The following is an excerpt from “Working with the Emotional Investor: Financial Psychology for Wealth Managers” by Chris White and Richard Koonce (Praeger, 2016). Mr. White is an experienced wealth management adviser and strategist who has invested on behalf of hundreds of individuals, families, couples and institutions for over 25 years. Mr. Koonce is an author and interviewer, a professional certified executive coach and a communications consultant.
Being a wealth adviser is a tough and demanding job! It involves far more than simply a knowledge of the markets and of various financial and investment products. You must also be good with people. That means knowing how to cultivate client prospects and build strong and lasting personal relationships based on trust, mutual respect, discerning listening and a clear understanding of a client's needs and wishes.
So what are the key building blocks that advisers need to be mindful of in building strong working relationships with clients?
As a top priority, an adviser must demonstrate his or her professional credentials to the prospect or client as a relationship is being formed. Professional training, certifications and other evidence of professional expertise are paramount, as is the ability to connect readily with the clients with whom you work —because clients don't just hire credentials, they hire people.
So what, in fact, do you have to offer your clients as an adviser? To answer that question, do an inventory of your professional background, skills and experience. What do you consider to be your greatest strengths and assets as an adviser? What's unique?
In his book, “The Consultant's Calling: Bringing Who You Are to What You Do,” Geoffrey Bellman offers advice that wealth advisers are wise to embrace. He asks: Why do clients [in any profession] actually hire us? Then he offers a list of reasons. They hire us because of our: experience, friendship, support, eyes, vision, contacts, age, reputation, authenticity, wisdom, information, perspective, accomplishment, approval, objectivity, values, skills, insight, products, personality, compassion, expertise, guts and credibility.
Understanding what you have to offer your clients as an adviser will do a great deal to fortify your professional self-confidence. Moreover, it's a great way to distinguish yourself from your colleagues and build a positive and professional brand.
'CONTRACTING' WITH CLIENTS
In my view, the single most important task for any adviser to accomplish in his or her initial meetings with a new client or prospect, is to have a wide-ranging discussion about the client's values, family history, life philosophy, and long-term life goals. In many cases, the conversations that advisers have with clients may be unlike any the client or prospect has had before. Indeed, advisers often discover that clients lack an even basic vocabulary for talking about such topics, until encouraged to do so as part of a holistic approach to wealth management discussions.
Early meetings with prospects or new clients should also focus on answering clients' initial questions, allaying concerns, framing expectations, and establishing good chemistry and rapport. Here I'm talking about “contracting” not in a legalistic sense, but in the sense of aligning yourself with your client, sharing with them what your firm's philosophy about investing is and explaining why you embrace this philosophy as well.
—“Working with the Emotional Investor: Financial Psychology for Wealth Managers” by Chris White and Richard Koonce (Praeger, 2016)
Sometimes, initial “contracting” can be as basic as establishing good chemistry and rapport with a client in the early stages of a working relationship. On the other hand, it can sometimes be quite formal and structured, if you are working with a wealthy couple or family where other professionals, including lawyers, accountants, estate planners, and others, are parties or stakeholders in the discussions about investing and wealth management that you have with your client(s).
In any case, substantive contracting at the beginning of a client-adviser relationship firmly anchors the relationship and creates strong alignment between the adviser and the client. Doing this in low-stakes circumstances is better than trying to build a relationship of trust and understanding when the markets are roiling or the client's portfolio experiences a market correction.
A healthy client-adviser relationship necessarily entails a regular review of financial, investment and wealth management goals with the client, be it an individual, couple or family. This means it's critical that you take the opportunity, at least on an annual basis, to explore with your clients their wealth management goals and objectives. There will be times when it will be important for you to drive the conversation; times when it will be important to be a listener; times when it will be important to simply let the client express his or her views, opinions and concerns; and times when it will be important to question or challenge something that a client says.
As an adviser begins to work with a client, it's vital that he or she discusses the issue of accountability. For me, this goes beyond paying mere lip service to professional guidelines; it should include a strong personal statement about fiduciary responsibility. If you are not intimately acquainted with the fiduciary responsibilities that are entailed with whatever professional credentials or certifications you hold, I encourage you to familiarize yourself with them. To me, accountability is also about adopting an attitude of stewardship and servanthood in the work I do on behalf of clients.
