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Financial Planning > Behavioral Finance

Twelve Things Advisors Need to Know and Do

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A recent study from MDRT surveyed over 1,800 adults to determine their attitude toward financial planning. From the results, MDRT determined six things advisors need to know about their clients and six actions advisors should take to work successfully with them.

Today’s clients are ready to talk about financial planning. Almost 90% of clients of all ages are “ready to talk about plans and planning,” according to MDRT, but the report found gaps between what consumers say they want and what advisors think consumers want. Among boomers, 85% said they think having a financial plan in place, but just 62% of advisors said they thought boomers understood they needed a plan. The gap widens with younger generations; 74% of Gen X respondents and 73% of Gen Y respondents said financial planning was important, but just 21% and 7% of advisors think those age groups place a high priority on planning.

To work with these clients, advisors need to focus on confidence issues. The MDRT report found a gap between the importance clients place on financial planning and their confidence in their plans. Although 95% of older boomers say it’s important to have a plan, just 62% say they are confident in the plan they have. Among younger boomers the gap is even wider; 94% recognize the importance of planning, but just 41% expressed any confidence in their plan.

There is a new normal for financial thinking. Boomers are less tolerant of risk, more so than any other generation, but even among boomers there is a gap in confidence. Sixty-one percent of older boomers say they are confident in their financial futures, while just 45% of younger boomers agree.

Advisors need to understand that client behavior doesn’t match thinking, yet. While boomers say they are less tolerant of risk, when asked how they would invest, about one-third of survey respondents said they would invest in stocks or bonds, while just 2% said they were interested in fixed annuities, and 4% said they would invest in life insurance.

The future is with Boomers and Gen X. About half of older boomers and one-third of younger boomers say they already have an advisor. Unfortunately, all age groups reported that their advisors don’t understand them as well as they want them to.

Advisors need to get to know younger Boomer and Gen X clients. About one-quarter of younger adults with financial planners said they had switched advisors in the past 12 months.

The most important attribute is trust. One of the biggest challenges advisors will face, the MDRT report found, is establishing clients’ trust. Ninety-one percent of younger boomers and 88% of older boomers say it is more difficult to trust their advisors now than it was five years ago.

Advisors need to understand the extent to which trust has been shaken. “Consumers have indicated to us in this survey that the goal should not be to ‘rebuild’ trust, because that assumes there already exists a foundation of trust. There isn’t one,” the report authors write. In fact, while 85% of all consumers said it was more difficult to trust their advisors, just 59% of advisors said it has become more difficult to build trust with clients now than it was five years ago.

Know you serve different roles for different generations. Younger clients want help making money and are looking to build a “retirement plan,” according to the survey. Older clients, on the other hand, want to manage their investments, and build a “financial plan.”

Advisors need to understand these subtle differences between clients. “Understanding the generational perspective on the future and then matching that with the right terms, expressions and language will move advisors and agents far down the path of repairing trust with consumers today,” the report authors write.

Understand how clients today respond to your sales tactics. Clients aren’t looking long-term, according to the survey, although advisors’ favorite sales strategy was to build long-term relationships with their clients.

Focus on honesty, knowledge and straight-forward advice. Boomers and Gen X respondents both cited these tactics as effective. Furthermore, 70% of those respondents say a sample plan, rather than a generic example, is an effective way to get them to take action.


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