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The primary audience of this article is analytical financial advisors who want to improve their relationships with their clients. Even if you think you're a people person, I think you will find at least one key takeaway. This path of conversational leadership is not for the faint of heart. I discovered a side of our business that I didn't know was even there. The main topics are as follows:
I have always been good at math, board games, and in school I enjoyed playing chess. I have an analytical mind with a natural curiosity. From an early age it was evident that I liked a challenge. I love to figure out how things work and thought I was a great problem solver. From my point of view, everything in life represents an opportunity to "solve a problem". Even the routines of life itself need a strategy.
My analytical skills seemed like a perfect fit to work as a financial advisor. Yet, my approach didn't always work well with my clients.
Earlier in my career I struggled with interpersonal communications. My analytical strengths and solution mindset overshadowed my ability to communicate. I would work towards finding solutions for what seemed like obvious "problems." Yet, for all that attention and detail work, sometimes my client's didn't get it. You can't understand client behaviors and choices using only a no-nonsense analytical mind.
Give me a problem, I'll solve it.
That mindset is pretty typical in the advisors I've met. This upsets some clients. I had to learn to not assume that every client who tells me about their "problem" wants me to solve it. Often, they might only need to vent and explore the idea before considering a solution.
By offering a solution without investigating you assume three things: a) that the client sees the issue as a problem, b) that they’re willing to do something about it, and c) that they want your solution.
Have you ever been the target of other people's assumptions and judgments? It is very frustrating when you are on the receiving end. The antidote to assumptions is to be curious. Ask questions. Get the other person to elaborate. The good news is that if you have an analytical mind, you likely have an innate curiosity.
Religion, politics and money are taboo topics. Money, specifically, touches every area of our clients' lives. I have discussed financial affairs with hundreds of clients. There is often an awkward tension in the air. People know in their hearts they should have a plan for their money, but they resist. It’s intimidating. It's easy to struggle when talking about money, relationships, and the future.
Their future financial security and dreams rely on their nest egg. It seems counter-intuitive for them to start spending what they amassed through a lifetime of not spending. Is it any wonder our clients sometimes feel a sense of anxiety and emotion? It's our job to talk through and work out the best possible solutions to their unique situations.
For example, a couple, John and Jane, come in to discuss financial planning. John, who often "looks after the money," seems to dominate the discussion. Jane says little, she tends to agree with John. Remember that she has an opinion, thoughts, and feelings too. I can’t help but wonder if this is the first time they’ve had an open, vulnerable conversation about money together. It would be premature to jump to the solution.
It's important to create a safe place for them to work through different scenarios. They can come together and discuss a touchy and emotional subject-- money. Keep in mind, John and Jane may not talk about it outside of your office. In fact, they may have a system so that they don't have to talk about money at all. If we can get them to talk about it, we can help them reach a mutual agreement.
When we discuss problems and possibilities openly, a conclusion becomes evident. I believe it is our duty to make everyone feel heard; we do this by asking open-ended questions. We give them an opportunity to express themselves and discover their priorities. It can be a powerful experience for the client express their deepest priorities. Plus, I feel I can serve them better. I remind myself that it is an honor being the one my clients talk to about money.
We make decisions on emotion. Later we justify with logic. I was once uneasy discussing feelings and emotions with my clients. But without knowing the motivations behind their decisions, how can I understand them? After all, we know that emotional clients do not make healthy financial decisions. In fact, typically emotions get them in hot water with their investments.
As financial advisors, we aim to take the emotion out of investing. This is the nature of the client-advisor relationship. We apply rigorous analysis and research before making changes to our clients' investments. The client still feels emotions along the way.
After 12 years I've learned that my client’s feelings are like a radar screen. It reveals their priorities and emotions. It can also be a predictor of future behavior. Their concerns and worries might make them react in fear, rather than principles.
For example, I had a flood of client calls when Barack Obama became president. Then recently, it was from different clients about President Trump "ruining the country". They wanted to know what they should be doing to protect their investments. My answer will always be the same, "It’s not wise to make major changes based on politics or current events."
