Nerd\'s Eye View Archives On Client Trust & Communication

The ‘Behaviorally-Enlightened’ Fiduciary’s Dilemma In Serving Clients Best

October 23, 2019 07:04 am 1 Comment CATEGORY: Client Trust & Communication

While there has been ongoing discussion at both the Federal and state levels of how a fiduciary standard should be defined from a legal perspective, and to whom those standards should apply, there has not been much discussion on what it means to be a fiduciary from a moral perspective. Furthermore, this discussion has not addressed the ways in which acknowledging behavioral insights has complicated determining how a fiduciary ought to act, because, it’s actually simpler to determine the ‘best’ advice for a professional to give a client when the only considerations are financial in nature. If financial advisors, as fiduciaries, wish to incorporate behavioral considerations into how they advise clients, determining which course of action to suggest as ‘best’ becomes more complicated.

In this post, Derek Tharp – lead researcher at Kitces.com, and an assistant professor of finance at the University of Southern Maine – discusses his January 2018 Journal of Personal Finance research paper, “The Behaviorally-Enlightened Fiduciary: Addressing Moral Dilemmas Through a Decision-Theoretic Model of Moral Value Judgment”, where he examines whether a fiduciary has a duty to advise clients from a “behaviorally-enlightened” perspective (reaching a conclusion of ‘yes’), and explores some of the underappreciated moral dilemmas that result from advising clients from a behaviorally-informed perspective.

Why would a behaviorally-informed approach lead to an increase in moral dilemmas? Most importantly, advising clients based on something other than objective financial facts necessarily opens the door to acting paternalistically. Should a financial advisor tell a client about an ‘optimal’ solution if they think the mere process of doing so might lead to a worse outcome than just presenting a ‘realistic’ solution? What if they are just trying to nudge clients in the right direction? Where do advisors draw the line, or should they even be worrying about this in the first place?

Nevertheless, there are some circumstances where advisors are perhaps justified in acting paternalistically, but those circumstances are probably fairly rare and advisors should take seriously their duty of disclosure to clients. Specifically, if the potential upside of a non-disclosed strategy to a client is small, the potential down-side to a non-disclosed strategy to a client is large, and a fiduciary is reasonably justified in their beliefs regarding potential outcomes, then a fiduciary may be more likely to be justified in advising a client from a “behaviorally-enlightened” perspective.

Ultimately, the key point is that financial advisors, as fiduciaries, are faced with new moral dilemmas that arise from attempting to incorporate behavioral insights into how they advise clients. While much of the prior focus has been on the legal responsibilities that fiduciaries have to serve their clients, we need to spend time wrestling with moral considerations as well!

Future Self-Continuity: How Envisioning The Future Is Important To Financial Planning

October 16, 2019 07:10 am 3 Comments CATEGORY: Client Trust & Communication

Developing good habits, like eating healthy, exercising, and saving for a rainy day, is a challenge that we all share. Clients of financial advisors are no exception, as no matter how carefully advisors craft financial plans and formulate sensible strategies to help clients achieve their goals, the majority of those clients struggle with following through on their tasks, even though they are 100% on board with the strategies they’ve agreed to adopt!

Future self-continuity, i.e., the ability to relate to one’s ‘future self’, is one factor that may explain why some clients struggle with plans they know, on a practical level, make sense to follow, but still have difficulty following through on the tasks they need to carry out. Research in the area of future self-continuity (FSC) – which examines three general areas: relatability, vividness, and positivity – suggests that increasing future-self continuity (i.e., improving one’s ability to relate to their future self) can increase financial self-efficacy, leading to a higher likelihood that clients will follow their financial plans and carry out the tasks outlined in their plans.

