Marketing frontlines:

(July 2003) The market downturn of the last three years has resulted in many casualties. Among them has been an erosion of the confidence that many clients have in their financial advisors. And it’s not just advisors’ knowledge that clients have begun to doubt — there are two other attributes critical to a good relationship that many investors are also calling into question.

First, there’s the ability to really trust their advisor’s advice. Many investors express doubts about whether the advice they got three or four years ago really operated with their interests in mind as opposed to being primarily designed to generate commissions and revenue.

Second, investors question their advisor’s real commitment to the relationship. A significant number complain that they haven’t heard from their advisors. And when they did, some felt all they got was the party line about holding the investment. This got them into trouble in the first place.

Research among investors conducted by Cartier Partners in December puts a dimension on the problem. In a survey of 2,000 Canadians, 63% indicated that they were either somewhat or very dissatisfied with their advisor; 10% said they were satisfied; the remaining quarter was neutral on this issue.

Having a well-thought-out plan for communicating with your clients has never been more important. Historically, successful advisors focused on quantity of contact. By simply being in touch on a frequent basis, you positioned yourself well.

In today’s environment, quality of communication — what you say — has become even more important than quantity. Many advisors understand that they need to communicate with clients, but struggle with what to say when they’ve been delivering the same basic “hang in there” message for the past three years.

Here are some guidelines for effective communication in today’s skeptical, “show me” environment.

Establish a dialogue.

The first step in any successful conversation is, in fact, to make it a conversation. Quite simply, many advisors spend too much time talking and not enough getting their current or prospective clients to talk about their views.

A 1980s research experiment showed the power of getting your client talking. Two graduating university students with similar credentials applied for the same job — each had 30 minutes to make their case.

The first student talked about the credentials and experience that qualified him for the job. The second used 20 of the 30 minutes to ask well-researched questions about the company and its competitors. In almost every case, the second student got the job.

A simple rule of thumb is the 50/50 rule. For every 50 words you say, your client or prospect should say 50.

Address your client’s key question.

Advisors often don’t address the single most pressing question and concern that clients who are losing sleep have — “Will I be OK?” Even clients who are losing sleep won’t raise this on their own unless they are prompted. Uncertainty about this issue is a huge source of stress for clients. The older they are, the more anxiety this causes. To address this, you need to go back to first principles and answer the three questions that provide the answer:

• How much will I need to retire when I want and how I want?
• How much will I have, based on how much I’ve saved, how much I’m saving and the likely return based on my current portfolio?
• If there’s a gap, how do I close it?

The answer to these questions establishes the framework for all of the conversations you’ll have with a current or prospective client. Next month, I’ll discuss four more strategies for communicating with today’s skeptical client.

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Dan Richards is CEO of Cartier Partners Financial Group and a columnist for Advisor’s Edge.

(07/14/03)