And clients don’t want to hear that, he said.
“They want to hear what can we do,” Salcetti said. “Clients love having those conversations. If you come to the agreement there’s nothing to do, that’s fine, but at least you’ve had the conversation and your client knows you’re looking out for them.”
Delivering On Promises
Above all, successful financial advisor firms don’t make promises, at least not any tied to performance, advisors said.
“Promising results is not a good practice and not setting the right expectations. A lot of advisors can’t execute on those promises. It’s a trap. If you quote a number, the client is going to be focused on that number, and it’s very hard to get them to look at something else,” Salcetti said.
“There’s a side of the industry that’s pushing product and performance,” Taylor agreed. “At the same time, people like to believe that there’s ‘smart money’ out there and someone can ‘beat the market.’ When that doesn’t happen, their confidence can be shaken.”
Taylor said that clients tend to overestimate their ability to withstand market declines, and they need to be shown that they could potentially “beat the market” and still not achieve their life goals. For that reason, he said he spends more time connecting with his clients over their goals, and showing them how that might be achievable with the least amount of risk.
“We’re big planners, and we lead with planning, not performance. If you lead with performance, once the account starts underperforming, what’s left?” he said.
When Mallouk’s Creative Planning onboards a client, they’re told what investment climate they’re in, how it can change, and the ways that bear market investing will be different from bull market investing, according to their own plan.
“And then we do exactly what we tell them we’ll do in a bear market. There are no surprises. You have to be delivering on your promises,” Mallouk said. “Advisors make all kinds of promises when someone comes on board, and when the waters are bumpy the clients are looking at the captain to deliver. And she needs to deliver.”