The first area of FSC research, which examines relatability, asks how a person’s perception of their ‘current self’ compares to their vision of their future self, with respect to goals, values, and priorities. This is important because the more a person considers their future self a completely different person (versus an older version of themselves) the less likely they will be inclined to act on something today to benefit their future self. For example, someone who identifies their future self as a stranger may have a difficult time committing to saving for retirement on a regular basis, even though they may understand intellectually that it is for their own benefit. The second area of research, vividness, asks how clearly a person is able to envision their future self, factoring in physical and circumstantial changes. For example, a client who has recently divorced (or whose spouse has died) that is able to clearly envision a version of their future, without their past partner, may have an easier transition recovering from what can be a devastatingly difficult situation. And the third area of research, examining positivity, asks about the level of esteem one has for their future self and how important is it for the future self to be happy and successful. Which is essential for achieving goals in a financial plan, because the more a client feels their future self is worth planning for, the more likely it is that they will follow their plan.

Ultimately, the key point is that FSC is a useful (and simple!) tool that advisors can use to help clients better relate to their future selves, which can make it easier for them to follow the strategies implemented in their financial plan, as it’s the future self who will reap the rewards of their goals. Assessing FSC can also be useful for advisors to gauge any psychological gaps that may exist for a client between their current and future selves. Not only can advisors use these concepts to determine whether to check in with their clients more or less frequently (as clients who are less attuned to their future selves may benefit from more frequent reminders of why sticking to their plan remains important in the long run), but it can also help the advisor identify the underlying reasons why their client may find it challenging to stick to their plan in the first place.

Ambiguous Loss: Helping Clients To Grieve Even Before A Loved One Passes Away

September 25, 2019 07:03 am 1 Comment CATEGORY: Client Trust & Communication

Loss is an experience that all humans share at one point or another, and when a loved one dies, the grief is undeniably and devastatingly certain. But what about the grief that we might feel for a loved one who is still alive, only physically separated from us? Or for one who is mentally incapacitated, but who no longer has the capacity to recognize us? These feelings of grief for someone who is still alive, but no longer present (either physically or psychologically), are referred to as ‘ambiguous loss’. For example, some clients might have relatives who are no longer mentally lucid (psychological ambiguous loss), and some may have loved ones who need full-time care provided by an assisted living facility (physical ambiguous loss). And as would be expected with extended human lifespans and increasing cases of mental incapacity that comes with a growing, older population, feelings of ambiguous loss are on the rise.

Because the average human lifespan has increased over the last several decades, we are now at a point where family members are commonly expected to take on the responsibility of caring for elderly parents or spouses, many of whom are afflicted with neurodegenerative diseases such as Alzheimer’s and dementia. Accordingly, advisors may find themselves dealing with clients suffering from ambiguous loss, especially when conversations are raised around incapacity planning and estate planning.

While most financial advisors don’t have formal training in grief management, there are some basic guidelines that can be effective in working with clients suffering from ambiguous loss. As a starting point, mentally preparing for client conversations, for example, can include a series of questions that advisors ask themselves about their own personal attitudes around grief and loss in general, and also around understanding the situational causes of their clients’ ambiguous loss. Understanding the daily routines and relationships that the client may be struggling with can also help the advisor relate more empathetically with the client. And starting any incapacity discussion as early as possible to give clients ample time to process their feelings of ambiguous loss while adjusting to their new responsibilities can prove helpful for the client to transition through change.

Additionally, the advisor can support clients by acknowledging their feelings of ambiguous loss, and helping them adjust to the ambiguity they face by planning for a broad range of financial scenarios. This can help clients attain a level of certainty over what they have control over versus what variables in their situation will inevitably remain unknown, and that may eventually need to be addressed. And last, the advisor can play an important role in their client’s life by helping them through the difficult process of understanding and accepting what is happening to them, by simply giving them time and space to share their stories when they are ready to do so.

Ultimately, the key point is that ambiguous loss is commonly experienced by many people, and advisors should be prepared to work with clients and their issues in a sensitive yet productive manner. The conversations will be difficult and may be highly charged with emotion, but offering compassion and providing support can have a huge impact on the client’s ability to make sound financial decisions, as well as establish trusting relationships not only between the advisor and the client, but with the client’s support system as well.

