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Financial Planning > Trusts and Estates > Trust Planning

Top Negotiator Offers Tips for Dealing With Clients

By Jane Wollman Rusoff

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When to talk and when to zip it, how to avoid making premature proposals, how to engage clients versus selling them, how to persuade and influence. Indeed: How to succeed in the business of advice-giving by skillfully trying.

Largely, it’s a matter of learning how to negotiate. And in light of the DOL’s fiduciary standard rule calling for FAs advising on retirement accounts to act in the client’s best interest, it’s a critical process to understand.

Nearly every interaction between FA and client is a negotiation, argues Raphael Lapin, a Harvard-trained negotiation and mediation specialist, in an interview with ThinkAdvisor. His clients include Fortune 500 companies and governments around the world.

Financial advisors should regard clients as partners, not targets of sales pitches, insists Lapin, founder of Lapin Negotiation Services, based in Los Angeles.

The Johannesburg, South Africa-born communications expert, a former rabbi, is certified in Harvard Law School’s famed Program on Negotiation. Among his clients are Microsoft, Yahoo, Northrop Grumman, UCLA Medical Center, the U.S. State Department and the governments of Qatar and the United Arab Emirates.

In the interview, he discusses skills FAs need to gain client trust and resolve advisor-client conflicts through powerful negotiation techniques.

Lapin, whose firm specializes in litigation avoidance too, is the author of “Working with Difficult People” (DK Penguin 2009). He writes: “Effective communication drives all successful human interaction. You can develop and refine your communication skills so that you can communicate with persuasion and influence at all times.”

ThinkAdvisor recently interviewed Lapin on the phone from his Tower office on Wilshire Boulevard. An adjunct professor at Whittier School of Law and visiting professor at Southwestern Law School, he sometimes makes time to monitor courtroom television shows. So how’s Judge Judy doing? Uh-oh, Lapin dings her for failing to zero in on litigants’ emotions. That’s an important aspect to address in the client-advisor relationship, as he discusses in our interview. Here are highlights:

THINKADVISOR: Clinton vs. Trump – doesn’t seem like they’re negotiating. But … are they?

RAPHAEL LAPIN: This is a great example of the negotiation approach known as “domination”: One is trying to dominate and vanquish the other. It’s a unilateral process. [Successful] negotiation is a joint and collaborative process.  

Does that go for advisors and clients too?

Yes. In fact, it’s something that has to be. This is when advisors become the most potent and powerful – when they’re not trying to sell and pitch but engage the client as a partner in the process. A negotiation is being able to understand what your set of needs and concerns are and what mine are. Then let’s talk about how we might meet them so that at best, [the solution] can be satisfying for both of us and at worst, we can live with it.

What are the three ways to negotiate?

Domination, which of course isn’t good; compromise, which isn’t ideal because it’s two people with parallel [positions] trying to find common ground; and the integrated concept, which addresses understanding the differences in each other’s needs and looks for ways to bridge them.

So the integrated process is best?

Yes, because you’re both on the same journey. It’s like two men in a lifeboat trying to get to safe waters: You’re both on the same boat trying to resolve the issue. You’ve written of “The Premature Proposal Trap.” Why is it counterproductive to present a proposal – such as recommending a particular investment – too soon in negotiating with the client?

If you propose before sufficient trust and rapport are built, the client will automatically have a “reactive devaluation.” It’s reactive because there’s no rationale as to why they’re [feeling] that way.

And why do they devalue it?

People make the mistake of putting their solutions out too early, before the other side can feel it’s a proposal that meets their needs. Because it’s presented prior to a relationship being established, they may feel the advisor is telling them something that’s self-serving – and then they become suspicious. If the client feels their needs aren’t being addressed, they’re not going to go for it, and the premature proposal will be rejected out of hand.

What’s the best way for an advisor to have their proposals accepted?

You can do a “responsive proposal” – that is, one the client will consider – only if you understand what needs you’re responding to. It’s not enough that you know those needs; the client also has to know what you know and understand their needs. They have to feel the advisor is walking alongside them demonstrating an understanding of their needs, concerns and risks.

