According to Investopedia, impact investing aims to generate specific beneficial social or environmental effects in addition to financial gain. The purpose of this column is to look beyond impact investing to “impact advising.” Since I just coined that term, I suppose I should define it.

Impact advising is financial advice that aims to generate deep psychological and emotional fulfillment for clients, in addition to financial goal achievement.

The natural tendency of many financial advisors is to explain, or overexplain, their processes rather than focusing on client outcomes and the impact of the advice. Too many financial advisors talk about how they manage money, asset allocation, diversification, risk tolerance, the efficient frontier curve, etc. They like to demo their planning software, display their cool fintech and explain their investment process.

In case you’re wondering how we know this, it’s because we train advisors to record their prospect and client interviews and meetings. Then we listen to those recordings to find out what’s done well and identify areas for improvement. I have coached thousands of recordings of successful financial advisors in every stage of client acquisition and client service. Not surprisingly, there are clear patterns and lots of opportunities for them to improve. As you’ve heard, “The truth is on the tape.”

The point is, clients don’t really buy the processes and the tools, they buy outcomes and impact.

Take the airline industry. For example, people buy airline tickets to get to their desired destination, right? Few are interested in whether the plane is made by Boeing or Airbus or care that Rolls-Royce or GE engines are mounted under the wings.

Jerry Seinfeld puts it this way: “The pilot’s gotta come on the PA system and tell you what he’s gonna do. ‘Well… I’m gonna take it up to 20,000 feet and then I’m gonna make a left by Pittsburgh and then I’m gonna make a right by Chicago. Then I’m gonna bring it down to 15,000 feet.’ He gives you the whole route and all his moves … we’re all sitting in the back going ‘Ya … fine, do whatever you’ve gotta do. Just end up where it says on the ticket. Can you do that?’”

Unlike airline pilots and flight attendants, you have more intimate relationships with your clients. You go beyond the destination. What are their personal reasons for going where they want to go? What’s the impact of achieving the outcomes?
Continuing the flight analogy, people want to get where it says on the ticket for personal reasons: to visit friends or family, to attend business meetings or to go on vacation. Sometimes it’s for something big. They want to go to the Super Bowl or an important wedding, a milestone anniversary, a graduation or a family reunion. They need medical treatment that’s only available at a specialty clinic in one particular city. They are flying to New York City to ring the opening bell on the day their company goes public.

The financial advisor who can successfully deploy more effective communication strategies about outcomes and impact will be much more successful at acquiring clients, retaining clients, being referred and inspiring clients to act on the advice. But this is easier said than done for an industry of people who tend to be analytical and trained as financial technicians.

The most common benefit of working with an advisor is that he or she will clarify common financial goals such as retirement, financial independence, college funding, weddings, vacations, health-care needs, etc. But these goals represent just the first layer: the outcome or destination. After the “tangible what,” there is the “emotional why,” or the reason they want to achieve the goal.

Both are important. For example, a person may want to achieve financial independence, the tangible goal, for the emotional payoff of feeling secure, helping others or having a sense of pride and satisfaction that they have accomplished something most people never achieve. There are more unique emotional whys than there are unique tangible whats. Two people can want to achieve the same goal for different reasons. When you help people discover what they want and why they want it, you build a stronger bond of trust. Now they are more likely to make the important decisions, like hiring you in the first place and then following your advice to take the actions necessary to achieve the goals.

Of course, one of the worst things you can do is try to guess people’s outcomes and impact. It’s much better for them to overtly state what they want and why they want it—after you ask the right questions in the right way.

A good advior offers benefits clients only appreciate when they see them, even if those benefits are rarely articulated when clients are surveyed. (Remember the saying, “You don’t know what you don’t know”?) There was no research to justify the creation of the smartphone. Steve Jobs didn’t do a survey where the respondents overwhelmingly said, “We’d like to have a single device that fits in our pocket that will replace hundreds of other physical devices that we previously purchased separately. At the very least, we would like our phone to take pictures, store our photo library, store and play our entire music library, be a video player and a game console. And it would also be very nice if we could do our banking, order food and call for and pay for transportation with a few keystrokes instead of talking to other humans.”

Just as the smartphone exceeded our expectations, the best advisors deliver outcomes the client may not have realized they would appreciate until after they experienced them.

What’s the impact if clients no longer have to worry about their money from day to day? How will their life be better with the physical and mental time this freedom affords them?

What’s the impact for clients to have a qualified professional who knows everything there is to know about their entire financial life and their wishes—so that if or when something happens to them that pro will step up and lead their family through the transition?

What’s the impact for clients to have a level of confidence—that no matter what happens in the markets, the economy or the world they will achieve their goals?

What’s the impact for clients to be emotionally free from the constant barrage of bad news from the media?

What’s the impact for clients to have all of their financial subject matter experts lead in a coordinated manner so every element of their financial advice operates with harmony and synergy?

The mantra of financially successful people is “true wealth is discretionary time.” To inspire people to work with you in the first place, you must know: What is it they want to do with their time that is more important than dealing with their money? What’s the impact of delegating their financial affairs to you?

Impact investing is good. Impact advising is even better. 

Bill Bachrach offers the “Quality of Life Enhancer” worksheet that helps an advisor determine clients’ emotional drivers and demonstrate how she can add value. Send an e-mail to [email protected] for more information. To learn more about how Bill and his team can help you be a more direct and candid communicator who helps clients make better decisions, schedule your Business Accelerator Meeting today. 858-558-3200/