It is a scenario with which most advisors are familiar: clients come in for a meeting and they’re excited about the latest returns in the hot market of the day, be it real estate, stocks or gold. They want to overweight their portfolios in this category, and they claim they want to be aggressive and can tolerate the risk.

An advisor’s role is to ensure that clients’ portfolios match their financial objectives and true risk tolerance. But determining risk tolerance can take reading between the lines and not taking client’s bravado at face value. It also involves strategic communication techniques and information gathering, so you truly know your client.

Toronto-based Assante Wealth Management Ltd. recently introduced a communications tool called Personality Dimensions that helps advisors and their assistants identify a client’s personality type so they can communicate with the client in the most appropriate fashion. The program divides personalities into four quadrants and trains observers to spot the verbal cues that identify each type so they can be recognized, even over the phone.

The four types are labelled orange, gold, blue or green. An “orange,” for example, speaks quickly and is direct. These people want information immediately and are fast to process it, says Gail Wiebe, director of learning at Assante. A “gold” is organized and likes to review options before making decisions. A “blue” is a peacekeeper who likes to work co-operatively and keep relationships harmonious, and doesn’t like arguments or disagreements. And a “green” is cautious and likes to build trust before making decisions.

“With practice, advisors and their assistants can tell the type of person they’re dealing with and tailor their approaches accordingly,” Wiebe says.

Adjusting communication style to personality type results in better exchange of information and more empathy from the advisor, she says. Empathy involves being able to read another person’s emotions, sensing and responding to unspoken concerns or feelings and understanding the issues or concerns that lie behind those feelings. It results in more appropriate, customized advice and, ultimately, greater client loyalty and a more profitable business.

“Almost everyone says they want high returns, but how much risk can they take?” asks Joe Canavan, Assante’s chairman and CEO in Toronto. “What if all major stock markets dropped precipitously, and stayed down for months? Would the client flee to cash and fire the advisor? The advisor needs to have a sense of the client’s emotional tie to money before building a portfolio, then make appropriate allocations between various asset classes.”

Assante has a handful of other tools designed to construct a detailed, multi-faceted picture of the client, and they are best used in conjunction with one another, he says. Every Assante client fills out a detailed “wealth-planning” questionnaire, as well as an “investment policy” questionnaire; contradictions are duly noted, Canavan says.

“If the client’s answers indicate a strong emotional attachment to money and fear of its loss, but he or she doesn’t admit to it, that should be in the advisor’s notes,” he says. “Keeping detailed records is extremely important.”

Assante advisors are encouraged to summarize the salient points of every meeting in writing, and have the document signed by both client and advisor. Over time, trends become apparent from the notes.

“Client needs are becoming increasingly complex,” Canavan says. “An advisor’s job is much more than selling mutual funds.”

Apart from verbal cues and written responses to questionnaires, much can be gained by observing facial expressions and body language in face-to-face meetings and free-flowing conversation. Dr. Paul Ekman, a professor of psychology at the University of California Medical School in San Francisco, has conducted extensive research into recognizing suppressed emotion and evaluating truthfulness. He says the human face has 43 muscle movements that combine to create about 10,000 possible facial configurations. Some are “microexpressions” or very fast manifestations of concealed emotion that are often missed because they usually last less than a quarter of a second, but these fleeting expressions can be extremely revealing to a keen observer.

“It’s a mistake to convince clients that their emotions are ill-founded or detrimental to financial success,” says Bill Bell, president of Aurora, Ont.-based Bell Financial Inc. “The client may need products with more or less risk, more or less guarantees or more or less potential for returns. Recognize that we’re dealing with money on an emotional level — it is not purely logical.” IE

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