From the April 2011 issue of Research Magazine • Subscribe!

April 1, 2011

Don’t Be a Robot

What advisors can do that technology cannot.

Imagine if financial advisor services were relegated entirely to technology, and the role of financial advice was replaced by keyboard strokes. Imagine if financial advisors became completely redundant in the face of innovative software entrepreneurs. Imagine if clients were subscribing to websites that were managing their investments automatically with uncanny success. Imagine that you were competing for clients, not against other financial advisors, but against cyberspace!

Now in this state of imagination (which by the way, is already reality) challenge yourself and ask: “What value am I, as a human being, adding to my clients’ needs beyond these comprehensive technological solutions and services?”

As I ponder this question myself, I recall the story of The Mad Hatter’s Tea Party from Lewis Carroll’s Alice’s Adventures in Wonderland. At that party, the March Hare is most disturbed about his broken timepiece which he has attempted to mend by applying butter to the inner mechanism. The Mad Hatter, puzzled by the bumbling bunny’s action exclaims: “I told you butter wouldn’t suit the works!” The hare responds: “But it is the best butter,” obviously perplexed as to why such a superior product had not repaired the watch.

Even though technology may be “the best butter,” it does not always “suit the works.” No matter how advanced technology is, it alone cannot replace the interpersonal connection, human energy, depth of understanding, personal interaction and special bond that exists in a face-to-face client encounter.

This human factor is crucial because as financial advisors we are providing services to our clients beyond just technical investing. We educate them about financial markets, products and performance; we impart knowledge; we answer their questions and perhaps more importantly, we challenge them by asking questions; we help them achieve clarity; we empower them; we reassure them; we provide creative solutions to their problems; we allow them to experience control over their financial future; we provide encouragement and inspire confidence in times of self-doubt; we protect them from ill-advised strategies; we guide them through the tough times; we are their partners and friends sharing in their dreams and cheering them on; we are, without doubt, their counselors, confidants and advisors in every sense of the word!

If all we are doing is technical investing, than indeed we will be usurped and made redundant by innovative technology.

So we stand at a crossroad where technology and powerful interpersonal capability intersect and compete with one another for the future of our profession. To be sure, it is imperative that we stay ahead of the technology curve, but to compete we also need to develop sophisticated and advanced skills, processes and techniques to manage our client relationships effectively, productively and profitably.

Helpful Conversation

A fundamental skill that is crucial in all of this — a skill that very few people have — is the ability to be in control of any conversation at any time. This does not mean in a controlling and manipulative way, but rather in a subtle way of leading, steering and funneling the interaction and not reacting with emotion and defensiveness. This competency allows us to manage and guide those conversations towards productive outcomes, with grace and composure at all times. It allows our clients to see us as solid and competent professionals, which inspires their trust and confidence.

To illustrate this point, I will share a recent conversation I had with a client whom I have been coaching in these areas of skill development (with his permission of course). In one particular session he related to me how his client had challenged his integrity as a financial advisor.

“How did you respond?” I asked my client.

“Well I can’t have clients who don’t believe in me or trust me, so I decided to fire him” said he.

I then asked him if he felt that the relationship would have been worth salvaging had it been possible.

“Oh! Of course it would have. He accounted for close to 20 percent of my annual income! But it unfortunately was not possible.”

Because my client did not have the refined skills to manage this difficult conversation, he allowed himself to become defensive and reactionary. He did not deliberately and decidedly fire his client, but he lost his client due to his incompetency in being able to lead the conversation towards a better outcome.

Let us now see how this conversation might have been conducted so as to achieve a more positive outcome.

Client to advisor: “I must tell you that I find your integrity questionable and I am not sure that I can really trust you!”

Advisor: “It sounds to me that you feel disappointed and have some reservations. I would like to understand this better. Please, talk to me a little more about this, what specifically was it that made you feel that way?” (The advisor does not get defensive, but artfully steps over to the client’s side to learn more and get down to some specifics.)

Client: “Well I was talking to a friend of mine who is knowledgeable in investments, and he was surprised quite frankly, at your advice and strategy recommendation. He felt it was not exploiting the current markets in the least and that I could do so much better with a different strategy and more savvy advisor.”

Advisor: “So when people you regard as knowledgeable express doubt in your investments and strategies, you take that seriously and question whether your decisions were correct. You would have more confidence in an investment approach if certain people you respect, such as your friend, concurred with it, is that correct?” (The advisor is still not defending but demonstrating impeccable understanding of the client’s concerns).

Client: “Exactly!” (The client, now feeling more heard and understood, is calming down and becoming more receptive).

Advisor: “Well, that is perfectly understandable. What if you formed a small group of those kinds of people, and any time we were about to make a major financial decision, you obtained their input before moving ahead. How would that work for you?” (Having understood and demonstrated understanding of the client’s concerns, the advisor now involves the client in problem solving while brainstorming some possible ideas that may address those concerns. The client is now engaged and the relationship in all probability salvaged. Note how the advisor was in control at all times.)

These skills, like any skills, need to be learned, practiced, refined and developed. It requires investment in intensive training, coaching and application by specialists in the field. Armed with these competencies and capabilities, we will never need to worry about technology replacing us. On the contrary, we will be masters over technology and not servants to it.

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