I became a wealth adviser because of my curiosity, both about the financial markets and about the motivations of people who invest in the markets. In my opinion, curiosity is essential to the work we do as investment advisers. It's incumbent on us therefore that in serving our clients, we get to know them on as intimate a level as we can.
Part of being curious about clients entails using what executive coaches call “powerful” questions; questions that are open-ended and invite a client or prospect to share their thoughts, ideas, and feelings with you in depth. This process is often referred to as “appreciative inquiry” as it entails a commitment to fully understanding not only the client's current thinking, but also helping that client to think in strategic, long-term ways about the management of their wealth.
Appreciative inquiry helps the client to articulate his or her goals. In his book “Wealth in Families,” Charles Collier points out that there are many kinds of wealth (“capital”) that people possess: “Human capital refers to who individual family members are, and what they are called to do; intellectual capital refers to how family members learn and govern themselves; social capital denotes how family members engage with society at large, and financial capital stands for the property of the family.” Thus, clients of financial means are well served if we ask them to articulate the various kinds of wealth that they possess, and to develop a vision around how they want their wealth to be used.
Collier poses many questions that advisers should ask wealthy families who are their clients. Similar questions can be directed to clients who are individuals and couples as well. Here are examples of questions I typically ask:
1. Do you have a vision for your wealth and how you want to use it? If so, what specific goals or priorities do you have?
2. What core values and principles are important to you when developing investment and estate plans?
3. How do values such as achievement, knowledge, diversity, hard work, generosity, creativity, compassion, spirituality, justice, integrity, honesty, service, respect and love influence you when thinking about your wealth?
4. What priorities do you want to include in your wealth management plans relative to financial inheritances by siblings, children, grandchildren and others?
5. What responsibility, if any, do you feel you have to society or to causes and interests beyond your family and extended family?
In my view, you'll be doing your clients and prospects a big favor if you ask powerful questions and have expansive conversations with them as you go about helping them develop long-term investment and wealth management plans. Why? Because you will be helping them to fully actualize their lives and realize the full potential of their wealth to better themselves as well as others.
One of the hardest challenges any adviser faces is building a trust-based relationship with a client. Building client trust entails both basic and complex steps. Being ethical, keeping client information private, assuring confidentiality, and providing clients with objective advice, information and counsel are clearly all critical. Also, acknowledging failure and mistakes openly and forthrightly when they occur is essential to maintain credibility and humility.
What else is critical to the trust building process? Bryan Olson and Mark Riepe have identified 21 specific actions advisers should take to build credibility and trust with clients. Some are basic and obvious, such as “Establish and communicate an understandable corporate investment philosophy and a disciplined process” to clients. Also, “Avoid making overconfident statements to clients.” Other recommendations are more subtle. “Be cautious about risk-tolerance assessments performed during or near periods of extreme market movements,” they caution.
Mr. Olson and Mr. Riepe also believe it's important to learn if your client had previous relationships with advisers that weren't satisfactory. “Past experiences, good and bad, may influence the client's perception of an adviser's intention or actions,” they write. So if you are meeting with someone who worked with an adviser before and did not have a pleasant experience, be ready. Gently probe the client as to their needs, hopes, goals and desires in working with you.
Still other dynamics that contribute to building high levels of client trust are a number of “high-touch” factors, including the ability to personally connect with clients, to display empathy and understanding, and to help the client believe he or she is being listened to in an authentic fashion. The Family Office Exchange based in Chicago, which helps high-net-worth families, representatives of family offices and wealth advisers discharge their respective wealth management responsibilities, recently published research in this area. It found that while product offerings are quite similar across firms, the realm of “client experience” remains a frontier yet to be fully leveraged with clients. Thus, many firms are endeavoring today to offer clients “white glove” client experiences similar to those that consumers have grown to expect from Apple and Nordstrom.
Ideally, as advisers, we want our relationships with clients to be “co-equal.” In other words, we're not simply there to be subject matter experts but also as partners with our clients. Obviously, the degree to which clients want to partner with us in helping to design portfolios and create investment plans will vary. But, it's my view that this process and the relationship itself should be as collaborative as possible.
