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Financial Planning > Behavioral Finance

Trust: Being a Good Advisor Is About More Than Expertise and Information

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Almost 20 years ago, I’d left my current job and was looking for something interesting to do. I was approached by a guy in the financial information business who’d I’d known for many years, attended some of his events and written favorably about what he was doing. After we had a few discussions about how we might work together, we got down to the inevitable issue of my compensation.

Talk about a Jekyll-to-Hyde transformation! I don’t know if he’d gone to one of those “how to negotiate anything with anyone” seminars or what. But he proceeded to run me down ten ways to Sunday, apparently in an attempt to make me feel grateful for whatever amount he intended to offer. As you might imagine, his diatribe had just the opposite effect. I told him that I couldn’t see why he would want to hire anybody he felt that way about, and I sure wouldn’t go to work for anyone who felt that way about me.

I had flashbacks to that conversation when I read the title of Jane Wollman Rusoff’s July 11 story: Top Negotiator Offers Tips for Dealing With Clients. So I was pleasantly surprised to read about a guy who clearly knows what he’s talking about, and has plenty to say to financial advisors as a communications expert, rabbi, Harvard Law School-trained negotiation and mediation specialist and author of “Working with Difficult People,” Raphael Lapin.

While much of what Lapin had to say would fall into the category of ‘sales’ (not that there’s anything wrong with that), he also provides a penetrating insight into a mistake that many professionals make, and should be required reading for all financial advisors: because many advisors don’t believe that they are “negotiating” with their clients—when they really are. 

The foundation of Lapin’s strategy is that there are basically three kinds of negotiating, and two of them are bad: Domination, compromise, and what he calls an “integrated concept.” If you guessed that the integrated concept is the “good” one, you win a cookie. Most of us probably recognize “domination” as a less-than-optimal negotiating approach. “It’s a unilateral process,” he told Wollman Rusoff. “Successful negotiation is a joint and collaborative process.” 

While most of us would probably think that “compromise” is the goal of most negotiations, Lapin says otherwise. “Compromise isn’t ideal because it’s two people with parallel positions trying to find common ground.” For Lapin, compromise is problematic because truly successful negotiations happen when both parties recognize their ‘common ground’ from the start. 

Which brings us to financial advice. In my experience, one of the biggest problems that most professionals—perhaps especially financial advisors—have is that after they’ve gained some experience working with clients, they have a very good idea of what a new client needs to do, virtually from the moment they walk in the door. Why is that a problem? Lapin calls it the mistake of “putting solutions out too early.”

“People make the mistake of putting their solutions out before the other side can feel it’s a proposal that meets their needs,” he said. “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.”

To establish such a relationship, Lapin suggests advisors ask “very probing questions.” Yes, I know, that’s exactly what financial planning and other interactive processes do. But Lapin is suggesting that advisors look at those Q&As from the other side, too: not just as information gathering, but as a way to reassure clients that you truly understand them and their needs.

“It’s not enough that [the advisor] know [their clients’] needs,” he said. “The client also has to know that you know and understand their needs, concerns, and risks. You need to demonstrate your understanding by explaining the client’s needs and checking for accuracy. As this information-development stage takes place, the client is becoming more assured that you understand them.”

All too often, experts and professionals such as financial advisors think that people will take their advice based on their education, training and experience. But when it comes to very personal areas such as their finances, professionals also have to establish trust: Which is earned through demonstrating your understanding.

That’s the kind of negotiating we all respond to. 

See Angie Herbers’ blog for ThinkAdvisor, 6 Keys to Effective Selling for Independent Advisors, and Jane Wollman Rusoff’s article for ThinkAdvisor, Top Negotiator Offers Tips for Dealing With Clients


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