How does the FA learn what those are?

A process has to take place in which you ask very probing questions. Then you need to demonstrate your understanding by explaining the client’s needs and checking for accuracy. As this information-development stage takes place, you’re learning more about the client, and the client is becoming more assured that you understand them.

So is that the right time to present a proposal?

Yes because you’re in a position to say: “Based on the information I’ve gathered from you and that I understand, would you consider this kind of product?” – or whatever you’re discussing. The client will be far more receptive to listening to your idea if they feel that you really “get” them. Then you can fine-tune the proposal together to make it even better.

You’ve written about essential steps to master persuasion, dissuasion and influencing. These include suspending your own views. Why not present your own views right away?

The key to being heard is to first make sure the other person is fully heard – then offer your idea. One of the best ways to dissuade and influence someone is not to tell them they’re wrong but rather to dive into questions that guide their own thinking. You might say, “Let’s talk about the current situation and what you’d like to see happen. How do you see this playing out over the longer term? What do you think the advantages are of approaching it this way?” As you’re doing that, you’re getting information, and the client is realizing certain things as well.

What other questions do you suggest the advisor asks?

“What have been the most frustrating obstacles for you?” Or: “What causes you the most anxiety right now?” When you’re listening to the answers, also listen for tone, word choice and degree of passion, as well as unspoken messages, like signs of lack of interest. You should explore those too by saying, perhaps, “I notice that you don’t appear as engaged as I expected. Would you care to talk about that?” For an authentic connection, clients need to feel you have a sincere interest in helping them meet their goals and objectives.

So asking questions is the thing to do – but keeping in mind that the less you talk in a negotiation, the more in control you are?

Right. Good questions and active listening [i.e., paraphrasing, clarifying] will keep you in control of any conversation. Try it even around the dinner table!

But sometimes emotions can be a barrier to a productive negotiation, as you’ve written. When does that occur?

You need to allow emotions to be expressed, and concerns and reservations articulated and exchanged. This phase is crucial for the relationship to be established.

What if, at some point, the client’s portfolio has dropped in value and they’re angrily blaming you, their advisor?

When a client feels they’re not being treated properly or fairly, the advisor is [faced with] strong emotions of anger, resentment and sometimes fear. Therefore, the dispute is not yet ready to settle. If the advisor tries to resolve it without acknowledging and demonstrating an understanding of these emotions, the [emotions] are going to be in the way and will obstruct any productive discussion.

In such a situation, what shouldn’t an advisor do?

If he tries to defend himself — which is our natural inclination when attacked and someone says, “You’ve made a mess of this. I can’t believe your lack of competency!” — they’re confronting the client. They’ve given them a force to push against; so their emotions and energy aren’t going to dissipate.

What’s the best approach, then?

Rather than confronting the client, walk alongside them. Acknowledge their emotions and articulate them. Then they have nothing to push against. The emotional energy dissipates, and you can bring them back to problem solving.

When is it appropriate to ask what you’ve called “directive” or “nondirective” questions?

In a mediation, I usually start with a broad, nondirective question because it gives the respondent enormous latitude as to what they want to say. For example, “What do you see as the purpose of this meeting?” Then I’ll begin to dig further, funneling down with more and more directive questions, topic by topic, that give them less and less latitude about what they can talk about. Some of these become close-ended questions with a yes-or-no or other short answer.

Suppose the client gets on a jag and complains on and on about money and attendant problems. They’re rambling, but the advisor needs to wrap up the meeting. What to do?

If the rambling has emotional content, the advisor needs to deal with it [as above]. But if it’s just rambling without much point and not accomplishing very much, you have to regain control of the discussion.

How is that done?

This is an example where you might use a close-ended question because it stops the rambling – basically they have to answer yes or no. It’s what we call a “process interruption” – interrupting the process of their rambling. Then you follow up with another question that takes the discussion in the direction you want it to go.

—For another take on the learnings from Raphael Lapin, see blogger Bob Clark’s 
Trust: Being a Good Advisor Is About More Than Expertise and Information

— Related on ThinkAdvisor:

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