Over the years, I have worked with approximately 2,000 wealth managers and have successfully coached many financial advisers.
Through my conversations with these wealth managers, I have noticed that there is a disconnect in our industry. This lies in our tendency to use words we are comfortable with as practising wealth managers rather than words that are easy for investors to understand. This ultimately boils down to one question: are we using the right words for our clients?
To ensure you are using words clients will understand, focus on four solid foundations: connection, clarity, strategy and communication. Keeping these at the forefront of our minds provides a framework to building productive, trusting relationships with our clients.
Let us look at connection. We should ask whether the use of complex industry jargon is helping us connect with existing and prospective clients. After all, like and trust (clients liking and trusting their wealth manager) are the drivers of connection, and it is harder to like and trust someone if you do not understand the words they are using.
For example, the process of building and managing a client’s investment portfolio represents a complex task that needs to be effectively and clearly communicated to them, but perhaps we need to do so without using words such as ‘asset allocation’, ‘par value’, ‘alpha’ and ‘structured product’.
We should also be asking the right questions; one issue with client communication is that it can be too one-sided. Our clients naturally come to us with a range of questions, but what questions do we have for them? A useful acronym to use as a tool for this connection process is ‘Form’: we should ask questions about family, occupation, recreation and motivation. It centres conversations on the client and helps to build up a solid level of trust in the relationship.
Clarity is another cornerstone of any working relationship; I call this the ‘one word value proposition’. Clients should be able to answer the question: “Why do I need a wealth manager?” with ease. Gaining clarity requires that we fully understand our clients’ goals and needs. The more both parties have clarity, the better the individual and collective outcomes will be.
To put it another way, clarity is about ‘why’ (the client’s purpose) and ‘what’ (his or her goals). Those visiting a financial adviser have a specific idea about what they want to get out of the relationship and so do we; we must successfully combine these aspects seamlessly and embed the ‘why’ and the ‘what’ elements of the relationship in our communications.
It is fair to say that the demand for wealth managers has increased as more and more people are building their own wealth as opposed to inheriting it. People are coming to financial advisers because they believe we can impart the best level of advice with our specific knowledge. Our focus should be on maintaining this belief and proving our worth. To do this we need to know what our customers know and we should also know what they do not know. Putting our knowledge within these parameters allows us to channel it in the best possible way and means that clients can get the most out of a clearly defined relationship.
With connection and clarity, we can next develop a strategy: the ‘how’ of relationships. Clients want to know ‘how’ we will help them meet their goals. Put simply, customers ask ‘What will you do with my money?’ This involves a range of factors including portfolio building, rates of return and reporting. More broadly speaking, our work is centred on putting the arrangements in place for individuals so that their wealth is managed most effectively for years to come.
Our insight needs to be forward-thinking and we should be able to empathise with clients as to their concerns for the future. One aspect involves the challenges people face as they grow older and do not want to leave their homes. In the US we call this ‘ageing in place’. As their wealth manager, we need to grasp the challenges our clients will face in order to help them through this phase of their lives.
In this area, research was undertaken by the MIT AgeLab – established in 1999 to improve people’s health and increase their productivity through the creative translation of technologies – to predict future quality of life. The MIT AgeLab came up with three questions, the answers to which indicate the quality of life for those entering retirement:
1) How will I change my lightbulb? (Home maintenance)
2) How will I get an ice cream cone? (Mobility)
3) Who will I have lunch with? (Socialising)
As wealth managers, these are theoretical questions we need to consider for our clients and align our expertise with empathy.
It is necessary as well to consider having tools in place that are personalised and intuitive for our clients. By having such tools, wealth managers are in a prime position to effectively communicate with customers on a more personal level.
Clients want to know how we will fulfil their goals for them. Our strategy hinges on having an investment process and investment philosophy in place, both of which should retain a clear focus to facilitate communication with them. Looking at the investment process, clients want to know that their wealth is being handled in the most effective and efficient way. As for the investment philosophy, clients need to know why we are doing what we do (and so do we).
The wealth management process known as ‘the six pillars’, as put forward by Nick Murray in his book Behavioral Investment Counseling (2008), is of great importance here. The process is based on three disciplines and three practices that enable clients to make non-emotional, business-like decisions. The process is also used to build and monitor portfolios effectively. The practices consist of asset allocation, diversification and rebalance, and the principles consist of having faith in the plan, patience and discipline.
Lastly, perhaps nothing acts as more of a valuable barometer of how well we are communicating than what clients are saying to their family and friends. Persistent communication needs to be at the forefront of our minds so that we are driving awareness of our services.
In today’s thriving media landscape, wealth managers also may wish to engage more with social media channels such as LinkedIn, Facebook and Twitter to establish deeper relationships with their customers. By using channels like these, we can disseminate information in a strategic and focused way and also boost our networking and interactivity prospects.
So, are we using the right words? Client relationships are essential for a successful wealth management business and have both personalisation and trust as their foundation. Focus on what the clients want and why they want it, and carefully consider how the use of complex terms comes across.
David Patchen is senior vice president, private client group education and practice management at financial services firm Raymond James
Key Points
We use words that we are comfortable with as practising wealth managers rather than words that are easy for investors to understand.
Clarity is a cornerstone of any working relationship.
Clients want to know how we will fulfil their goals for them.
