How to Talk Risk Without Scaring Your Clients

He also argued that advisors should use “comfort zone” versus “risk tolerance,” because the latter is about how much pain the client can stand.

Lastly, he said clients respond better to “steady growth” than “consistency” or “consistent performance.”

“During the crisis in 2008, they realized they didn’t lose it in and day, so they won’t make it back in a day. They just want to see that it’s growing and it’s steady.”

He then played an amusing video (in which he starred) to illustrate what would happen it a doctor spoke to a patient in the same manner most advisors speak to their clients.

How comfortable would you feel if a doctor came in and immediately started talking about how he got started in medicine, his credentials, his practice’s growth and didn’t ask the patient a word about themselves? He would then turned to the dire risks of the surgery, tell the patient he will nonetheless do the surgery, and will then cut them loose for a follow-up in six months. Even though the doctor in the video was capable, had the necessary expertise and was confident, the patient would still be scared to death.

The conclusion?

“Facts before framing equals fear. If we don’t create a comfortable environment, our clients will be planning their escape. They’ll give you the classic, ‘We’ll think about it,’ or ‘I’ll have to look it over’ and never come back. We cannot fight fear with facts.”

He then said the key question is how do advisors make risks “motivational, understandable and actionable for our clients? And those words are in a defined order. You can’t do one ahead of the other and expect to succeed.”

He noted that most Americans didn’t care about debt until term ‘fiscal cliff” was introduced.

“We have to take an institutional language and make it understandable to clients. Words matter. It’s not what you say, it’s what they hear. On the way here, I said the audience will be unattractively avoided to me,” he said to laughter.

He ended with his “Three Ps for Preventing the Great Escape.”

1. Make it personal—It’s not about you, it’s about them
2. Have a clear purpose and make the benefits clear—“This sounds like selling 101, but so many still struggle with this. Too often, we cover features, not benefits.”
3. Position—“When talking to clients, use ‘you’ 2.5 times more than ‘I.’ the formula, we’ve discovered, is really that simple.”