Remember how investors behaved during the Financial Crisis in 2008-2009? With the help of the media, people convinced themselves that the world was ending. The fear caused them to panic out of their investments. The cost was tremendous. As of 02/28/2017, the 10-year return on the Vanguard 500 Index Fund (VFINX) was 7.50%. But investors in the fund only made 3.95% annualized because of their emotions getting the best of them! (source: Morningstar, Inc. 02/28/2017)
You have limited time. As an advisor, I have two choices of how to spend my time:
(1) I could try in vain to beat, predict, or time the market; craft that perfect financial plan; or study every angle.
(2) I could spend my time helping clients be better long-term investors. This helps them avoid the emotional mistakes.
The answer is obvious but hard for the analytical financial advisor to swallow. It was quite the realization! As a result, I became more interested in behavioral coaching. I started research two years ago. In the midst of it, I discovered the top three reasons clients fire financial advisors. They were:
(1) Failure to communicate on a timely basis: 72%
(2) Failure to understand the client's goals and objectives: 51.1%
(3) Failure to promptly return phone calls: 43.9%
(source: Financial Advisor Magazine, 12/10/2013)
Imagine my surprise! The top three reasons were related to interpersonal communications. You might dismiss reasons 1 and 3 and think those advisors are lazy. But I want to challenge any advisor reading this on reason #2. Can you understand your client's goals and objectives if you don't know their emotional motivation?
Once at a conference, I asked other advisors how they dealt with client emotions. I remember how surprised I was at the number of blank stares. One advisor told me flatly, "We don't do that." Advisors generally don't think about discussing feelings and emotions with their clients. You cannot provide personal service without knowing how they feel.
Here is where curiosity comes into play. We all have it, but stifle it when we think we know everything. I began to use my curiosity to engage my clients in a deeper conversation. This started by asking open-ended questions.
One cannot answer an open-ended question with a simple yes or no. For example, "Do you understand?" doesn't invite more than a one syllable answer. I'll get a yes, no, or maybe a head nod. I have clients who are very smart people who won't admit they don't understand. In contrast, "What do you think about that?" requires an answer. Their answer will reveal their level of understanding.
Common words don't have the same meaning between any two individuals. We are all unique, biased by our experiences, and interpret words with our own mental images. For example, I talked about vacation with a client. He and his spouse have very different definitions for vacation. Even though they went to the same places, they enjoyed different aspects. In Greece, Mr. Client visited historical sites while Mrs. Client met new people.
People are often vague. They make generalizations. Just look at the two previous sentences. For instance, a client might say, "I'm worried about China." Their vagueness may be unintentional. You have your own feelings and opinions about China. This isn't about you.
Don't jump to conclusions and make assumptions. Here is a great opportunity to probe deeper. You can simply say, "Tell me more," or "What do you mean?" or "What about China worries you?"
So, I have asked the open-ended questions and uncovered their thoughts--their mental image. I will admit my first attempts were awkward. Yet, I was pleasantly surprised at the outcome. I learned valuable information about what my clients were thinking. But my work wasn't done yet. The next step for me was to identify the underlying emotions.
I used to think that being able to hear and see emotion got to the heart of it. In a meeting, when a client teared up, I thought, "They're sad." Maybe they were sad, but not for the reason I had in my mind. The only way for me to know was to ask them about it. Specifically, "How do you feel about that?" or "Tell me about what you're feeling."
By identifying that emotion, I uncovered the deeper values that motivate my clients. I heard more emotion and got more information. Often the deeper issues weren't apparent when we started the conversation.
The final step, ironically, is to figure out what to do next. Here's where it gets really uncomfortable for me. As a problem solver, I am tempted to prescribe the solution. As a financial advisor, I felt that I get paid to provide the answers. The secret is that people know what they should do, I just need to draw it out of them.
Again, I ask more questions. I might recap what I've heard--focusing on the critical issues. Then I would ask my client what they thought the next step should be. If I can guide them to discovering the answer that works for them, they buy into it 100%. Discovering their own answer can be a powerful revelation. Buy-In means that they adopt the solution for the reasons that matter to them. In the future when fear or emotion makes them doubt their path, you can remind them of this conversation.
