Inside Information

“Yet, even though you talk to clients every day, it’s very difficult to get into their heads: to know what it is that they are really thinking,” Maslansky told the advisors in the audience. “Humans, by nature, don’t always tell people the whole story.”

Maslansky explained that the results would appear on the big screen as a flat line that either trended up or down: “The middle of the graph is 50. That’s neutral; not good and not bad. A response of 70 or above means what’s being said is really working. Between 50 and 70 you’re not hurting yourself, but you could probably be doing a better job of engaging your client or prospect. If you’re below 50, you really should just shut up because every time you open your mouth, you’re really doing damage to you credibility and to your ability to sell your client.”

The answers that advisors gave (which were the normal answers they used in their practices, I’m told) did, indeed, show some dramatically different investor responses. For instance, when one advisor answered the question, “Why should I work with your firm?” by saying he had a “great investment method, based on a disciplined, scientific strategy that won a Nobel prize and has been tested for 40 years,” the responses were negative, negative and negative. In fact, not one panelist felt positive about this pitch. “He came across as a salesman,” said one investor, capturing the sentiment of the panel.

In answer to the same question, another advisor talked about being independent and working for the client rather than a large company, which enabled him to look out for his clients’ best interests, all of which tested well into the very positive range. “He said what he would do for me,” said one panelist, “rather than giving me a pitch.”

The investors also liked presentations that included financial plans, setting realistic expectations, financial goals, considering their values and people who are important to them, and especially, a team approach, which indicated to them expertise beyond one person. They didn’t like any words they didn’t understand, such as volatility, outsourcing and particularly counseling. “It’s a negative word,” said one panelist. “Nobody wants to go to ‘counseling.’ I’d rather go to the dentist.”

The panel of investors gave the highest positive scores of the session to the advisors talking about how they got paid. All were direct, clearly stating they had a 1% of assets fee up front. They then talked about what they would do for that fee, including keeping their clients from making mistakes, especially when the markets were down; keeping clients from blowing up their financial plans; making less when clients’ assets were down; and working even harder when the markets were down and they got paid less. Maslansky summed up the effectiveness of these answers this way: “We see a lot of advisors try to avoid giving out the number,” he said. “The best answer to a fee question is a fee. If you don’t have the number in the first two sentences, you’re toast. Then they think that you’re hiding it. Say you charge a 1% fee, and then tell them what you do to earn it; it’s much more effective.”

These, and the responses to the other questions that the advisors answered, illustrated a surprisingly small number of communication mistakes that advisors make—yet, according to Maslansky, they make them with great regularity. A big one is talking about themselves rather than about the clients and what the advisor will do for them. “Most advisor/client conversations quickly become more about the advisor and less about the client,” he said. Then there’s overselling: “You can’t offer a perfect solution, and investors know this. Tempered promises have more credibility.”

The most prevalent mistake is the use of industry jargon, which the vast majority of investors don’t even begin to understand, and which consistently tested negatively: Volatility, asset allocation, accumulation, distribution, longevity risk, investment policy statements, CFP, the list is nearly endless. “This is where the industry falls down every day,” he said. “There is so much jargon that you don’t even recognize it. Advisors need to constantly remind themselves that investors don’t know what you think they know.”