When Heuristics And Biases May Actually Improve Financial Decision-Making

September 18, 2019 07:24 am 1 Comment CATEGORY: Client Trust & Communication

Making good financial decisions should be based on a thorough analysis that is free of influence from the use of behavioral biases or heuristics… or so we’re told. We should strive to adopt an objective point of view and choose the best path forward based on factual data, avoiding gut-instinct, rules of thumb, and other biases that could influence our behavior. This perspective has become so common that many financial advisors now market one of their key value-adds as their ability to 'de-bias' their clients and provide an objective point of view. While there are certainly cases where bias and heuristics can interfere with good client decision-making, is it possible that we’ve adopted too negative of a stance towards bias and heuristics when making financial decisions?

In this post, Derek Tharp – lead researcher at Kitces.com, and an assistant professor of finance at the University of Southern Maine – explores this question and the research summarized by Gerd Gigerenzer and Henry Brighton, which finds that not only can bias and heuristics be potentially valuable tools from a cost-benefit perspective, but they can, under the right circumstances, even improve decision-making beyond what could be achieved with extensive data collection and analysis. Of course, it has always been acknowledged that there is a cost associated with gathering and analyzing data. It’s no surprise that at some point the costs of further analyzing a decision are not worth the benefits. But the insight highlighted by Gigerenzer and Brighton is that, in some cases, less truly is more!

Under the right circumstances, bias and heuristics can help us make better decisions by allowing us to avoid 'overfitting' historical data and making the most efficient use of our limited cognitive resources. Similar to intuitively knowing how to catch a ball, a skill based on heuristics developed and ingrained over a long history of evolution and natural selection (despite the fact that no human can, in the moment, do the calculus necessary to compute a ball’s trajectory and then precisely position their body to complete the catch), some heuristic techniques allow us to ignore what otherwise might seem to be important factors, but still arrive at a solution not only equal to what we might have accomplished via a more cognitively demanding route, but actually better instead!

Interestingly, the conditions under which bias and heuristics are the most efficient (i.e., an environment where data is lacking, or where the data appears to be too random or 'noisy' to be considered useful) are precisely the conditions under which we make many financial decisions, which could explain why there are so many best practice ‘rules of thumb’ (e.g., the 10% savings rule, the 70% replacement ratio in retirement rule, and the ‘cost-per-use’ strategy to make purchasing decisions) that are still remarkably pervasive in society and effective in helping people achieve their financial goals.

Of course, there’s danger in relying on a rule of thumb that is inappropriate for one’s circumstances. Few people who start saving at 55 are going to be successful saving 10% of their income. But, at the same time, it’s possible that our attempt as financial advisors to rely on in-depth analyses of a client’s situation (and the use of parameters, such as safe withdrawal rates based on historical data) may 'overfit' a client’s situation and miss out on some of the wisdom embedded in heuristics and biased decision-making. This perspective may also help explain why, despite nearly consistent proclamations that Americans aren’t saving enough, no epidemic of elderly poverty has actually come to fruition. It’s possible, and there are studies which have found, that the failure to account for factors such as Social Security income in retirement or the declining spending throughout retirement have systematically overstated how much savings many Americans need.

Ultimately, though, the key point is that we’ve perhaps been too negative towards bias and heuristics. Bias and heuristics are not inherently good, but they aren’t inherently bad either. It is crucially important to acknowledge the ‘ecology’ in which heuristics and biased decision-making can be rational, as well as the environment in which greater data gathering and analysis may be useful. By effectively using (and refining) heuristic techniques when it is appropriate to do so, we can develop an arsenal of useful decision-making tools to better help our clients!

Kitces & Carl Ep 15: Why Are We So Afraid To Just Listen

August 29, 2019 09:05 am 1 Comment CATEGORY: Client Trust & Communication Kitces & Carl Podcast

Although gaps in a conversation are often awkward and uncomfortable, when used effectively, they can become power tools for financial advisors to foster deeper connections with their clients. Because, beyond just hearing what financial concerns a client may have, advisors can use the opportunity to give space to the conversation, which helps to establish empathy and build trust, and in the process sometimes bringing to light the unique roadblocks clients may have in executing their plan.

