In a dramatic shift over the last 15 years, financial planners think far more highly of their abilities to understand their clients than their clients do, according to a new Financial Planning Association study.
The report concluded that advisors who do not re-evaluate how they’re getting to know their clients are missing out on one of the most important factors in building client trust and commitment to a long-term relationship.
In addition, planners need a lot more training in identifying and managing client financial anxiety if they want to hold onto clients, as clients who are experiencing financial anxiety are less likely to think their advisor will be able to deliver satisfactory financial services, the study found.
“Developing and Maintaining Client Trust and Commitment in a Rapidly Changing Environment” was the undertaking of the FPA and the Money Quotient Research Consortium, which is a nonprofit research organization, along with the Kansas State University Personal Financial Planning Program. The project was funded by Allianz Life Insurance Company of North America.
The study revisited a set of questions first posed by the FPA in 2006 in an attempt to define what aspects of communication really mattered to the planner-client relationship. That earlier study identified specific components to communication (topics, tasks and skills), as well as the positive and significant correlation those components could have with client trust and commitment.
What came out of the 2006 study was validation that client-centered “life planning,” which was in its infancy at the time, brought significant value to planners and their clients when it came to retention, satisfaction, cooperation, openness to disclosing personal and financial information, and referrals.
But a lot has happened in the last 15 years, the current study pointed out. There are technological advances that added new methods of communication, a series of economic crises that shook Americans’ confidence in their financial security, several recessions, the unexpected shocks and tragedies related to the Covid-19 pandemic, and the rise of social attention to diversity, equity, inclusion and cultural awareness. All of these have taken a toll on the planner-client relationship whether planners are aware of it or not, the study said.
In consideration of these changes, the 2021 study employed all the questions of 2006 but also added new questions in three key areas: virtual communication, client financial anxiety and social issues. The 2021 study maintained the perspective that “good communication is effective in achieving desired ends, connecting needs with resources, resolving problems and issues, and strengthening relationships,” and that an understanding of what goes into an effective effort is found in topics, tasks and skills.
The studies defined topics as the discussion areas that a planner will dive into with a client on both quantitative and qualitative levels. Between the two, it’s the qualitative aspects of clients’ lives—those needs, priorities and goals—that are harder to pin down but also more critical to a financial plan’s success, the study found. Tasks are the to-do checklist that a planner should go through with a client, such as mutually defining the clients’ personal and financial goals, ordering priorities and collecting all the relevant documents prior to developing a financial plan.
Skills were broken into two areas: facilitative and listening. In 2006, facilitative skills were the ways in which a planner could use nonverbal and verbal communication and spatial arrangement to increase client comfort and openness. In 2021, the study focused on the skill level of planners in the use of video conference technology instead of spatial arrangement.