Ask about your prospects' values before you ask about their account values.
We have all heard that "Trust is the hardest thing
to find and the easiest to lose." It is the key to a successful
relationship between a client and an advisor, yet it isn't something
that you gain by merely saying, "Trust me."
So what is it that financial planners do that
consistently inspire trust that others may not? As we all probably
know, gaining trust is very complicated and often takes years to
develop. Nevertheless, we believe the process can be accelerated by
what you do and say early in the planning process.
Moreover, it could be nurtured to grow as the
relationship continues. Many advisors, because they see themselves as
honest people, tend to take trust for granted. But establishing and
maintaining trust involves more than honesty. And since it is so
valuable, shouldn't we find ways to accelerate the process rather than
leave it to chance?
Clients who trust you are not likely to fire you
because of a market downturn or poor investment performance. When a
true trust relationship exists, it becomes a pleasure to work with the
client. And, of course, clients who trust you are likely to refer you
to their friends, associates and family.
While there are many components to building trust,
we believe that integrity and empathy are the most important.
Integrity, of course, is at the core. Some people equate integrity with
honesty, but it goes far beyond that. Honesty, for example, may mean
telling the truth when asked. Integrity, on the other hand, means
disclosing all important information and potential conflicts without
being asked. Integrity is disclosing, for example, how much you earn
from the services and products you recommend.
If you are paid commissions, it means telling
clients what the commission is. If you are a fee-only planner, it may
mean disclosing, in advance, that you charge asset management fees in
addition to planning fees for the services you provide. Handing them an
ADV, while it satisfies the regulators, is not enough. If you bill
hourly, you need to accurately estimate the total fee in advance. If
you place a "cap" on your hourly billings, you should almost always
bill less than the cap. Full disclosure is an important ingredient in
building the trust relationship. Your clients are much more likely to
trust someone who fully discloses this information than one who acts as
if it's none of the client's business.
When Roy had a new home built three years ago, his
builder presented him with a fully disclosed and itemized estimate of
the total cost. At the bottom of the sheet was the amount of money this
builder was making on the project. This was one of many things he did
that demonstrated to Roy that he could trust him-and three years later,
that trust has grown.
In 1983, Roy was in the life insurance business and
decided to offer fee-based financial planning. That meant that he had
to register as an investment advisor with the SEC and the New Jersey
Department of Securities. In addition to the approval letter he
received from the state, he was provided with the state laws for
investment advisors. Among other things, they required that Roy
disclose the amount of any commissions he would receive from products
he recommended.
At the time, Roy was convinced that his clients
would balk at the insurance commissions, but he had no choice but to
comply with the law. He was quite surprised at the reaction from his
clients. Many of them actually told him how much they appreciated this
openness and that no other advisor had ever done so before.
Moreover, none of them ever objected to the
commission Roy was earning. Roy learned a valuable lesson at the time.
Being open about everything we do is not risky. It actually helps to
build trust. It's that way in personal relationships, and it's that way
in client-planner relationships.
Integrity also means establishing realistic
expectations for your clients. Nothing will erode trust faster than a
client discovering that you made unrealistic claims because you wanted
the business. For example, what do you communicate that you can do for
your clients' portfolios? Roy tells his prospective clients that if
their goal is to "beat the market," then they have visited the wrong
planner. He tells them t they may encounter three types of planners.
One will know that he is not capable of consistently beating the
market, but will claim that he can. The second will actually believe he
can beat the market, but cannot. The third will know that he is not
able to do better than the overall market, and will tell you so. Roy
tells them that they are in the office of the third type of advisor.
Client expectations about market performance need to be communicated up
front to avoid disappointments and an accompanying loss of trust as a
result.
You begin to demonstrate your empathy with the
discovery process you use. This sends a message to your clients about
your interest and intentions in their affairs. It is one of the
linchpins in attaining and maintaining trust. The questions you ask
will differentiate you from the pack if those questions are
life-focused rather than financial-focused. By asking the right
questions, you create a foundational framework in their mind. In
previous articles, we have written about the important of the initial
questions you ask and how they affect your clients' perception of you.
Asking about their lives before you ask about their
money communicates to them that you care about who they are and their
unique needs. You are more likely to begin building trust by asking
about their lives than you are by collecting asset information. The
American Society of Association Executives wrote, "One-to-one
relationship building will become even more important in a world where
everyone is suffering from information overload. You are far more
likely to get my attention if you demonstrate you know who I am and
what my aspirations are."
Elissa Buie, CFP, asks all of her new clients to
recount their life histories. "Several years ago," she says, "I hired a
business consultant who wanted me to identify my target market. He
asked me to examine my clients to find a common thread among my best
clients. I started by listing the people I liked working with and
cross-referenced them to the ones that were most profitable. I wasn't
surprised to discover that many of my clients appeared on both lists. I
wanted to understand the similarities and found none, except for one
thing: They were the clients I knew the best-the ones with whom I had
the most intimate relationships. I told my consultant this and he said,
'Elissa, we can't build a marketing plan that targets people you know
well!' That was obvious, but I wanted to find a way to jump-start what
normally took five years to develop. I knew that after working with
clients for several years, they would share their stories and life
dreams with me. I felt that knowing a person's life history would be a
good place to start. We ask all of our new clients 'Tell us about
yourself, we'd like to know your life history.' An open-ended question
like this enables them to go where they want to go with the answer.
What they talk about is our first clue to what really matters in their
lives. What I did not realize at the time was that there is such a huge
intimacy in being asked and actually being listened to." Elissa
clearly demonstrates her empathy and she is rewarded by the trust her
clients place in her.
Clients want to work with advisors who understand
their life and goals. When an advisor makes sufficient inquiry into the
lives of her clients, they begin to feel that the groundwork is in
place for trusting that advisor because the advisor is now connected to
their lives and goals--as well as their account balances. If an advisor
knows little to nothing about what is happening or will be happening in
the life of the client, then the trust level of the client may be
hinged exclusively on the performance of the advisor. In this paradigm,
as soon as performance dips, the trust level dips with it. If, however,
the trust level is built on knowledge and understanding of the client,
the fluctuation and temperament of trust is changed.
Performance, while important, will not be the sole
basis for continuing the relationship. To change advisors because of
market fluctuations, the client would be faced with the prospect of
working with someone who does not understand his life as well as his
current financial advisor does. Trust is at the core of why a client
will maintain a relationship with an advisor. An intelligent and
comprehensive inquiry process is necessary for initiating this level of
trust.
Good questions are the key to a better advisory
business. Good questions reveal as much about you as the answers reveal
about your client. Think of the people you personally trust the most,
and recollect the level of discovery they have done in your life.
Chances are they have intimate knowledge of your life because they
cared enough to ask the right questions and had the time to listen to
and respond to your answers. In the psyche of clients, your level of
inquiry indicates your level of caring.
Why would clients want to trust an individual who
only inquired about their account balances? Such inquiry is a poor
foundation for establishing trust at any level--especially at the level
required to maintain long-term relationships and endure turbulent
markets. Your future hinges as much on your process of discovery-and
the care and curiosity that drive that process-as it does on your
ability to manage and invest the assets entrusted to you. Begin today
to increase the depth and breadth of your inquiry process and witness
the transformation it can bring to your client relations--and
ultimately to your business success.
Roy Diliberto is chairman and founder
of RTD Financial Advisors Inc. in Philadelphia. Mitch Anthony is the
author of Your Clients For Life, The New Retirementality and Your
Client's Story and is a regular keynote speaker at industry events.