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How To Add Spine To The Wavering Client

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Rejection by a prospective client is seldom a happy experience. What can make the rebuff doubly difficult is when the prospect is the dithering sort: one who initially expresses interest in a financial plan, then later turns it down.

What prompts clients to backpedal on advisors’ recommendations? Producers interviewed by National Underwriter say that interference by family members, friends or other professionals frequently is the culprit.

Sometimes the client simply gets cold feet, agreeing to recommendations verbally, but unable to follow up in writing. Ultimately, observers say, advisors may only have themselves to blame because they did not probe for warning signs early on.

“Objections that come up late in the game are almost always the result of errors or oversights by the planner,” says Russ Jones, an executive director at Private Wealth Services Group, Denver, Colo. “Shame on me if I didn’t ask questions during the discovery process that would have uncovered hidden issues or biases.”

The first concern of clients, sources say, is their long-term financial health and the extent to which the financial plan enhances or detracts from it. Thus, thorough fact-finding in advance of plan recommendations is essential.

To that end, Jones employs a three-level financial pyramid that explores goals and objectives for the client’s immediate family (the base of the pyramid), extended family and the greater community (assuming, for example, the plan will include a charitable component). By working from the foundation up, says Jones, advisors can mitigate the risk that an 11th-hour objection will catch them off-guard.

Where the soundness of the plan itself isn’t at issue, advisors should seek to determine if the client is predisposed to soliciting the opinion of an outside party before giving an OK. That predilection, say observers, is partly a function of the client’s net worth and the amount of money in play.

Jason Ray, president of Donahue, Macchia & Ray, Tampa, Fla., says that clients with more than $1 million in assets are more likely than less affluent individuals to shop for a financial plan or seek counsel from an attorney or accountant. For Fred Farhoumand, president and CEO of One Resource Financial Consultants, Fort Wayne, Ind., the individuals that require extra hand-holding generally have between $750,000 and $1.5 million in investable assets.

“These clients constantly are doubting you and listening to others,” says Farhoumand. “One reason, I think, is that they’ve expended so much effort to get where they are financially. By contrast, the very wealthy–those with $5 million or more–tend not to question so much.”

In many cases, the second-guessing is less the result of the client’s financial position than of changes in his/her personal situation. Among recently widowed and divorced women, especially those who are not financially savvy, advisors observe a tendency to turn to adult children for council. Often, too, children will involve themselves in the planning process to protect a parent from advisors perceived as lacking in expertise or inclined to put their interests before the client’s.

Especially challenging to navigate, producers say, are cases involving children who manage a parent’s assets because they are themselves financial professionals. Ray points to a widow whose son, an accountant, had invested $2.1 million of his mother’s estate in a wrap-fee account and derived a fee from the invested assets.

Ray’s colleague on the case, a financial planner and former funeral director, was able to persuade the son to part with $1 million of the assets. That freed his mother to redirect the funds into a financial plan, including a $500,000 life insurance contract in which the son is named as the beneficiary. That provision, and the extraordinary communications skills the advisor had honed as a funeral director, clinched the deal, says Ray.

“Whereas a more technically proficient planner would have tried to go tit-for-tat with the accountant to prove the merits of the plan, my colleague was able to approach the discussion in a totally different way, showing what’s important to everyone,” says Ray.

To be sure, the superiority of the plan can prove crucial in winning over the client. Jones cites a client who resisted buying a $35 million life insurance contract Jones had recommended because a college friend of the client, a wire house investment advisor, had long managed the assets in question.

Jones convinced the client that he was better off with the insurance policy by noting the contract would boost his rate of return by 200% and cut investment risk in half.

“I told the client, ‘you’re not being adequately compensated for the risk you’re taking,’” says Jones. “‘Do you want to know more about this or should we keep it to ourselves?’”

Irrespective of a financial plan’s technical merits, advisors say that parties who might influence a wavering client need to be identified and consulted–the sooner, the better. These discussions should take place in person: Communications conducted via the phone or in writing, says Jones, reduce the advisor’s ability to overcome objections.

Observers say that producers also can help irresolute clients by preparing them to respond to questions that outside parties are likely to raise, by emphasizing that financial objectives only can be attained if the client commits to the plan long term and by noting the client may only have a small window of opportunity to leverage their services.

“When meeting with prospects, I talk about my experience and tell them I don’t know how much longer I’ll be accepting new customers,” says Joy Johnston, an investment representative at Invest Financial Corp., Sheboygan, Wis. “That makes them understand the importance of working with me now. And it makes them feel special.”

‘Objections that come up late in the game are almost always the result of errors or oversights by the planner’

Thorough fact-finding in advance of plan recommendations is essential


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