In our 15th episode of Kitces & Carl, Michael Kitces and financial advisor communication expert Carl Richards sit down to discuss the value of really listening to clients, and how, by simply talking less and listening more in client meetings, an advisor can improve the chances that a client will stick to their plan.

In general, financial advisors are trained to be knowledge experts and to communicate that knowledge to clients. But even though clients seek out financial advisors for their technical expertise (after all, the main value-add financial advisors offer are the recommendations that help clients down the path of achieving their financial goals), what may not be so obvious are the reasons that clients will (or will not) successfully follow those recommendations. Reasons that can’t be discovered… unless the advisor gives the client the space to reveal them.

Because no matter how perfect and comprehensive a plan may be, it will offer little value if the client does not know how, or is unable, to follow it. Like a swimming instructor teaching a fearful student how to swim, it may be very clear to the advisor what steps the client needs to take and how to communicate what those steps are. Yet it may be harder to see the doubts and fears that the client may be holding on to – or about whether they can even trust the advisor in the first place – which, in turn, can give rise to a client’s hesitation and reticence to follow through… in essence, a “gap” between what the client knows (i.e., what you tell them), and what a client actually decides to do. But by encouraging clients to fully talk through their concerns – and by using silence as an opportunity for the client to reflect deeply on the questions asked – advisors can empathetically understand what a client’s true priorities are, and particularly, what may be creating the knowledge/action gap for the client.

In the end, the key point is simply that it’s okay, and maybe even potentially valuable, to have some silence during a client conversation, because it can lead to a better balance between the delivery of knowledge and the discovery of nuances that make the client a unique individual. Ultimately, by asking probing, relevant questions, and leveraging silence, advisors can become better listeners and strengthen their relationships with clients, and in doing so, may even identify the obstacles that are keeping them from sticking to their plan in the first place.

Managing And Nurturing Clients Through The Lifecycle Of The Advisor-Client Relationship

August 26, 2019 07:02 am 1 Comment CATEGORY: Client Trust & Communication

Over the past decade, the financial advisory industry had continued to shift away from being primarily sales-based (where every new year starts off with little to no income, and there’s immense pressure to always be finding the next new client) and towards a recurring revenue model (typically based on AUM fees). The good news is that, after a few years of building such a recurring revenue business, advisors can spend more time providing more and better service to their existing clients, without needing to worry as much about finding the next new one (since just keeping those recurring-revenue clients itself becomes very lucrative over time!). The bad news, however, is that advisors must also learn a whole new set of interpersonal and management skills to ensure they really establish and keep that ongoing relationship… skills that often have very little to do with the formulation and delivery of financial recommendations themselves. In other words, in the ongoing advisory business, one of the key challenges is learning how to manage and nurture those evolving client relationships (in the face of the clients’ own changing needs and expectations).

Accordingly, in this guest post, financial advisor Adam Pearce explains how client relationships can be viewed as developing across four distinct phases, potential pitfalls that an advisor may encounter through those stages, and the potential impact of client needs in each stage may have for an advisor’s workflows and client service models.

For instance, in the Onboarding Phase, new clients closely watch to see if the expectations that were set while the advisor was selling themselves and their services are being met (i.e., does the advisor really follow through on the quality of service they promised upfront?). Accordingly, it’s particularly important for the advisor to be especially proactive as accounts get set up and paperwork gets processed, and to make sure that there is frequent communication so the new client sees that their advisor is working hard on their behalf… to allay about doubts they may otherwise have about whether they made the right decision (to hire the advisor) in the first place. In other words, it’s not just about the paperwork itself, but an opportunity for the advisor to demonstrate – in how they handle and communicate about the paperwork – the advisor’s own service standards and affirm that the client really made a good decision.

As the relationship moves into the Feeling Out phase - which can span over the first few years, and, statistically speaking, is the most likely time that a client will decide to leave - advisors should focus on “excelling at the basics”, which means continuing to meet expectations, maintaining frequent contact, and cementing a personal connection with the client… which could even include getting to know them socially as well.

