Your clients are not financial advisors

September 25, 2017 by Nathan Lukow

about the author:

Nathan Lukow

Account executive

Nathan is an account executive at Advicent, the financial planning technology provider of choice for nearly 100,000 financial professionals.

You might think the headline of this post seemed obvious, redundant, or borderline sarcastic – and you might be right.  The fact that the people seeking financial advice are not themselves financial professionals is a concept that sounds pretty intuitive when taken at face value.

I have, however, spent many hours working with financial advisors, and I have consistently found advisors who seem to believe that their clients’ understanding and interest in the nuances of financial planning are on par with their own.

To clarify, these advisors are not dumb. They are some of the sharpest minds in the financial services industry; they have their clients’ best interest in mind and they are genuinely proud of the work that they do. People come to these advisors seeking financial advice, and advisors intend to deliver the best advice possible. Many advisors have put together a meticulously thought-out financial plan that is met only with nods and blank stares upon its delivery. The disconnect here has nothing to do with intention, it is a problem of translation.

The broken-down car analogy

Imagine that as you are commuting to work one morning you notice your car shudder a bit as you approach a red light. It is not a huge deal at first, but it gets progressively worse over the next couple weeks, you get concerned about safety, and then you decide it is time to take action.

Since you are a financial advisor and not a professional mechanic, you decide to drop it off at an auto shop near the office. You get a call the following afternoon with good news: the shudder was caused by a brake issue that has been fixed, and the mechanic also tells you he was able to address some minor issues that could have caused serious problems down the road. The bill was only a few hundred bucks and he is confident that with regular maintenance you will easily get another 60,000 miles out of this car.

You are ecstatic; you had been worrying for a while about the possibility of having to buy a new car. Now you have learned that this car will not only last longer than you expected, you may even be able to hand down to your son when he gets his license in a few years. The mechanic just earned a loyal customer and excellent referral source.

Now imagine another scenario that is identical to the first up until the point you get the phone call. This time, the voice on the other end explains that the shudder was a result of your front rotors being out of round by a fraction of an inch. The mechanic was able to resurface them to bring them back within spec but was not able to salvage the pads. He replaced those with quality semi-metallic ones.

He goes on to tell you about the thermodynamic superiority semi-metallic pads as opposed to ceramic ones. This guy is obviously proud of his craft. He continues on, explaining in great detail how he also replaced a ballpoint that had a torn boot, did a valve-lash adjustment, and optimized the ignition timing. He even tightened everything to manufacturer’s specifications using his new torque wrench that is accurate within two percentage points of full scale.

You feel yourself doing a lot of nodding and repeating some variation of the phrase “Yep. Mmhm. Good”. You have no idea what this guy is talking about and while you are still glad your car is fixed you leave feeling like you have more questions than answers. Is a “ball joint boot” even a real thing? In both of these hypotheticals, the quality of work is identical, but your impressions of the experiences were very different.

Communicating effectively with clients

By now I am sure you have deduced the meaning behind this analogy and it may seem like a bit of a stretch. However, if you replace “torque wrench” with “Monte Carlo analysis,” “semi-metallic” and “ceramic” with “REITs” and “Small Cap Equities” and the question “How long will my car last?” with “When can I retire?” the parallels to the way many advisors discuss financial plans are pretty striking.

The takeaway here is that as a financial advisor, the things you think are interesting and the ways you interpret and absorb information are entirely different from those of your clients. While it is certainly important to have the right tools in your toolbox; the key to truly providing value with plans is your ability to translate the information and data behind the scenes into a language that resonates with the person to whom are you delivering it.

To learn how Advicent can help your firm work with the next generation of clients, click here.

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