Financial advisors typically make a very big mistake when trying to persuade prospective clients that they’re the right person for the job: They talk too much, said Moira Somers, a financial psychologist and executive coach in Winnipeg, at the Financial Planning Standards Council’s annual CFP Professional Symposium in Toronto on Wednesday.
“The evidence shows that client satisfaction is directly related to how much air time the client gets, especially during that first meeting,” Somers said.
An advisor’s tendency to be chatty is motivated by a need to prove him- or herself as having the proper skills and education for the role, but it actually leads clients to feel that the advisor is not trustworthy.
“There we are, trying to prove our credentials and [the clients] are, thinking, ‘I am not going near this person’,” Somers explained.
Advisors can resolve this potential problem simply by finding out what the client wants to know about the advisor. Advisors could ask the client the reason that brings that person into the office and what that individual would like to accomplish during the appointment.
Another problem that occurs within meetings is that advisors’ language is simply too “fancy” for clients, said Somers, who referred to the issue as the “curse of knowledge.”
“Once we learn something, we can’t un-know it … We don’t know what it is like to be a non-professional,” she explained. “The problem with all of that fancy vocabulary is that it slips into our conversation with our clients in a very real way. They do not speak the language and it makes them feel stupid and embarrassed.”
This embarrassment is one of the major reasons people give for not tending to their finances, she added.
The test of understanding is that clients should be able to go home and explain to their family the financial advice they were given. Also, if they do not fully understand what they have agreed to when signing a document, they have not provided truly informed consent, which can give rise to liability issues if advisors are held to a fiduciary standard, Somers warned.
“Uncomprehending clients are the ones that are more likely to skip the followup appointments with us, to reject recommendations and turn to non-professionals for help,” she added.
Determining what words or concepts your clients do not understand can come from asking them to tell you what they did not comprehend or even giving them some of your literature and asking them to highlight the terms they do not understand, Somers suggested.
If possible, rework those pamphlets so they do not include those confusing terms and find other ways to explain unclear ideas when you are speaking with clients.