It's possible they come to a conclusion that doesn't fit their best interests. This is where I would, as a fiduciary, step in. I would remind them of their goals and explain why their solution might harm those ideals. As always, the client's best interests come first, even before what they think they want.
I learned that communication is worth the risk and the investment of time and energy. These rich conversations become a virtuous circle for both myself and my clients.
Greg Dickson defines conversational leadership as "a communication framework designed to gain a better understanding of the priorities, desires, and perspectives of the people you live and work with every day." Through conversation, we end up feeling more connected. Even the disciplined savers sometimes need a nudge to connect with their dreams. It is palpable when they buy-in to their next steps. A clear path forward often appears leading to peace of mind and clarity.
I made a simple shift by focusing on communication as one of my practice's core competencies. I experienced a boost in the quality of my clients' conversations by asking open-ended questions.
The trick is to shut up and listen.
It is so cliche, but, people don't care how much you know until they know how much you care. The act of listening shows how much you care. Once they realize you actually do care, they care a WHOLE lot. This is the power of listening.
I have learned that it is my job to lead by listening. This helps clients along a path of self-discovery. It is the single most important thing I do every day. It opens doors of awareness for my clients. When I’m curious, they open up. Everyone has dreams. Many people have given up on them. Maybe I can help them start living their dreams and worrying less. That's why I do this work. That moment is worth any awkwardness and discomfort.
For more on listening, see Krista Tippett: On Generous Listening and Asking Better Questions
We all know practice revenue flows from financial planning and asset management service fees. It is how we get paid. We get and keep our clients through our relationships with them. Communication sets the foundation for those relationships. You cannot have a relationship without communication. Thus the three pillars of our business are financial planning, investment management, and communication.
Communication is the core service we offer that may make all our clients' dreams tangible. When I first started down this road I was hoping to feel more confident in the quality of our services. I knew we were doing a good job for our clients. What I didn't know was how our clients perceived what we did and what they actually valued.
All my wealth management clients have money. What I uncovered was they want to feel a sense of clarity, confidence and peace of mind. Few have this. Clarity arises when we combine our skills and knowledge with their dreams. These experiences all take place within the heart and mind of the client. I cannot quantify the value of conversational leadership on my balance sheet. I can share that I wouldn't want to go back to the old way of doing business.
Why do I feel this way? I can print off the financial plan or send my clients a quarterly report as a tangible outcome of our services. Yet the experience is how the clients evaluate our results.
You may think you are a pretty good communicator now, but most of us can do better. Improving your communication skills can provide a major leap forward in your practice. It can also boost your clients' experience.
I recently decided to commit our firm and raise the standard by which we measure success. When we can help our clients meet their financial objectives that is an obvious win for both of us. Yet, if financial advice is not understood, it will fail to deliver financial peace of mind for the client. Failure to deliver this is not an option in our practice.
As I write this, we are early in the year. Despite this, we have received seven solid client referrals. These are engaged clients who want our help.
Our clients and staff are happier as a result of adding communication as a core competency. Also, we are now much more approachable and "referable". I am surprised by the strong effect conversational leadership has had on our business.
Be forewarned, not all clients will follow. Some clients tell us "make my money grow" or "I pay you to take care of it for me." That type of client is not a fit for our philosophy. Every day, I am faced with the decision to stick with my choice to raise the bar on the quality of our communications. I demand the best from myself and my team. We have worked to develop our communication skills and I am leading by example. You can do the same thing. You might just find your own peace of mind along the way.
Business coach Greg Dickson taught me much of what I know about conversational leadership. He continues to coach me to this day.
For a great book on open-ended questions that could apply to any situation, see "the Coaching Habit: Say Less, Ask More & Change the Way You Lead Forever" by Michael Bungay Stanier
The book that launched my journey toward becoming a behavioral coach, Behavioral Investment Counseling by Nick Murray.