KYC is about asking the right questions

Embrace the power of curiosity. Advisors must reengage their curiosity quotient and have dialogues instead of monologues with their clients.

Rob Kochel, vice president, national accounts at Invesco, was extolling the virtues of meaningful communication with clients at an advisor workshop organized by Invesco Wednesday, in Toronto. A constructive dialogue with clients, he said, goes beyond small talk and shop talk.

“You have a terrific opportunity to get below the waterline [one that separates the tip of the iceberg from what remains underwater]; it’s called Know Your Client [process],” said Kochel.

Trouble is, KYC is a compliance requirement not quite as popular with the advisor community as yoga pants are with Vancouverites. So much so that some advisors make it sound like they are taking blood from a client, said Kochel.

“How does that client feel about that process? Is it a positive experience for them? Not the way you are setting it up,” he said. “The KYC is a marvelous opportunity to start asking the questions to get below the waterline.”

The key, however, is asking the right questions and not wasting the opportunity to get to know the client better. Kochel said asking for referrals or questions about complicated investment techniques don’t differentiate advisors in any shape or form.

“These are imposter questions; sales technique type of questions,” he said. “A question is designed to get information from a person that you don’t have the answer [to] or information about. What’s interesting about a question mark is that it’s ear-shaped; it’s designed to listen.”

He used the results of a Russ Alan Prince research to illustrate ways to understated and address issues that matter most to clients. It is about asking the right questions, he said.

Some of those questions ask clients how they made their money or their best and worst experience with financial advisors. “Circumstance that would impact your financial future [or] who do they relay on for financial advice [and] how much money they need to stop worrying about their finances?”

There is a logical order of questioning and it starts with history, he said. “This is the [question with] easiest answer, designed to put the client at ease.”

Some of the best history questions, said Kochel, are about the best financial decision a client ever made or about the financial advisors they worked with in the past.

Then come principals questions aimed to tease out investment values and beliefs that guide a client’s decisions. Further, it is critical to understand how they measure the success of their investments. “This is a very interesting questions because I found out about an advisors who lost a client of eight years” despite having “delivered better results than the S&P/TSX and better results than the MSCI World for eight years in a row” because he failed to beat his brother’s investment returns for the same period.

“He left the advisor after eight years; the advisor had no idea [why].”

Goals. Questions around goals reveal what clients want their money to do for them. And here’s how they sound. “Describe something your parents did [or didn’t do] for you that you’d like to do for your children [or] what three goals you have to accomplish in your lifetime?”

But listening skills alone will not lead to good relationship. And that’s where empathy gets added to the mix. “Empathy is a contagion; it’s a virus. Once you feel empathy from somebody you give it back.”

At the same time, it is important to maintain a critical distance. “You don’t want to be too far; you don’t want to be too close, but you need to demonstrate empathy.”

Advisors need to learn the lost art of conversation and being curious, asserted Kochel. Helen Keller, the late American author, political activist, and lecturer, lost her sight and lost her hearing at a very young age. Years later she was asked which of the two was a greater loss.

Without hesitation she said with the loss of sight she lost the ability to connect to things, but when she lost her hearing, she lost her ability to connect to people.