After those first few years, though, the ongoing relationship enters the Maturity Phase, which is often characterized by a decline in the frequency of client-initiated communication… not because they don’t see as much value in the service they are receiving, but because their comfort level typically grows to the point where they trust that their advisor is doing their job and don’t feel such a need to check in as often. Yet, it’s still essential that the advisor continues to proactively engage with the client to make sure everyone is on the same page when it comes to such things as how often they should come in for in-person meetings. Even if clients aren’t asking for more meetings, the advisor still gets credit for offering them.

Eventually, a Transition Phase will emerge, where the client faces some major change in their life (e.g., divorce, career changes, retirement, or health issues). Which in turn has the potential to put new strains on the advisor-client relationship. Which means it’s more important during this phase that the advisor once again is being effective at handling the little details, but making sure they’re adapting and changing along with their clients’ new needs and preferences, and are again actively reaching out to stress the importance of proactive planning during these major transitions.

Ultimately, though, the key point is simply that advisors need to be aware of the changing stages that client relationships will go through over time, so they can take advantage of the various opportunities they have to deepen the relationships they have with their clients (which do, in fact, vary by stage). And the best way to make that happen is by having processes and workflows in place to ensure a consistent level of service… because if advisors can’t even handle the basics smoothly, it creates doubt in the mind of the client, while those advisors who can deliver reliably on the fundamentals help assure clients that they can know what to expect… and will trust that their advisor is taking care of them!

Kitces & Carl Ep 13: The Better Way To Send Market (And Other) Commentary Emails To Clients

August 1, 2019 07:01 am 2 Comments CATEGORY: Client Trust & Communication Kitces & Carl Podcast

In our last episode, Kitces & Carl opened a proverbial can of worms by asking if financial advisors still, in this day and age, send out market commentary to their clients. And if so, what do they send? The general conclusion was that, yes, advisors still need to touch base with their clients, outside of their regular service cycle, using some sort of bulk communication tool or personalized report. Because doing so accomplishes several goals, including and especially that it demonstrates to clients that the person they trusted to manage their life savings is “paying attention.”

Regular communication, meanwhile, is especially important for those clients who are in the “Cone of Trust” (e.g., that stage of the relationship where a client has been with an advisor long enough to meet much less frequently and understands that the advisor will reach out if there’s a problem, and vice versa) because it helps ensure that the client actually stays in the Cone of Trust. Unfortunately, though, while our intrepid hosts were able to conclude that sending something is better than sending nothing (and especially better than anything that features a couple holding hands against a backdrop of a lighthouse on the beach), they ran out of time before they could answer the question: What should advisors be sending their clients?

So, in our (lucky) 13th episode, Michael Kitces and financial advisor communication expert Carl Richards sit down to discuss why it’s important to send regular commentary, provide a specific example of an easy and effective way to let clients know that you are thinking about them and their challenges, and why it matters so much that it ultimately comes from you (versus any number of white-labeled, off-the-shelf offerings).

In general, what advisors send out for regular communication generally fell into three buckets. Some use third-party commentary and other materials from a reputable source (some of which can be “white-labeled”), others question the value of even sending anything out at all (since the objective is for clients to not focus on and become concerned about short-term market gyrations), while still others insist no one should be sending content unless it was produced in-house (since the goal is for the advisor to establish their own expertise and authority).

For advisors who fall somewhere between the second and third camps, but whose skill set doesn’t include content creation, one effective strategy is to send out a collection of interesting articles (which may or may not have anything to do with money or “the market”), along with a short comment on why you found it useful. It provides a means of still connecting with clients (since ultimately, whether you connect frequently can be just as important as what you send to connect). And this way, when something noteworthy in the market does come along, your clients (or even prospects) are already accustomed to your cadence.

