Frequently the most difficult problem faced by an advisor is facilitating emotional decisions to be made by a client.
As an engineering graduate who has been thru maths, add maths, applicable maths, calculus, physics, mechanics, optics, programming, wave mechanics, particle physics, network engineering, and getting the investment prize in Certified Financial Planning exam, there is no issue in figuring out an optimal solution for the client. My biggest obstacle is in addressing the client’s emotional requirements in accepting the solution. Let me explain.
Recently I read an article about cancer care:
The point is that cancer care as a service addresses a highly sensitive and stressed issue faced by customers.
It involves the wellbeing of the consumer of which the problem is an unknown factor to the consumer – cancer.
Similarly, financial advisory as a service addresses a highly sensitive and stressed issue faced by clients.
It involves the wellbeing of the consumer of which the problem is an unknown factor to the consumer – financial freedom.
And for such an sensitive and stressed issue, there are many factors which will be felt:
1. Lack of familiarity with the service being delivered – when clients are used to receiving investment proposals and insurance proposals, how do they feel when they are not given a proposal and instead given a service menu?
2. Lack of control over the performance of the service – when clients are familiar with the concept of ROI and can calculate the performance of each investments, how do they feel when instead they are told to analyse their total networth and calculate the liabilities part of their wealth as well?
3. Major consequences if things go wrong – nobody likes to lose money. Period.
4. Complexity that makes the service a black box and gives the provider the upper hand – if you think reading investment statements AND comparing the results across different providers is a challenge (personally I don’t know any one individual investors who can do this properly, even I bought an insurance savings plan at one point…) imagine what happens when advisors do a holistic assessment of all assets and liabilities and tell you that you have a problem. You probably couldn’t follow the train of logic the first time round.
5. Long duration across a series of events – most people are used to a ‘hi n bye’ meeting with their agents. Imagine how they feel when they are told they need to meet up periodically over a year, no escape.
In actual fact, empathy is very much an important characteristic to have when engaging with a client. Our firm recently have a client who did not understand the value of a diversified Invesment for two years. It was only when the advisor empathize with the client and saw it from the perspective that the value is derived from less time managing volatility in direct stocks only was the message received.
So obviously it takes two hands to clap. For the advisor, empathy can be developed the longer time is spent with the client and with more types of clients. For the clients, what they can do is to keep an open mind for an advice they receive as stress over financial wellbeing might throw up defensive emotions that are automatic yet detrimental to overall wealth.