A financial advisor's most important skill is to ability to win the client's confidence. Many seemingly less qualified and 'technically' skilled advisors are successful thanks to this fact. Experience also shows that success in the practice is directly proportional to the enhanced management quality of client relationships. Simply put, the better you manage your relationships with clients, the more successful you will be. And holding the client's confidence is at the heart of it.
Luckily, the skills needed to effectively manage clients has little to do with your 'personality' or 'charisma' or even your sales pitch. Rather, it has more to do with some of your basic attitudes, principles and practices, which, if consistently applied will help you win your client's appreciation and loyalty. Talking of effective client management, we list here a few commonly observed mistakes which we should do well to avoid ....
Common Mistakes:
- Choosing the wrong client:
We would likely meet only a few 'perfect' clients over many years of practice. If we aim for perfection, our work is more likely to stagnate and ultimately sink. But we do have every right and indeed we may feel even obligated to carefully choose whom we decide to accept as clients.We should find clients who are serious about managing their money and are willing to listen and understand our financial advice. Acceptable clients should also be willing to follow our advice, with adequate level of reasoning. Your client should be one whose expectations are reasonable and which can be matched by your services /skills. There is no point in acquiring a client on promises which you yourself are not 100% sure of. If these basic premises are not satisfied, a client may not be right for you irrespective of his net-worth. Having the right set of clients can help you practice at your optimum level, freeing time & resources with less stress and with good amount of work satisfaction.
Some quick pointers...
- Avoid clients whose needs are different to your core expertise /skills
- Avoid clients who are unwilling to follow your advice /recommendations
- Avoid clients who have unreasonable expectations in performance or servicing
- Avoid clients if you are too busy to give adequate attention to
- Being self-focused rather than being client-focused
One of the common mistakes which advisors do is to focus too much on their technical and academic knowledge for solving client's problems. We tend to think that we will best win the client's trust by impressing him/her with our knowledge, degrees and expertise. We naively think that the client will put their affairs in our hands if we convince them of our expertise.Well, it doesn't quite work that way. To win trust of any person, it should be both earned and deserved. We need to park our ego and be genuinely helpful and interested in their affairs and problems. We should be sincere in our attitude and ethics to help the clients realise their goals, keeping their interests first. No cosmetics can work here as the clients are smart enough to see through such artificial makeup.
We also usually see the client's problem with our own prism of experience and knowledge – not realising that this prism can be biased and unfit for the client's situation. We should start with a clean slate for every client and believe that the client and their problems are unique. We should avoid fitting our standard solutions to multiple clients and instead work our solutions starting at the client's problems first.
Some quick pointers:
- Talk less of yourself but listen more about the client
- Be genuine in keeping client's interest first
- Do not standardise solutions and treat every client & situation as unique
- Failing to Understand Client
Imagine a batsman walking out to bat against Sohaib Akhtar without wearing proper safety gear. Seems impossible right? As financial advisors, we also need to properly assess the pitch, the opposition, the target, the field, etc. before playing the game. We must proceed to propose any solution/advice to client's problems only after undertaking proper diagnosis and assessment as needed. And for doing so, a proper understanding of the client is very essential. This would involve understanding the risk tolerance level and the degree of financial awareness and patience he may hold. Note that these are two different things. We also would need to understand the client's family obligations, life goals, financial situation and so on to propose a solution that can meaningfully impact the client's life. Understanding of the client's expectations from you is also important for you to work to his/her satisfaction.Some quick pointers:
- Be respectful and patient to client's level of knowledge & belief systems
- Try to get as much relevant information as possible before planning
- Keep yourself in the client's shoes while designing financial plans
- Pleasing clients during wrong times
We may want tasty snacks but what we really 'need' are veggies. Clients too want to here all good news but they 'need' to be told of the bad news. As 'financial doctors', it is better to tell them the truth – sooner than later. For financial advisors, it is also our ethical and moral responsibility to show the true picture to clients. While counseling our clients, we owe them factual, objective and measured explanation and analysis of the good as well as the bad.Clients must know the advantages & disadvantages /weaknesses of products, asset classes. They mush appreciate the potential gains as well as the risks and all the potential outcomes that could be possible. Only with proper awareness, will they be in situation to take the right decisions. Doing so will also relieve you of any fear of unwanted outcomes in future. Facing a client who has not been foretold or warned or updated of a bad news is often much difficult than doing the right thing in the first place.
Some pointers:
- Always share both the good and the bad sides of any decision and possible outcomes
- Always communicate with clients of any good or bad developments backed with proper explanations
- Never hide bad news and keep conscience clear
- Failing to Confirm /Document
We all tend to remember the good things rather than bad ones. We are more likely to also remember less of commitments made by us than those made to us. Being Indians, we also habitually remember the lower figures of any costs, fees or rates quoted to us. As financial advisors we see that clients often remember the upper end of expected returns more rather than the lower end. To our profession, this is a challenge since we have to protect ourselves with this natural instinct of 'convenient remembrance'.Thus, first to protect ourselves and second to make it clear to clients, we should adopt a practice of confirming all advice and assessments with the clients, preferably in any documented format. It is better to properly record the thought /reasons behind any advice and decision taken at any point of time with clear description of the good & bad outcomes. Needless to say, these records can be greatly helpful in managing your client expectations in future. In absence of it, you may be forced to accept that 'client is always right', harming the good works done by you. If any dispute may arise, you will pat yourself a hundred times for having proper records. You may also never loose a good client for reasons of any misunderstanding /wrong communication /dispute and so on.
Some pointers:
- Record advice /decisions with proper reasons and expected range of outcomes
- Share records so that the client also feels committed to take action on his part
- Be a better professional and manage client in light of historic records
- Accepting unwanted client behaviour
Respectful, compassionate, empathetic and patient service to your clients should be your aim. However, in return, it is most reasonable that you and your team too be treated with respect, consideration and with professional courtesy. A client-Advisor relationship can take any shape but it should not be allowed to degrade to a Master-Servant kind of relationship. Regardless of how careful one can be while selecting clients, one will occasionally encounter clients who are simply impossible to please. Once we start pleasing such clients and accepting their behaviour, it goes only down-hill from there, to the limits of your patience and capacity.Such clients must be dealt in a polite, professional manner and given an opportunity to change. We say this for the reason that your time and efforts are far more valuable to other clients who truly value and need you rather than those who don't. Second, handling such clients will only lead to the inevitable result of a sour, frustrating relationship which you could do very well without.
Some pointers:
- Keep your dignity, professional identity intact and command respect
- Identify abusing clients early and learn to handle or change them
- Learn to say No smartly and before it is too late
- Always respect your clients and your team, especially in front of clients, to not leave any scope for disrespect by any person
Conclusion:
We have tried in this article to implicitly lay stress on the idea that effective management of client relationship is not so much a matter of standard processes or tactics but of your principles and values. When we depend solely on processes and tactics in client management, they can be argued and contested by anyone. But when we approach our clients based on our set of principles & values it is far harder to argue on same. Your principles, beliefs and values can be very effective tools for your practice. We hope that this article encourages you to think on this lines and then find countless ways of adopting your principles and values in client management activities. The above list of mistakes is just the beginning point.
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