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Client hesitation can impact your business

Are you contributing to confusion and indecision?

It’s no secret that our industry uses a lot of jargon. On top of that, the investment product landscape continues to evolve. As a result many frequently used terms leave Canadians in the dark. In a recent poll1 conducted for Manulife, 47 per cent of respondents had “no idea” what ETF stands for and 18 per cent had “no idea” what bitcoin is. Interestingly, nearly half (45 per cent) of those respondents think bitcoin is “the next big thing in investing.”

Of even more concern to advisors, only 34 per cent of those who work with a financial advisor say they “understand perfectly” what their advisor tells them. More than half – 52 per cent – say they understand most of what their advisor tells them, but “some things I don’t understand.” More than one in 10 (11 per cent) go further, stating, “I only understand about half of what they’re talking about.” 

Graph showing client comprehension of your services

Advisors have been focusing on explaining compensation leading up to and following the implementation of the Client Relationship Model, Phase 2 (CRM2) – and ongoing discussions in that area are still critical (see The lay of the land post CRM2). But there’s also clearly a need to go back to basics with many clients, spelling out financial acronyms and providing plain language definitions. 

It’s worth paying close attention to clients’ comprehension of broad concepts, as well as terminology. Consider, for example, that seven in 10 poll respondents (71 per cent) believe GICs are a great way to save money and build interest, and that about one in eight (12 per cent) think it’s a good idea to put all their investment eggs in one basket.

These misconceptions raise the question, what else are clients not fully understanding? Do they know what they need to know about risk and reward? Are they confused about volatility and baffled by asset allocation? The lesson here is that advisors can’t assume understanding of even foundational ideas – and without those foundational ideas, clients probably won’t be able to grasp more sophisticated financial planning concepts.

The good news is that making a commitment to bridge the knowledge gap can help clients understand your products and services more fully. That, in turn, can help them recognize the value of what you offer and the value of your educational guidance. Explaining the basics in simple terms can also enhance client trust – and that’s important for your practice’s continued growth.

Asking for referrals can be as painful as pulling teeth 

Speaking of the health of your practice, nearly one in four respondents (24 per cent) would not refer their advisor to their mother, given the opportunity. About one in three (34 per cent) would leave without a backward glance ¬– not bothering to say goodbye personally if they switched advisors. Just as humbling, among all respondents (those with and without an advisor), almost one in three (32 per cent) would rather go to the dentist than talk to a financial advisor.

How can you make the seat across from your desk a more comfortable destination than the dental chair? A good place to start is with a renewed focus on educating clients in an engaging way. All advisors have stories to share (without identifying details) that make financial planning relevant and real. Throw in an example if you see a client’s eyes begin to glaze over. Don’t drill into them with more product features. Be straightforward, running the numbers and calculating results for different options. Use analogies. Draw pictures. Think back to the lessons that made financial concepts click into place for you, and share them with your clients.

Perhaps most importantly, ask more often if clients would like extra background on a specific topic. Clients may not proactively request information – they may be a little embarrassed that they don’t already know something, or they may not even realize there are gaps in their knowledge. So it’s essential to make the offer frequently, and to make it very clear that you see client education as part and parcel of being an advisor.

Tailor your conversations

In the end, the key is to provide information tailored to each client’s current knowledge and interest level. Of course not everyone wants the same level of detail. Some people are more than happy to delegate thinking about the more complex aspects of financial planning. But advisors do need to make sure their clients have a base level of common knowledge so they can make informed decisions about the issues that affect their financial future. Then advisors can identify those who would appreciate more information and deliver it to build trust. 

One in three Canadians (33 per cent) have a financial advisor, according to the Manulife poll – and they’re the lucky ones. They have access to a knowledgeable person who can explain terms and concepts, provide context and partner with them to achieve their goals. As their understanding builds alongside their wealth, the value added by their advisor will come into sharper focus. 

In time, they may even be willing to refer their mothers (and other family members and friends) to you. In that way, clearing up client confusion can very directly expand your client base and grow your business. See more about this consumer insights campaign on Repsource.ca.

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