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Portfolio > Investment VIPs

Understanding Client Culture

By Raphael Lapin

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A very common challenge that we as professionals face is how to avoid projecting our own values, fears and concerns onto our clients. A lawyer for example might go to battle on behalf of a client for the maximum restitution that he perceives possible when all the client really wants is to settle amicably and move on. A doctor might prescribe an entire arsenal of pain medication when the patient might prefer to live with some moderate pain rather than to intoxicate himself with all those chemicals. A financial advisor with a high risk tolerance may talk his client into a high risk/high return investment when his client is far more risk averse.
In our work with multi-national clients, we help teams of cultural diversity negotiate a working culture that allows them to function productively despite the cultural differences. This work has led us to develop an operational framework within which to make sense of all these differences and nuances in a way that they become manageable. We have distilled these differences into four categories: communication; value priorities; decision-making processes; and perceptions of managing and management. Unless these four areas are acknowledged, addressed and a workable charter effectively negotiated, relationships will be strained, productivity diminished, trust eroded and team effort undermined.

As we did further work and research, we discovered that these four “cultural” areas of differences manifest themselves in a unicultural environment as well. Even in a group of people who are of the same nationality and living in the same country, there are often differences in communication, values, decision-making processes and ideas of managing and management. These may be the result of socio-economic factors, education levels or even sometimes just personality differences. They may also be a result of thought patterns instilled from parents or family.

Communication

Different people integrate information in a variety of ways. Some learn best through listening, others through seeing. Some do best when they actively participate and do, while others perhaps do best with a combination of these approaches. Another question in today’s world is electronic communication versus phone or in-person (which will be influenced by generational factors to be sure).

In establishing a strong working relationship with your clients, find out about what style of communication works best for them in conveying important information. Questions to ask so as to generate dialogue around communication differences might be:

  • Which methods of communication generally work best for you?
  • Given your experience with other professionals, what foreseeable gaps might occur in our communication that might be troubling to you? How might we preempt them?
  • In situations where we may need information from one another, what might be the best way of obtaining that?
  • What do you think might cause misunderstandings and how should we best deal with them?
  • Addressing such issues up front will help towards learning a good deal about your client’s communication “culture” and allow you to adapt accordingly.

Value Priorities

Some discussion around what your client places particular value on is also important. Not all people value things equally. What we may see as a high-value priority, our clients may see as having lesser value. It is these differences in value that allow the marketplace to work effectively. If we all valued things equally, there would be no buying and selling!

Value differences could be manifest not just in terms of financial goals and objectives but also in terms of what kind of investments the client values. For example, some clients may be willing to forfeit return-on-investment within reason in order to feel that they are doing right by the environment. Others may want to advance medical research and invest in those kinds of opportunities even if the investments hold greater risk than others.

In addition to the usual questions about financial goals, talk to your clients about what things are really important to them. Ask questions such as:

  • What kind of legacy do you wish to leave?
  • What values or causes are really important to you?
  • Do you see investments as a means of making a contribution in addition to building wealth?
  • What kinds of investments, if any, would you not wish to make on principle?

This kind of discussion is useful as it helps your clients think about new perspectives and dimensions they may not have thought of much before. You are helping them to develop a strategy that is aligned with their personal values

Decision Making

We all have our own “culture” in how we like to make decisions, often vastly different from one another. Some of us like to make decisions by committee and consensus. Some of us like to make them unilaterally. Some of us have limits on our authority, others don’t. There are those that do extensive research and information gathering before making decisions, and then there are those who make decisions quickly and intuitively, almost on a hunch. As advisors you should not assume that your clients make decisions in the same way as you do. Rather we must seek to understand how they typically make decisions so that our advising works within the construct of their personal and individual “culture.” Questions and requests that will help to uncover their decision-making processes are:

  • What important decisions have you had to make in the last three years?
  • Talk to me a little about the challenges of those decisions.
  • How did you overcome those challenges? How do you deal with uncertainties or time pressures?
  • Walk me through the process you would typically use to make important decisions.
  • Who else in your circle needs to be involved in these kinds of decisions?

The consummate professional realizes that good advice is not achieved by advising clients from the advisor’s mindset and “culture,” but from the client’s perspective. Understanding how clients make decisions will help you to be far more effective in serving your clients.

Investment Management

The final dimension to this framework involves differences in clients’ expectations of how the advisor will manage investments. Do they want to participate in the management of their investments to a smaller or greater degree or would they prefer to be less involved and leave it in the able hands of the advisor? How often do they need to be updated and what sort of updates and information would they like on a regular basis? Do they see themselves as directing the advisor or as a subordinate to the advisor in terms of investment management?

To better understand how clients perceive the role of advisor as manager, generate some discussion around their experience of management in their work environment; specifically, what has worked well for them and what could have been better? Then transfer the points of that discussion to the financial advisor’s role as investment manager.

As a point of departure for this discussion ask:

  • What models of management have you experienced in your work environments?
  • How have you managed those directly accountable to you?
  • Which management techniques and approaches have you found resonates with you most?
  • What kinds of managers have you found most ineffective? Why?
  • In light of this discussion, how would you like my role as your investment manager to be?

These four components provide a useful framework to create a client “personal culture” profile. With this understanding of your clients, you will be able to connect with them on a far deeper level, and they with you. The service level you provide will be superior, which is ultimately what will distinguish you from your competitors. It is this “going the extra distance” that will keep your current clients satisfied and bring new ones through your doors.

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