The key to building a book of clients that follow your advice is to find that happy medium between being “an arrogant hard-ass and a squishy marshmallow,” argues financial psychologist Moira Somers in an interview with ThinkAdvisor.
Clients ignore financial advisors’ counsel because, for one, they’re human and because advisors commit big errors that make adherence even more difficult. But when advice sticks, FAs see lower client drop-out rates and more referrals, Somers says.
In her book, “Advice that Sticks: How to Give Financial Advice That People Will Follow” (Practical Inspiration-March 2018) — written for professional money counselors — the consultant and financial therapist presents a number of “adherence-boosting” strategies. They combine approaches from the fast-growing fields of neuroeconomics, positive psychology and behavioral economics.
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For a decade now, Somers, whose background is as a clinical neuropsychologist, has been adapting health-related behavioral-change techniques to financial advice-giving (moneymindandmeaning.com).
“I’ve always been interested in what makes it so hard for human beings to do the right thing,” she says, noting that her Ph.D. dissertation was on procrastination.
In the interview, Somers — based in Winnipeg, Canada (from where she often trains FAs and firms across North America via Skype) — highlights a handful of Don’ts: what to avoid that could thwart adherence and even harm client relationships. They include: Don’t be judgmental and disdainful. Don’t debate with ambivalent clients. Don’t offer solutions too soon — let the client talk. You’ll get a wealth of information.
The doctor has some Do’s as well, such as asking “three readiness questions” to assess if, based on the advisor’s recommendation, investors are prepared to take the next step.
“Failure to ensure readiness is a major contributor to non-adherence,” cautions Somers.
ThinkAdvisor recently interviewed Somers, on the phone from her summer cabin on Lake Manitoba. Though the emphasis is on how to gain clients’ cooperation, sometimes advisors need to “transfer, refer or even fire” a client, she points out: Just as it is essential to choose a breed of dog that “fits your lifestyle and personality,” she writes, “persistent adherence challenges with a particular client [or type] [could mean] this is not the right dog for you.”
Here are excerpts from our conversation:
Why should advisors pay attention to the “soft side” of giving advice?
All across the wealth spectrum it has been thought that math was the important thing. But we’re trying to give advice to human hearts and minds — so you have to figure out how to engage clients. If advisors aren’t trained in that, they’re going to make predictable — but preventable — errors.
How do clients’ sticking to FAs’ advice help FAs?
People who follow advice are more loyal to their advisors. When advisors get good at giving advice that people can follow and support the implementation, they end up with much happier clients and more referrals. And the advisors end up less stressed.
Why do clients ignore or buck so much of the advice that FAs provide?
Sound financial advice requires us to delay gratification, to anticipate future needs and to honor those needs as much as we honor what’s immediately in front of us. But humans disproportionately focus on what feels good here and now. And then there are some advisor errors that make it all the more daunting for consumers to follow up.
Advisors need to “find the right ground between being an arrogant hard-ass and a squishy marshmallow,” you write. The latter would be someone who’s too empathic, I suppose?
Yes — always pulling punches, not being willing to say, “There’s nothing more I can do for you if we don’t change the direction this is going.”
But you also make the point that advisors need to empathize with clients as opposed to showing judgement and disdain. Advisors really do that?
Yes. They show judgement and disdain all the time. There are certain things that seem to generate a lot more judgement than others. Overspending is one of them. Adult children who are thwarting their parents’ financial or retirement plan is another thing that just makes advisors crazy.
They’re trying to protect their clients. They’re worried about what’s going to become of these people if they don’t pull things out of the fire. But that sometimes doesn’t come across as concerned or curious or kind. It comes across as “judgy.”
You also recommend not debating with ambivalent clients. Why?
That’s based on a principle we learn in martial arts: Don’t combat brute force with brute force — it can end very badly. When you debate with an ambivalent client, you’re often forcing them to come up with stronger and stronger reasons to justify their inaction or not committing to the course of action you’re very concerned about.
What else might that sort of debating result in?
It can drive client objections underground. That is, they may smile and nod and say, “I’ll get back to you on that.”
What’s the best way for advisors to avoid that?