Out of Touch?

Now, while 71.5 percent of the surveyed advisors believe that mitigating capital gains taxes is important to affluent clients, only 8.2 percent feel that mitigating estate taxes is important to their affluent clients. Thus, with respect to mitigating estate taxes, the advisors are off by nearly a factor of three for the lower-net-worth group (21.7 percent felt it was important versus the advisors’ surmise of 8.2 percent), and off by an order of magnitude for the higher-net-worth group (81.3 percent feel it is important, but only 8.2 percent of advisors know this).

Advisors’ misreading of this substantial concern makes it likely that they are also severely underestimating the importance of other related issues such as providing for heirs, health insurance, long-term care, etc. Conversely, an issue the advisors believe that affluent clients hold as being very important — mitigating capital gains taxes — is on average far less important than surveyed affluent individuals actually feel it is.

Building Bridges

If advisors are out of touch, then what is the cause, and what is the cure? The cause of the problem is an all-too-human one: We all look at the world through our own colored glasses, and until someone challenges us to take them off, we usually aren’t even aware that we are wearing any. Advisors work in their own minds and typically are only clued into their own heads. Since they are usually certain that they know what’s important, they often don’t actually check in with their clients, affluent or otherwise, to find out what they really want and need. In short, for those who think they already know the answers, there’s no reason to inquire any further.

To bridge the gap, advisors need to recognize that they are often out of touch and uninformed about who their clients really are and what is going on with them. For example, at a recent conference I met an advisor who had done a sliver of business with a new client. Only later did he find out that the client was worth $30 million to $40 million. This advisor did himself and his new client a huge disservice: Had he made the effort to fully understand the client from the beginning, he might have found a way to gain the lion’s share of a huge account while meeting more of the client’s needs.

The key to bridging the knowledge gap, then, is to regularly touch base with your clients as to their actual need, fears and goals. What are their values, goals, key relationships and interests? What is the broad scope of their financial assets and other investments? Who, really, are they? You simply can’t uncover everything you need to know through a basic fact-finding checklist or risk-tolerance questionnaire. Only an in-depth discovery process and ongoing consultative relationship will really give you the insight necessary to serve the affluent well.

It’s a clich? to say that we should “step outside the box,” but how many of us really take the time to step outside of our own minds? If you think you know your clients, you won’t dig any further. Remember when all Detroit could do was produce large, gas-guzzling vehicles simply because it assumed that’s what Americans would want forever?

So stop assuming and sit down with your clients, ask them about what’s really going on with them, and then shut up and listen. Stop assuming and start inquiring, and you’ll find that you’ve already built most of the bridge that you need to get over the knowledge gap.

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PATRICIA J. ABRAM is a senior managing partner with CEG Worldwide, a research, training and consulting firm.