As advisors, we have all found ourselves in situations where a client believes he knows better. The advisor-client roles suddenly appear reversed as the client holds forth about what strategy or investment plan must be implemented. It may be, for example, that your professional experience and training dictate a resolute financial plan to be fully invested in equities for long-term growth regardless of short-term market turbulence. When the market shows signs of volatility, your client demands that you sell even though it is the worst possible time. You just know that this can’t be good!
In this kind of situation, many of us avoid saying “no” even though we should. We become anxious about how our clients may take it, and the defensiveness and anger that it may cause. We may deal with this by trying to avoid the issue to the extent possible. Even worse, we sometimes acquiesce when we really should be saying a resounding “no!”
Knowing how to say “no” constructively and positively is a skill that we all need in order to manage our relationships with authenticity and transparency. In this month’s column, we offer a four-step formula to say “no” without the negativity associated with it, and in fact, without even uttering the word.
1. Acknowledge the Client’s Point-of-View
There is a vast difference between understanding and agreeing. Many people are reluctant to make an effort to understand for fear of it being misconstrued as agreeing. It is possible to understand another’s opinion immaculately and even to argue the other party’s case more articulately than he could himself – and yet disagree vehemently. Moreover, the other party is far more likely to listen to you and take your point-of-view seriously when he knows that you have listened and understood his point of view.
When confronted with a client that challenges your professional judgment, resist the urge to immediately contradict him. First show him that you are listening and have understood. In our example above, you may do this by paraphrasing his concern: “If I am understanding you correctly, the continuing market volatility is a cause of great concern and you would like to do something proactive. Is that accurate?” This will indicate that you are fully present and engaged, walking right alongside the client figuratively speaking. When you vigilantly apply this first step, the client will be much less defensive and resistant to what you have to say.
2. Explain Your Concerns
After having demonstrated clear understanding of the client’s views, explain your own concerns and constraints. When you convey this in a reasonable and legitimate way, the client will understand that you are not stubbornly unwilling to comply, but rather unable — an important distinction when saying “no”. You might say: “As your financial advisor, I take my fiduciary responsibility very seriously. Based on my professional expertise, knowledge and experience, I cannot advise you, in good conscience, to sell all your equity investments now because I feel that this will set you back enormously in the long term.”
3. Invite the Client to Suggest Alternatives
Once you have adequately explained your own concerns and constraints, invite the client to brainstorm some possible alternatives. Help the client search for other ideas that could meet his needs and concerns while still maintaining the integrity of your advice. Going back to our example, you could ask: “What other ideas can you think of that would make you feel more secure under the current economic conditions and yet at the same time not derail the original strategy?”
This is a useful step, in that it communicates very clearly that even though you may be saying “no” to the client’s specific request, you are however saying “yes” to helping resolve his problem.
Furthermore, by engaging the client in searching for solutions to his problem, he will be taking ownership and responsibility, which will encourage him to explore and examine options more carefully.
4. Tell the Client what you are Prepared to Do
After explaining your concerns in fulfilling a request you cannot fulfill, and then inviting the client to brainstorm alternative solutions with you, tell the client what you would be willing to do. You might suggest: “Although I have great reservations about your desire to sell equities right now, I would be prepared for us to have a conference call with an esteemed economist whom I know to obtain his opinions. Is that something that would be of value to you?” or: “Perhaps I could go along with your idea of selling up to 15 percent of your equities or further diversifying them in a way that would hedge your risks to some extent without jeopardizing the long-term strategy altogether”.
This four-step approach to taking the negativity out of “no” works because saying “yes” to helping the client look for alternatives and “yes” to what you are willing to do mitigates the “no” to the client’s specific request, thereby avoiding defensiveness, anger and a feeling of rejection.
Finally, even though your client may accept your constructive “no,” the relationship may be adversely impacted, or in some instances depleted. Furthermore, in a long-term client-advisor relationship this situation may recur and you will have to stand your fiduciary ground again. It is therefore important to replenish and nourish the relationship. Get together for coffee or lunch and make a point of including the client in pertinent events. Show that your reluctance to comply with the request was not personal in any way.
Also (genuinely) acknowledge the event verbally and encourage the client by saying something like: “I appreciate how stressful this has been for you. I feel however that the way we managed this situation was productive both in terms of our working relationship and also in terms of the decisions reached. Thank you for your understanding and trust.” This kind of reaching out will help to restore confidence to the relationship. In this regard, remember the words of William Shakespeare in The Taming of the Shrew: “Do as adversaries do in law. Strive mightily, but eat and drink as friends.”