Ultimately, the key point is simply that it does matter that advisors send something to their clients and that they do so on a fairly predictable basis. Because if you are consistently communicating with clients, you can dictate the tone and focus of whatever it is you’re sending. Which means at the end of the day, what matters is that you do take some time, on a regular basis, to send something (preferably in your own words… even if it’s just a sentence or two about why you find a particular article useful). And when you do, you send a clear signal to your audience that you’re thinking about them… and about the responsibility you have as a steward of their life savings!

Kitces & Carl Ep 12: Communicating With Clients To Bring Them Under The Cone Of Trust

July 18, 2019 07:03 am 3 Comments CATEGORY: Client Trust & Communication Kitces & Carl Podcast

Although “real” (i.e., holistic and comprehensive) financial planning encompasses far more than “just” investments, for better or worse, clients look to their financial advisors as people who are (at least) more knowledgeable than your average bear in regard to “the market.” Because, while providing advice on a client’s portfolio is just one part of the ongoing financial planning process, it’s natural for clients to worry about their investments (or more generally, their assets) and look to their advisors for reassurance that their life savings is being looked after… especially when the financial media consistently bombards them with clickbaity doom-and-gloom headlines. Which, in turn, leads to the question: should advisors send their clients market commentary to demonstrate the advisor’s expertise and try to soothe their nerves… or does doing so just risk making them focus even more on investment issues?

For our 12th episode of Kitces & Carl, Michael Kitces and financial advisor communication expert Carl Richards sit down to discuss if sending market commentary to clients actually helps solve any problems (or if it’s just a relic of a product-centric industry), what sorts of clients benefit the most from proactive communication (and why), and ultimately, why sending investment market commentary to clients may be a good thing to do… even if the majority of your clients never even read it!

As a starting point, though, it’s important identify the problem that advisors are really trying to solve by sending market commentary to clients, and which types of clients need such a solution. Because the reality is that, no matter what advisors send, those clients who are true delegators (and hired an advisor in the first place so they didn’t have to be bothered with keeping track of their investments) won’t be interested. However, many clients – even those who delegated their portoflios – do feel like they need to “check in,” at least from time to time, to be reassured that they made the right decision when they hired the advisor to tend to their life savings. Which often manifests itself by the client asking about current market affairs… not because they really care, but because they want to know that their advisor is really “on top of things.” And not only is it a good idea to make sure the advisor can answer their questions, but regularly sending out commentary is a good way to proactively address whatever the topic du jour may be once (rather than fielding potentially dozens of identical phone calls on the same investment concern).

Meanwhile, as client relationships mature over time, meetings naturally become less frequent (as trust levels have developed, and most of the early planning heavy lifting has already been done), so simply staying in touch even by sending out bulk emails with the advisor’s “commentary” can help prevent the dreaded transfer paperwork from landing in the inbox. As no matter how much we’d like to think we’ve “trained” our clients to stay focused on the big picture and ignore short-term market fluctuations, the reality is that sudden spikes in volatility will cause clients’ loss aversion instincts to perk up.

Ultimately, though, the key point is simply to realize communicating with clients outside of their regular meeting rotation matters, and sending them some form of investment commentary (whether it be from a third party or written in-house) is a great way of providing reassurance that you are versed in whatever may be going on in the market at any given time. Even if you always wind up with the same conclusion, which is that your clients are properly allocated and are served best by sticking with the plan you’ve developed with them.

Kitces & Carl Ep 10: Transitioning Long-Standing Clients To Create Room To Grow

June 20, 2019 07:07 am 4 Comments CATEGORY: Client Trust & Communication Kitces & Carl Podcast

The perennial problem facing financial advisors throughout their careers (and especially at the beginning) is simply getting in front of prospective clients… and then convincing them to actually hire you and pay for your great advice. However, for those advisors who eventually reach the point where their business is sustainable, and have clients who understand the value that a “real” financial advisor brings to the table, the problem can easily morph from not having enough clients to keep the lights on… to having too many clients to be able to serve effectively (and no remaining capacity to add more and grow further).

