Watch your language

(January 2008) An elderly couple entered their advisor’s office for their annual financial check-up.

Although they were a little concerned that their portfolio was down slightly from the same time last year, they kept reminding themselves they are retired and allowed to withdraw money for trips and the odd “big ticket” purchase.

They were also concerned about their investment portfolio: It seemed everyone — their neighbours, the children, even the five o’clock news anchorperson — had suggestions about how they could improve their returns.

It was time to seek reassurance from their financial professional of many years.

They started the meeting with your typical, open-ended question: “How are we doing?”

Their advisor sat back in his chair, took a deep breath and launched into this sermon:

“I think we are OK considering the market took a bit of a nosedive in Q4,” he told them. “Earnings were off and the Canadian dollar stayed strong against the greenback. That really hurt our foreign funds. I took a glance at your RIF and LIF. It seems that the drop in your REIT’s really hurt your cash account, but I wouldn’t worry about that now because the changes in tax legislation are already priced in the market, which is why I increased your SWIP’s.…

“You will notice on your T5 that your income is also down from last year. That said, we did manage to pick up some yield on those preferreds. I have also reviewed your funds. The MER’s seem reasonable. I don’t care what the newspapers say; a 2.5% MER is fair for a good bottom-up value fund. It is a core holding.

“That being said, I do think we should consider some I-units. I would stand pat until your DSC schedule runs out, then we can go front-end zero later in the year. Maybe we can average in — it reduces market risk.…

“Speaking of risk, I do think we should review your IPS. It seems that we might be taking on a little too much beta — I think we may be too far up the efficient frontier, if you know what I mean.

“Other than that, I think we are in a great position!

My assistant left a note on your file suggesting that we also update your KYC’s. Maybe we should do a couple of P of A’s (Translation: Really bad street speak for power of attorney.) just to be safe.

“Oh, I forgot to mention your grandchild’s RESP. It got whacked by the strong C-buck but I do think we should take advantage of the CESG. It’s basically free money.

“What do you think?”

The couple sat back in their chairs, glanced briefly at each other and graciously nodded their approval.

Do you think they feel much better?

This may sound a little extreme, but many clients would agree that this is how we sound to them.

As financial advisors we have a “street language” filled with acronyms, slang, jargon and terminology that doesn’t breed confidence or understanding.

In a recent survey I conducted, one client actually said he had no idea what his advisor was talking about most of the time. What’s more, the client also felt stupid asking questions, saying he would just prefer to agree and move on.

Understanding is the root of trust. (Conversely, lack of understanding breeds fear and unease. —Ed.) Is it any wonder our industry is suffering from growing public skepticism?

The average advisor spends 50% of his or her time communicating with clients. Our communication style, verbiage and body language often determine how much people trust us. Would you receive a passing grade?

Communication is your craft. You are measured not just by what you know but more for your ability to effectively communicate your knowledge and explain information.

In the late 1990’s, a Canadian blue-chip brokerage firm used the tag line “Knowledge Is Power.” I couldn’t disagree more. Knowledge is power only when it is communicated effectively enough to drive desired results.

When working with financial advisors across Canada, I find veterans are the worst offenders. As a young broker in 1988, I used slang to hide my lack of experience. It was sometimes fun to intentionally confuse clients. The reality is that I, too, was confused.

Today is different. Clients have an amazing number of opportunities to get advice. There are more channels, more advisors and far more information readily available.

A financial advisor today must use a different kind of language. Our words should not alienate people. We should empathize, listen intently and build conviction through understanding.

It is no secret that the lion’s share of wealth in this country is in the hands and bank accounts of those over 60. Consider this: A gentleman is his early 70’s has been the primary conduit for his family with their financial advisor. His nagging worry is whether or not his wife will be able to work with his advisor if he dies.

What criteria should he consider when choosing someone to work with his spouse? My best guess is that he is looking for someone he trusts to manage things properly.

This sense of trust hinges on his advisor’s ability to speak in a manner that breeds comfort. How often do senior clients unexpectedly leave an advisor’s practice?

We often say clients leave because of performance, but in surveys, clients repeatedly tell me they’ve stayed with firms, despite poor short-term performance, because they implicitly trusted their advisors. Many also tell me they’ve left advisors despite reasonable performance because there was no trust.

What can you do to improve your client communications? Like most things, our language is habitual. I suggest that you ask clients for permission to record meetings and conversations. Listen carefully to those recordings — it won’t take you long to determine whether you are clear in your communications.

I took this advice many years ago. It was painful but enlightening, and ultimately very effective.

Shawn O’Brien is the vice-president of national sales at Investment Planning Counsel. For more information, contact Shawn at shawn.obrien@ipcc.ca or (877) 212-9799.

(01/23/08)