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2 Best Practices for Managing Client Expectations

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How do you effectively manage client expectations? Not an easy question, says Keith Johnson, and one that advisors have traditionally failed to adequately answer.

Johnson, vice president of practice management at Denver-based managed account provider Curian Capital, notes than when a clients come into a meeting, they bring with them all sorts of preconceived expectations. Advisors have most likely done extensive data mining on the client, but they don’t go nearly as deep to identify and address these preconceived notions.

“There are really two areas to cover in any client meeting; the expectations that surround investment performance and returns and the client’s expectations concerning the advisor relationship,” he says. “There hasn’t been as much focus on the latter, but thankfully this is beginning to change.”

Any risk tolerance questionnaire or investment policy statement is “just a measurement in time,” Johnson argues. However, expectations change as market conditions change.

“There is no one questionnaire that will span the client’s lifetime, but that’s how too many advisors use them, as a one and done. It should be that every time an advisor has a meeting with a client, the IPS should be discussed and, if need be, revised over and over.”

He recommends the following best practices as they relate to managing client expectations.

  1. Ask questions about past experiences with other advisors and beliefs held by the client. The focus should obviously be on investments, but on client relationship issues as well.
  2. Identify and address what are often subconscious biases and beliefs held by the client. These will usually involve the level of service they expect, investment performance and communication and responsiveness. Clues will be held in the client’s past experiences with clients.

“The key to uncovering them is the type of questions the advisor will pose, what I call ‘wise questions.’ Rather than asking ‘What did you hate about your last relationship with an advisor?’ which is a negative, reframe it as ‘What did you like about your last advisor relationship and what could have been improved?’”

The clues will be revealed, he concludes, but if the advisor never has the conversation, they won’t discover these unreasonable expectations until four or five years into the relationship.

“It usually only happens after something goes wrong, and by that time it will be too late.” 

Check out Curian Survey: Advisors Surprise on Interest Rates, Social Media on ThinkAdvisor.


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