Do your clients come to you for investment strategies or investment solutions?

The words you use with clients have an important emotional weight behind them, and a session at the Sage Advisory Perspectives on the Future 2015 conference offered some hard numbers to support which words you should use in your discussions with clients.

Gary DeMoss, a director at Invesco Consulting, offered four communication principles for advisors to have more productive discussions with clients who were happier at the end of them. Advisors should use these principles in their conversations, in their literature and on their website, DeMoss said.

Based on the focus group work of Frank Luntz, who tested participants’ emotional responses to language, Invesco worked with Maslansky and Partners to find out what advisors were saying that made clients and prospects shut down. They played videos of advisors talking about how they could help investors while the focus group participants measured their level of positive and negative emotions using a dial. Smaller percentages indicated anger and fear while higher percentages showed respondents were more comfortable with the language used.

The first principle Invesco’s focus group uncovered is that fear- and guilt-based language needs to go. Instead, give clients and prospects a positive, hopeful message, DeMoss said.

Invesco asked the focus group participants what they wanted an advisor to help them with: managing longevity risk, inflation risk or market risk. When the participants heard a pitch that mentioned managing market risk, the response rate fell to 37% (responses to inflation and longevity risk fell even lower to 19% and 10% respectively).

“What if I said it a little bit differently?” DeMoss said. “’I want to make sure that you can participate in the gains while reducing your downside risk.’” The response rate jumped to 63% when the statement was phrased that way. When inflation risk was rephrased as “the ability to afford to maintain your lifestyle,” the response increased to 81%. When participants heard they’d have enough money to support themselves for the rest of their lives, instead of longevity risk management, the response rate went up to 90%.

“I’m still talking about market risk. I’m still talking about inflation risk. But I’m talking about it in a way that makes people say, ‘OK, I get this now. I want to do something about this,’” DeMoss said.

The next finding is especially important considering many advisors’ move to a fee-based pricing structure. Invesco asked the participants what they least liked to pay: commissions, fees, charges or costs? “Fees” had the most negative association among the respondents. They understand there are costs associated with advisors’ services, and were much more comfortable with that word.

“They totally understand that you’re not free,” DeMoss said, “so I frame it with the word ‘cost’ and then I talk about fees.”

Another word bandied about these days is transparency, but DeMoss found that respondents had a much higher positive response to “straightforward fees” than to “transparent fees”: 58% versus 20%.

He noted that “transparency” has been hijacked by politicians over the last seven or eight years.

The second principle is to stop talking about mansions and vacation homes, and focus on plausible, credible messages. Clients aren’t looking for a dream retirement (11%), DeMoss said; they want a comfortable retirement (57%).

Should your conversations with clients focus on securing their financial freedom or financial security? Before the Sept. 11 terrorist attacks, investors were more interested in financial freedom, but today, they just want to feel secure.

“There’s a different message today. There’s a different level of skepticism,” DeMoss said.

Another example: When respondents were asked if they would invest their portfolio in a single well-diversified fund that would seek to maximize upside potential while limiting downside risk, emotional responses were evenly split. By simply adding the phrase “a portion of,” positive emotional responses jumped to 90%.

“If we don’t qualify it, they think we want everything,” DeMoss said.

The third communication principle is to avoid jargon. “The language that we use in our industry is influenced by the language that is used in the culture,” DeMoss said. Dollar cost averaging and open architecture may be immediately clear to advisors who use those terms every day, but clients don’t always know what they mean.

Even the fairly un-jargony term “nest egg” was panned by respondents for “investment income.”

“They hated the word ‘nest egg.’ They were offended by the word ‘nest egg,’” DeMoss said. “Retirement paycheck” was only slightly better received than nest egg because it implies they’re still working, he said.

Finally, advisors need to get rid of generic conversations and emphasize the personalized strategies they can create for their clients. “People don’t buy features, they buy benefits,” DeMoss said, so product discussions should focus on what they do before what they are.

DeMoss recommended advisors focus on “you” and “your”: “It’s all about you, it’s all about your. Every time we show that in our dial sessions,” DeMoss said, the dials show respondents’ feelings are more positive; “‘Oh, this is about me. Thank you for making me feel important in this conversation.’ It is such a powerful pronoun.”

Invesco found that respondents would prefer an advisor who had more time for them, even if they get them a lower return in their portfolio.

DeMoss asked attendees to choose which common phrases resonated better with clients.

  • Do clients prefer to make voluntary contributions to their retirement plan or automatic contributions?
  • Do they want to maximize their gains or minimize their losses?
  • Are “new and improved” strategies more appealing than those that “work as advertised”?
  • Are clients looking for long-term strategies or recovery strategies?
  • Do investors want strategies that are not correlated to the market or that are diversified?
  • Do your clients expect you to be experienced or knowledgeable?

Check out the answers in 6 Words, Phrases to Avoid in Client Communications.

Incidentally, respondents preferred hearing about investment strategies to solutions. Offering a “solution” implies they have a problem, and leaves less room for change as their situation changes. A strategy can be adjusted as their needs and wants evolve.

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