There’s a popular myth among some members of the media that massive numbers of Canadians have severed relationships with their financial advisors as a result of the market tumult over the past year. In truth, the vast majority of investors are working with the same advisors they were working with a year ago.

What has changed, however, is how investors are working with those advisors.

One outcome is that advisors will fundamentally need to rethink both the information they communicate and, just as important, how they communicate. Changing these two key dimensions of your communication strategy — what you send clients and how you send it — will be key to future success.



> A Major Shift In Mindset

In understanding the need to shift our thinking on communication, it’s important to look at the broader shift in mindset among many clients.

Until recently, most clients would respond to a recommendation with: “If that’s what you think, fine.” Today, even if the same decision is ultimately reached, conversations are taking longer and clients are asking tougher questions — and often looking for backup through direct access to experts.

Indeed, many clients are looking to collaborate on decision-making. That’s especially true of clients in their 40s and 50s.

This trend is reflected in a comment from Paul Allan, senior vice president of Mackenzie Financial Corp., regarding research on high net-worth Canadians from Toronto consulting firm Investor Economics Inc. : “High net-worth investors are trying to get closer to their money and are listening to multiple sources of information beyond their financial advisors. As a result, advi-sors need to spend more time addressing different viewpoints. Three years ago, clients would typically agree with financial advisor recommendations. Today, they want advi-sors to explain exactly why they are recommending solutions and strategies — and to provide evidence and support.”



> Empowering Skeptical Customers

There’s nothing new about more skeptical consumers. Starting in the 1960s, the baby-boom generation led the charge on questioning authority. You can see this in attitudes toward traditional institutions, such as churches, government, the media and big business.

What’s different today is how this skepticism has translated into changed behaviour, with the Internet playing a crucial role.

Sometimes, it’s hard to remember the days before the Internet. Perhaps the greatest long-term impact of the Net will be the remarkable fashion in which it has levelled the information playing field. That access to information has dislocated business models of intermediaries such as travel agents and put traditional media such as newspapers under huge stress. It has also led to much tougher questions from consumers for everyone they deal with. For instance, doctors talk about patients coming in with pages of questions they’ve printed off the Internet.

It’s clear that many Canadians have changed their attitudes toward their financial advisors and the financial services industry as a result of the events of last year. When you look at what’s happened elsewhere, you can make the case that this spike in skepticism was overdue; the industry is just playing catch-up with everyone else.



> A “Short Attention Span” World

It’s not just the amount of evidence needed to back up recommendations that’s changed; it’s how Canadians want to receive that evidence. There’s less tolerance for financial bafflegab and industry-speak, and more demand for candour, substance and transparency on things such as fees.

And there’s less appetite for reading, generally. Historically, financial communication was paper-based: articles, newsletters and lengthy reports. Clients have long complained about the avalanche of paper they get. It is long on disclosure to satisfy legal requirements, but short on meaning.

In fact, many financial advisors doubt whether most of what they send gets read.

“Our firm’s economist publishes a monthly report that we’re encouraged to send clients,” one advisor says. “The chances of most clients looking at that report approach zero.”



> Introducing Sight And Sound

What makes video so powerful is just the fact that clients are more likely to watch a video than read an article. It’s also the impact of the sight and sound that video brings. The impact of sight and sound on the effectiveness of communication is far from new.

Advertising as we know it today first appeared with the launch of newspapers in about 1700. For more than 200 years, newspaper ads were how companies communicated to customers. In the early 1920s, radio came along, and the first major revolution in customer communication entered the scene. Now, firms could take static words and pictures and add sound to the mix.

@page_break@In 1941, the first television ad appeared — a commercial for Bulova Watch, targeting the 7,500 households with TV sets in New York City. Sight was added to sound and mass communication changed forever.



> The Power Of Video

In early 2009, I conducted a series of morning workshops, outlining strategies to improve communication with clients.

Among the ideas I covered was supplementing face-to-face and telephone conversations with regular emails of articles from credible sources such as the Wall Street Journal, the Economist and Fortune.

A few weeks later, I got a call from an advisor who had attended the workshop. He had started emailing clients articles and had received a generally positive response. Then, one day, he decided to try emailing a video of an interview with Warren Buffett from CNBC. He was blown away by the feedback.

As he puts it: “The response to the articles was good, but the feedback to the video was great. Partly because it was Warren Buffett; but a big component was that clients could actually see and listen to him for the first time. Even if I’d sent an article by Buffett, it wouldn’t have had anywhere near the same impact.”



> David Foot In Action

Recently, my company launched an initiative that allows financial advisors to send clients videos of interviews with financial experts. Among these interviews were several with David Foot, Canada’s leading authority on demographics and co-author of the bestseller Boom, Bust and Echo. In one interview, Foot discussed the thesis in a book by Harry Dent, The Great Crash Ahead: that demographics will cause a market collapse.

Last autumn, an advisor called to tell me about an experience he’d just had. A million-dollar client had called him, saying he’d just finished Dent’s book and had decided to go to cash as a result. Despite all the advi-sor’s best efforts, nothing could change this client’s mind. At lunch, a colleague told the advisor about the Foot video. The advisor arranged for a short meeting at the client’s office that afternoon and played the Foot interview on the client’s computer.

Afterward, the client thanked him, said that now he understood the advisor’s perspective, apologized for wasting his time – and asked if they could just pretend that the morning’s conversation had never taken place.

“What made this work,” the advisor says, “was that my client could see and hear Foot in real time. If I’d sent an article by Foot making the identical points, it wouldn’t have had the same impact.”

Let’s be clear: the written word will always be with us. In a time-pressed world, reading is still the most efficient way to assimilate information. And with the launch of digital devices such as Amazon.com Inc.’s Kindle, Sony Corp.’s Reader and Apple Inc.’s new iPad, reading in real time will become easier.

Further, there are some complex topics that just don’t lend themselves to video. And, of course, there are some clients who will always prefer to receive information in writing. For good or for ill, however, those clients are shrinking in number. We live in a world that’s moving to shorter and shorter attention spans, with greater emphasis on immediacy and on the visual medium.

Radio and TV revolutionized advertising by introducing sight and sound. Video is doing the same in the online space. IE



Dan Richards is president of Clientinsights in Toronto For other columns and access to his blog, visit www.investmentexecutive.com.