Because the reality is that we can only do so much before our calendars (and our brains) reach their limits. It’s at that point where the most obvious answer is to start hiring some team members to help. But that solution can create all sorts of new challenges, and there are plenty of advisors aren’t interested in all the other stuff that comes along with hiring and managing employees… and find that they’re stuck as a result. They don’t have room for more clients, and they’re not interested in hiring and managing employees to create more capacity. And so the question then becomes: how can you, as a financial advisor, create room in your practice to be able to start growing again, especially if you do not want to increase your staff headcount (and management responsibilities) in the process?

In our tenth episode of “Kitces & Carl”, Michael Kitces and financial advisor communication expert Carl Richards sit down to discuss some reasons you may need to start transitioning long-standing clients (some of whom may have given you a shot early on when no one else would, but consequently pay you far less than what it takes to service them) to make room so you can help others, some practical steps for communicating such a transition to those clients, and why arguably it’s your duty to do so… in order to ensure that all of your clients are getting the level of service they deserve.

As a starting point, it’s important to recognize that creating more capacity in your firm by transitioning away some long-standing clients isn’t about just booting those clients to the curb for the sole purpose of finding other, more profitable clients. But the reality is that the clients who you’ve “outgrown” would probably be better served somewhere else anyway. Or put more simply, your “C” clients are almost always someone else’s “A” clients. Which means transitioning them can be win-win-win for you (creating capacity), for the client (receiving better service as an A client), and for the other advisor (who may be thrilled to grow with the clients that aren’t a good fit for you anyway now!).

That still doesn’t solve the problem, though, of communicating this to your clients, some of whom might well have their feelings hurt by your decision. Practical ways of effecting this transition include: raising your minimum fees (in order to serve your clients well, and do all the things you do for them through the year) and letting the client decide for themselves if they value your (higher-fee) advice enough to continue on as your client, sitting down and simply telling them that you’re changing the direction of the firm and (with their blessing) would like to facilitate their transition to another advisor who’ll be a great fit for them, or simply telling them that you’ve been examining all of the relationships in your practice and feel that you’re simply not a good fit for them at this point in their lives.

Because at the end of the day, you are running an advisory business, and that’s nothing to be ashamed of. Taking on the responsibility of advising clients on the best way for them to manage, grow, and use their life savings is the very mission of that business, and ultimately you have to ensure that the direction of your practice is aligned with what your clients need… and if it’s not, it’s your job to tell them.

Finding Your Own Money Story To Better Communicate With Clients

June 5, 2019 07:06 am 1 Comment CATEGORY: Client Trust & Communication

It’s difficult to give financial advice to others if you don’t have your own financial house in order, first; not that anyone – including financial planners – is “perfect” when it comes to their own money, but in the end, if financial advisors can’t even follow the advice and go through the process themselves, it suggests that, at the least, there’s room for improvement in the advice itself or how it’s delivered.

In fact, arguably, one of the best ways for financial advisors to really understand what it takes to give good financial advice is to better understand their own financial challenges and what they need to change to improve their own situation… akin to how therapists become better at providing therapy by going through the process themselves.

Money exercises that financial advisors can go through (by themselves, perhaps for future use with clients as well) include the Money Egg (sketching out some of your earliest money memories, reflecting on whether they were positive and negative, and considering how those embedded money memories may be impacting your decisions today), assessing your Money Scripts (do you tend towards Money Vigilance, Money Status, Money Worship, or Money Avoidance?), and considering how your prior money experiences may have created Money Narratives that now impact (or even burden) your everyday decisions (e.g., my advisory firm is a reflection of my self-worth, so I have to keep growing my firm to grow my status… even if I really don’t financially need a larger firm at all!).

Ultimately, many (or even most) financial advisors may feel uncomfortable doing such deep self-reflection on their own financial situation and may find it awkward and intimidating to get help and outside advice around their own money challenges. Yet at the end, when clients are asked to do the same things themselves with a financial advisor, arguably going through the process as an advisor provides a good perspective (and perhaps even empathy-building) for the stress and emotional turmoil that clients may be feeling in the financial planning process as well!