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(June 4, 2004) In the ever-changing world of financial services, Doug Towill suggests that the successful advisor of the future will be able focus on the emotional or “soft” side of the client relationship, not just the financial data.
“It’s about intellect and logic being married with emotion,” Towill, a vice-president and sales manager at AIM Trimark Investments, told a roomful of attendees at the recent Advocis national conference in Calgary. “How much do we really know about [the client’s] emotional side and what really drives them — their fears and their dreams — are we in tune with that?”
According to Towill, advisors tend to fixate on the financial and material needs of clients, but neglect or ignore their “emotional basis.” It’s one thing to ensure a client has the money in place for a sound retirement, but what about practical issues such as where the client will live or what he will do to replace the social network he had at his workplace? “I would suggest helping people with that shift in retirement is just as important as helping people save and invest so they can pay for the retirement that they want,” said Towill.
Referring to an illustration entitled the “curve of complexity,” Towill explained that over the past few years, clients have evolved from an investment-performance focus to an interest in estate planning and asset-protection strategies to a place where emotional issues are front and centre. Towill pointed to new designations for advisors specializing in working with divorced clients as just one example of how to effectively tap into the emotional sides of clients to better serve them.
“I’m not suggesting that we become marriage counsellors; there are limits to what we do, but understanding the emotional issues around a client as he or she goes through a divorce and the family goes through a divorce can only help us be better financial planners,” said Towill.
Towill also addressed the tendency of investors to behave irrationally, pointing to a study where people were asked to state how much money they would have to receive to participate in a coin toss where “heads” means they would lose $100. The average answer was that a “tails” result would have to pay out between $200 and $300. “The pain of losing money is two to three times as great as the joy you get from gaining the same amount of money,” noted Towill. “It’s twice as painful to lose.”
Towill extended this premise to the real world where a client makes $10,000 on a $100,000 investment in a mutual fund one year and loses $10,000 on a $100,000 investment in a different fund in the same year. With the market flat to down that year, most would conclude that the advisor did a good job overall by not losing any money and keeping the client in vehicles with some upside potential. However, due to the phenomenon of “asymmetrical loss aversion,” the $10,000 loss feels more like a $20,000 or $30,000 loss to the client.
“It’s just an example to show that you need to take into account the emotional, illogical side of all humans when they’re dealing with money,” concluded Towill. “Logically you’ve done a good job, emotionally maybe not.”
Towill wrapped up his presentation with the story of a 47-year-old “rookie” advisor he helped train who decided her target market was going to be 50-year-old men, because she had lot of friends, family and colleagues in this demographic and was keenly aware of — and sensitive to — their special issues, whether it be job loss, divorce or a first major health scare. More important, she knew which financial solutions to link to these emotional issues.
The result? Twenty months later, the rookie advisor now has $30 million of assets under administration and has sold “a ton” of insurance product, according to Towill.
“My challenge to us as an industry is to start really thinking about putting the [intellectual] and the [emotional] together, about putting the hard and soft side of ourselves and our clients and our businesses and our relationships together to make us all world-class advisors,” said Towill.
Filed by John Craig, john.craig@advisor.rogers.com.
(06/04/04)
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(June 4, 2004) In the ever-changing world of financial services, Doug Towill suggests that the successful advisor of the future will be able focus on the emotional or “soft” side of the client relationship, not just the financial data.
“It’s about intellect and logic being married with emotion,” Towill, a vice-president and sales manager at AIM Trimark Investments, told a roomful of attendees at the recent Advocis national conference in Calgary. “How much do we really know about [the client’s] emotional side and what really drives them — their fears and their dreams — are we in tune with that?”
According to Towill, advisors tend to fixate on the financial and material needs of clients, but neglect or ignore their “emotional basis.” It’s one thing to ensure a client has the money in place for a sound retirement, but what about practical issues such as where the client will live or what he will do to replace the social network he had at his workplace? “I would suggest helping people with that shift in retirement is just as important as helping people save and invest so they can pay for the retirement that they want,” said Towill.
Referring to an illustration entitled the “curve of complexity,” Towill explained that over the past few years, clients have evolved from an investment-performance focus to an interest in estate planning and asset-protection strategies to a place where emotional issues are front and centre. Towill pointed to new designations for advisors specializing in working with divorced clients as just one example of how to effectively tap into the emotional sides of clients to better serve them.
“I’m not suggesting that we become marriage counsellors; there are limits to what we do, but understanding the emotional issues around a client as he or she goes through a divorce and the family goes through a divorce can only help us be better financial planners,” said Towill.
Towill also addressed the tendency of investors to behave irrationally, pointing to a study where people were asked to state how much money they would have to receive to participate in a coin toss where “heads” means they would lose $100. The average answer was that a “tails” result would have to pay out between $200 and $300. “The pain of losing money is two to three times as great as the joy you get from gaining the same amount of money,” noted Towill. “It’s twice as painful to lose.”
Towill extended this premise to the real world where a client makes $10,000 on a $100,000 investment in a mutual fund one year and loses $10,000 on a $100,000 investment in a different fund in the same year. With the market flat to down that year, most would conclude that the advisor did a good job overall by not losing any money and keeping the client in vehicles with some upside potential. However, due to the phenomenon of “asymmetrical loss aversion,” the $10,000 loss feels more like a $20,000 or $30,000 loss to the client.
“It’s just an example to show that you need to take into account the emotional, illogical side of all humans when they’re dealing with money,” concluded Towill. “Logically you’ve done a good job, emotionally maybe not.”
Towill wrapped up his presentation with the story of a 47-year-old “rookie” advisor he helped train who decided her target market was going to be 50-year-old men, because she had lot of friends, family and colleagues in this demographic and was keenly aware of — and sensitive to — their special issues, whether it be job loss, divorce or a first major health scare. More important, she knew which financial solutions to link to these emotional issues.
The result? Twenty months later, the rookie advisor now has $30 million of assets under administration and has sold “a ton” of insurance product, according to Towill.
“My challenge to us as an industry is to start really thinking about putting the [intellectual] and the [emotional] together, about putting the hard and soft side of ourselves and our clients and our businesses and our relationships together to make us all world-class advisors,” said Towill.
Filed by John Craig, john.craig@advisor.rogers.com.
(06/04/04)
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