique “currencies” driven by their unique purpose, needs and motivations. . As clients are not mind readers, FARs should communicate their expectations to help create a higher level of trust in their relationship with their clients. Applying the same general principle in life, when we ask for what we want, there is a higher chance that we get it, and then we can trust them a little more, hence increasing the reserves of the EBA. The client who regularly pays for meals and credits into the EBA, will more likely not get frowned upon by a FAR for incessant inquires that does not lead to a commission payout.

Building and repairing relationships takes time and effort. Some can think of it as chalking up “karma” dollars. How is your Emotional Bank Account balances with others? Open a POEMS account tagged to me to jumpstart a relationship with me. Otherwise, I do accept a pint of craft beer for that initial meet up introductions.