Behavioural researcher Samantha Lamas advises on not waiting for a financial crisis to shore up your client relationship.
As behavioural researchers, we often get asked questions like:
- How can I prompt clients to refer me to others?
- How can I prevent lost returns or market volatility from affecting my client relationships?
- How can I convince my client to follow my advice?
Although each of these questions has its own nuances, at their core, they have one thing in common: They pertain to building a strong relationship with clients.
Once an adviser has a strong relationship with their clients, many of these problems seem to resolve themselves. Even for those that require a bit more coaxing, the solid foundation of a strong client relationship will make ongoing interventions much more successful.
The problem in modern-day financial advising is that many advisers wait until a financial crisis to dedicate time to their client relationships—only then do many advisers play the role of financial counselor or coach by helping clients manage their emotions. At this point, it might be too late. Research shows that lost returns are among the top reasons advisers get fired. Also, research has found that satisfaction with advisers followed market fluctuations.
In other words, you have to do the work to build a strong client relationship before a crisis. Unless you’ve done that prep work, when markets go awry, your client relationships may already be suffering.
So, how do you build stronger client relationships?
To start, let’s consider what breaks them.
In our research, we asked investors who had cut ties with an adviser in the past why they fired their financial adviser.
- Quality of financial advice and services: 32%
- Quality of relationship: 21%
- Cost of services: 17%
- Return performance-driven factors: 11%
- Comfort/discomfort handling financial issues: 11%
- Quality of communication: 9%
Once we dug into each of these categories, we uncovered two key areas advisers can focus on to prevent these issues from popping up in their practice, and to mend or build strong relationships in the process.
Building Understanding
To understand an investor, advisers must begin by helping the investor understand themselves. To an extent, advisers must help investors discover their own needs and goals.
To better understand a client, advisers must ask good questions and then listen. This sounds simple, but it isn’t.
- Start with an icebreaker question—there are loads of promising ones out there. Regardless of which one you use, pay attention to how this question affects your client’s mindset. Small tweaks in wording can make a difference in how they think about their financial goals.
- Remember that the client should be talking most of the time. If it takes a moment for them to answer a question, that’s OK. Don’t jump in to fill the silence—let the client fill it themselves.
Sometimes it’s hard to help a client dig deeper during discussions, but it’s essential to really getting to know a client.
- Don’t be afraid to lean on ready-made checklists, exercises, or tools to guide discussions.
- Repeat this process regularly. Many advisors only do this during onboarding but, as clients change, their needs change.
Building Trust
Trust is about vulnerability, and for an individual to feel comfortable with vulnerability, they need to believe in the intentions and behavior of the other party. To develop trust with a client, start by putting those intentions and behaviors on display. This is still about building understanding—but now, it’s about helping the investor understand you.
Building trust starts with open and honest communication that makes the financial planning process clear and accessible to clients.
- Help your clients understand the services you provide and how they can be used in their personal situations.
- Be proactive about reaching out to clients. Remember, out of sight is out of mind. While you’re at it, try using different communication channels to meet clients where they are.
- Keep clients updated on both the actions you take with their account and what market insights mean for them.
In our research, investors consistently cite an advisor acting in their best interest as a top source of trust. Unfortunately, many clients may not have a good idea of what the term “best interest” means.
Discuss your commitment to the best interest standard by defining what it means for your relationship with the client and their money. A few possible topics to address:
- How do you get paid? Show a breakdown of any costs/fees.
- What happens if the client accepts your recommendation? What is the process that follows?
- Detail how often you will be monitoring their investments.
- State how often you will be meeting with the client.
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