As all advisors know, it’s one thing to provide clients with appropriate advice and another thing to actually get them to follow that advice.
In this series of reports, Investment Advisor columnist and psychotherapist Olivia Mellan and financial behavior specialist Kol Birke of Commonwealth Financial Network address some common scenarios that advisors face in getting their clients to follow through on their advice. This advice for advisors flowed out of a web seminar hosted by Investment Advisor and ThinkAdvisor editor Jamie Green late last year.
As panelists in the webinar, Kol Birke and I discussed several prepared scenarios involving clients who don’t make the choices recommended by their advisor. Then moderator Jamie Green brought up an issue from a webinar attendee that hadn’t been touched on before. Here’s our take on it, in this last installment of highlights from the webinar.
Scenario 7: Who's in Charge in the Client-Advisor Relationship?
Jamie Green: Here’s another interesting comment from a participant in our audience: “I like the common themes, but we appear to give the power to the client. As the advisor, I should be the one making the decisions rather than giving them choices and allowing them to tell me what they want.”
Kol Birke: Each advisor is going to attract the clients that work best with them. You should definitely run the practice that you want to run. Within that framework, people don’t change their minds when you’re talking; they change their mind when they’re talking.
It’s a really interesting phenomenon. It’s only once you understand an idea, agree with it, feel it inside of you, and are explaining it back to me that you’ve really changed your mind.
I was in a session at the Commonwealth Financial Network national conference just an hour ago where one of the speakers said, “The most dangerous word a client can say is ‘Okay,’ because that means that the next time something goes counter to what you suggested for them, they’re going to be all over you. They’re going to be harping on the mistake you made.”
Olivia Mellan: What occurs to me with this question is that it may have something to do with generational differences. Older generations might like that the advisor has all the answers and even makes the decisions, although I personally am a little uncomfortable about it. But I believe that financial advisors are educators and really help in partnering the decisions. But I’m a therapist after all and I’m a boomer, but I prefer that.
Certainly Generation Xers and Millennials want to partner with you, they want to do some of the research themselves. They don’t want you to deliver the Sermon on the Mount to them. They will not respond well to that.
It really depends on tuning into your clients’ styles. But I think you also protect yourself in not being the one who makes all the decisions, because if their portfolio goes down, they will blame you for everything. Whereas if they are partnering with you in the process and you are educating them, they’ll say, “Remind me of what you said when we talked about if the market goes down.”
It’s a whole different dynamic, and I think it’s a much safer one to cultivate.