5-minute Finance: Ensuring Effective Communication With Clients

By RICHARD DOBSON 
For AdvisorNews

Many of the people we serve seek our help as financial advisors because they’re not able to process financial information the way we can. Many new advisors react to this skills gap by attempting to close it. This desire to share their professional expertise is laudable, but can overwhelm clients and cause them to turn for help elsewhere.

Removing industry jargon and advanced terminology from your conversations with clients will earn you their appreciation and attention. Instead of spending your time on explanations of complex financial terms, meet clients at their knowledge level and use language they understand to keep the focus on building trust and a strong advisor-client relationship.

Avoid The Curse Of Explaining

Almost every advisor will fall into what I call “the curse of explaining” at some point. An advisor will go off on a tangent or use market terminology that might give pause to even the most dedicated Wall St. Journal readers. When advisors do this, they forget that clients lack the education and tools we use to make sense of these topics, and can feel misguided when we throw an entire book at them. This can lead to clients feeling overwhelmed, and subsequently failing to act on advisors’ recommendations.

Tailor your approach to different clients, as some grasp financial concepts more easily or enthusiastically. Your clients’ professions, especially, can guide you in choosing customized explanations to use with them. Business owners and farmers, for example, are intimately familiar with capital and market risks. Some professionals that don’t directly work with markets can also desire higher-level explanations - engineers, in my experience, prefer to treat financial planning like a machine and get to know the different components and moving parts.

Whichever professions or geographic markets you work with, telling stories about helping other clients or using easily understood metaphors will help make sure you and your clients are on the same page. Sharing examples of helping other clients allows you to demonstrate your own topical knowledge and share the successes they hope to replicate. Don’t forget to ask questions. It involves people in the discussion and is a great way to use “participant-centered learning” in your practice.

As for metaphors, my personal favorite is the carpenter’s ruler I use to walk my clients through saving for retirement. Thirty years of peak earning, represented by the full ruler, sounds like more than enough time – but once I fold in sections of the ruler to represent not saving while young or retiring early, clients typically understand the need to save throughout their working lives.

Rely On Common Knowledge

Advisors tackle complicated challenges, but they can lean on more everyday ideas in discussions with clients. The core concept of “save now, benefit later” has been around for as long as societies have been, and advisors shouldn’t have to try very hard to get clients to understand that mindset.

Use these everyday ideas to simplify investments as well. Almost all investments can be split into “ownership” and “loaning” categories, which are easy for clients to understand. An “owning” investment, like a stock, is like a house or a car – they belong to the client, and the value will change over time. On the other hand, a “loan” investment, like a bond or fixed annuity, is like a savings account – money your client is letting someone borrow with a promise of interest on their deposit. Clients will understand “own or loan” and can use this to start evaluating things like risk-aversion before you ask it of them.

Our goal in communicating with clients and prospects is to put them at ease. Clients want to know who we are and what we do, not everything we know. By communicating with clients using language and analogies they understand, we can give them the confidence to let us use our skills on their behalf.

Richard Dobson, Jr., CFP, is a 17-year MDRT member. He is President of American Financial Management, an RIA firm, and is also an officer of American Financial Securities, a Broker/Dealer. Richard has served on numerous MDRT committees, including service as Past President of the MDRT Foundation (2017) and MDRT Finance Committee Chair (DVP, Finance 2015). A member of NAIFA since 1984, Richard has served NAIFA–Iowa on various committees, the board of directors and as an officer. Richard lives in Cedar Falls, Iowa.