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Financial Planning > Behavioral Finance

Why Clients May Not Trust You and Your Financial Plan

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In last week’s blog, Why Financial Planning Remains the Right Thing to Do, we discussed the value of financial planning and how clients react so differently when the idea of creating a plan is presented to them. One client may fully embrace the notion while another shows no interest at all. Part of the reason has to do with the client’s personality and level of wealth. However, even if these characteristics were identical, there’s another crucial piece to the puzzle. Does the client trust the advisor? In this post, we’ll explore how advertising and past experiences influence a client’s decision to engage a financial planner.

If you ask 10 clients to define financial planning, you’re likely to get 10 different answers. In other words, although a financial planner can easily define it, clients must generally rely on advertisements and past experiences to define the phrase. Because a client’s perception of planning plays such a major role in their acceptance of it, it is critical that clients have a proper understanding of what a plan entails and what they can expect.

Advertising and Past Experiences

A 30-second television ad is incapable of conveying the requisite information necessary to properly understand financial planning. For example, when Tommy Lee Jones explains in a commercial that Ameriprise now has a “Confident Retirement Analysis” (or something of the sort), I ask, was the predecessor plan less confident? And, if so, how do I know that this one is actually more confident? Advertisements may actually do more to distort the truth than clarify it. But advertising isn’t designed to portray the truth. Rather, its intent is to create an image for a company and touch the emotions of its target audience.

There’s another crucial issue which affects a client’s perception and willingness to have a plan created. Past experiences in planning may have tainted the client’s view on the subject. For example, the most common complaint I’ve heard from clients and prospects is that their previous advisor was creating a plan only to try and sell them a product. In short, it wasn’t a positive experience. Hence, clients who have had a negative experience with financial planning are more likely to be distrustful than those who’ve had a good experience, all else being equal. All of this damages the industry and hinders a client’s ability to accept advice from their next advisor. 

The Problem With Big Firms

Clients are looking for something very specific: They’re seeking an advisor who will always put their interests first. Many advertisements, many companies, and many advisors say they will do this, but how can a company with 5,000 or 10,000 advisors promise that each and every one will always place the interests of the client first? In short, they can’t. Why? Partly it’s due to a predominant culture of sales in the financial services industry. Hence, a large company will always have advisors who, in a desire to get ahead and receive accolades and attention from management and peers, will operate in sales mode. 

Moreover, when an advisor is focused on selling product, they’re not focused on placing the interests of the client ahead of their own. That’s just human nature. Therefore, until the culture within the industry changes, my advice to clients will be: buyer beware. 

Next week, we’ll continue this discussion about the sales culture in our industry and discuss how to engender trust in clients.


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