While close collaboration is essential in any adviser-client relationship, there comes a time when the adviser clearly needs to assume a consultative role with his or her clients. To this end, advisers should work with clients to develop wealth management goals and objectives, and performance expectations/metrics by which portfolio performance will be developed. The adviser should be ready with worksheets for developing investment plans and portfolio options. He or she should also offer the resources of his or her firm on behalf of the client; for example, by providing client education materials, ancillary services, and online resources to clients, as requested and appropriate.
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Based on the discussions you have with clients, and the trust and rapport you establish, the time eventually comes when it's important to discuss and commit to financial goals. As part of laying the foundation for a client's investment and wealth management plans, I invite clients, at a certain point in our conversations, to provide me with a set of their financial goals — at a high level — in their own words. These goals then become part of the investment policy statement that is developed for each client, and each relationship or account. Developing investment policy statements is a highly collaborative process that should be periodically revisited on a mutually agreed-to timetable.
As you and your client develop investment and estate planning goals, and discuss the client's values, family history and priorities, a vision of the future for the client's investment plans eventually starts to emerge. This process, which can take months, can help both of you stay on course with wealth management goals and objectives over the long term. But the visioning process is not a one-time event. A client's vision for their wealth often evolves over time, as needs change or a family ages. Thus, advisers and clients will want to have periodic re-visioning discussions over a period of years.
I believe that helping clients develop a personal vision for their wealth is critical to framing a client's wealth management goals and priorities, and putting them into a meaningful context for both the wealth holder and those close to them, including spouses, siblings, children, grandchildren and others, to understand. As an adviser, you have a unique opportunity to act as a critical sounding board in helping your clients articulate their values about their wealth and their priorities for its use.
Finally, let me say just a word about the importance of establishing and maintaining appropriate professional boundaries with clients. I can't emphasize strongly enough the importance of advisers doing this, both for the sake of their careers and the welfare of their clients.
As advisers, we often are privy to personal information, family secrets, financial records and other intimate information about people's lives. We must deal with grieving families and spouses who have lost husbands, wives, partners or significant others. In such situations, we are sometimes put on pedestals by individuals who are emotionally fragile, who overidentify with us or who are looking to transfer (unconsciously) their love and grief to people beyond their immediate family.
The relationships we have with our clients typically are not symmetrical, which simply adds to the challenge. While we're there to provide financial assistance to people who need it, our clients often are wrestling with a variety of emotional, psychological and even sexual/intimacy needs that come to the surface in moments of emotional vulnerability and life transition. Sometimes clients become overly dependent on us emotionally. Sometimes too, advisers get too close to their clients.
As someone who possesses what I call a “protector” personality, I have a strong impulse to take care of others. This is how I am wired. For that reason, there are times when I must keep my emotions for a client in check, notably in instances when a client may be vulnerable or emotionally fragile due to a recent experience of grief, pain or loss.
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Sometimes, no matter how unwanted it is, an adviser can become an object of attention or affection from a client, as once occurred when a client of mine (a wealthy widow who'd recently lost her husband of 50 years) expected that a sexual liaison would be part of our working relationship. She was in her late 70s at the time. I was a young man, just getting started in my career as an adviser.
Her actions toward me (including the writing of an erotic “love” letter) made me wince, and forced me to share details of the incident with my colleagues in my firm and seek their guidance on how best to deal with it. When I shared my story with my colleagues, we jointly decided that thereafter I would always have one other person with me when meeting with and advising this client. Over time, I ultimately shifted much of my work to this colleague and to others.
When you are counseling others about personal and private topics, such as wealth and estate planning, and when either the client or counselor is emotionally vulnerable or immature in judgment, it can be a recipe for catastrophe. Not only does it bring up issues of ethics, but it potentially can create a manipulative and dangerous situation for both parties involved. I offer counsel here especially to younger wealth advisers who may just be starting out in their careers. As advisers, you are likely to learn many intimate details of your clients' lives and be put in positions in which confidences must be kept and privacy respected. It can be a very heady experience for a young adviser to be a counselor to wealthy and sometimes famous people who are accustomed to getting their way and who (sometimes) are master manipulators who have learned to exert power and control over others.
If you find yourself in situations where you are uncomfortable or are concerned that you could be violating ethical or professional standards or crossing interpersonal boundaries, err on the side of caution. Seek out a senior colleague at your firm for advice and counsel. Don't blame yourself or believe that you brought the situation on. And don't try to ignore what's going on. Instead, take note of what is happening and act with prudence and maturity.