A recent email I received had a link to the findings of a survey conducted with 1400 advisers in the US into why they had been fired by clients [http://discus.org.uk/8285-2/]. Although the survey itself was quite negative, I did think it interesting that the top three reasons were all connected to communication, with ‘poor investment performance’ only sneaking in at number four.
Rather than focus on the reasons for being fired, I’d much rather see a survey with clients that highlights the reasons they use their advisers. My hunch is the top answers would also be about communication.
When I say ‘communication’, I’m not just talking about meetings, emails and phone calls. As the best advisers know, communicating with clients involves a lot of listening, to really understand their goals and objectives.
There are excellent tools available that can help advisers really get to know their clients and the best ones use behavioural finance. This enables the adviser to explore many more facets of a client’s financial personality beyond simply risk tolerance.
The tool we use at PortfolioMetrix – part of our Wealth ExplorerTM package – is designed to enable advisers to assess clients’ investment composure and pre-empt potentially destructive behaviour. It also assists in client ‘coaching’, helping them to recognise how their behaviour can impact on their investment strategy. Although the main purpose of the tool is to measure a client’s willingness to take risk, the additional information it delivers is invaluable when completing the portfolio construction phase, as well as being valuable in identifying clients who may need more intensive coaching in future during periods of market stress.
In my experience, the best advisers have an inherent ability to communicate with clients effectively and efficiently. Adding a bit of science into the mix via behavioural finance tools is no substitute for this but, used effectively, it can be a valuable additional component. It can save time and effort at the start of a client relationship plus mitigate against angst and anger later on should volatile markets put the relationship to the test.