Communicating effectively with clients is easy. Just organize and explain your thoughts clearly — verbally or in writing — and clients will get the message. Well, maybe. Ellen Rogin, CPA, CFP, president of Strategic Financial Designs, Inc. in Northfield, Ill., recently had an experience with a long-term client that convinced her otherwise. She and the client had discussed several financial planning topics during a meeting. The client seemed satisfied with the conversation and Rogin assumed the session had gone well.
Several months later the client informed Rogin she had been very upset at the conclusion of that meeting because the client had heard Rogin ask her how long she expected to live. The client had recently recovered from a serious illness and the question shocked her, although she did not express her reaction at the time.
Rogin, who has been a financial advisor for over 20 years, says she has never asked any client that question and she doesn’t know how the client picked up on it. “I can’t even tell you exactly what I said versus what she heard,” says Rogin. “I think the point of this (is) we can communicate in ways that we think we’re being very clear and based on whatever is going on with the other person, they might hear it differently.”
Other miscommunications can be less dramatic but just as important for advisor-client relationships. Jerry Verseput, CFP with Veripax Financial Management, LLC in El Dorado Hills, Calif., has encountered disconnects with clients’ understanding of portfolio risk. Several of his retired clients cannot afford large losses but still need inflation-beating returns to meet their goals. Verseput discusses downside protection and risk-management techniques at length with them, emphasizing that no risk-management technique is foolproof. However, he tells clients, to earn a higher return than U.S. Treasury 10-year bond, for example, they must take some form of risk.
Hearing what they want to hear
Although Verseput’s clients seem to understand, he believes they hear what they want to hear. He tells them, “We will attempt to limit losses” and what they hear is “I will never experience a loss.” That problem can lead to some awkward conversations. “After the U.S. credit downgrade last year and subsequent market downturn, one client’s portfolio experienced about a 2 percent loss for that quarter,” says Verseput. “When the client asked me how I felt about this, I admitted that I felt pretty good we were able to limit losses to only 2 percent in such a turbulent market. The response was, "How can you feel good about losing us 2 percent?”
Other advisors experience the same problem with clients but on a different scale. Kevin Meehan, CFP, ChFC with Summit Wealth Advisors, LLC in Itasca, Ill., agrees that clients often do not hear what is being said as much as they hear what they wish for, especially since the financial crisis. “Due to the fact that many people’s incomes are flat, down or gone and real estate values are lower, many have struggled to accept their own reality,” says Meehan. “This has caused a need for clear communication and some very difficult conversations regarding key objectives such as education for children and retirement.”
For example, says Meehan, clients who planned to sell their appreciated homes, downsize and invest the remaining proceeds for income are facing reduced home values. Others who bought second homes and planned on higher rents to cover the property’s carrying costs have also been disappointed. Another major problem area: parents who can’t bring themselves to tell their adolescent or adult children that Mom and Dad no longer have the income and funds they did previously. Helping clients face their changed circumstances and adjust is a challenge, says Meehan. He shows them that they need to make changes in their plans even though those changes can be difficult. It’s critical to avoid coming across as judgmental, he says, but the clients must understand what’s happening, even if they reject the advice. “We’re OK if they walk away from us because we delivered what we should as advisors: an unbiased perspective on the decisions that they’re making and the impact they’re going to have.”
Recognizing client preferences
These disconnects start with personality orientations, says Mitch Anthony, president of Advisor Insights in Rochester, Minn. Anthony teaches advisors to follow an adapted version of the Myers-Briggs preferences profiles that he calls TEAM Dynamics. Advisors using Anthony’s system learn to recognize clients’ dominant personality profiles. “The four types are togetherness (T), which is your just very amicable, likable, agreeable personality,” Anthony explains. “The second type is the enterpriser (E) who’s a bottom-line, results-oriented personality. The third type is an analyzer (A) that wants to drill down and get into molecular detail. And the fourth type is the motivator (M), who’s all about flexibility and freedom and having fun and being friendly and they want a good positive feeling all the time.”
Recognizing clients’ profiles facilitates effective communication and reduces the risk of disconnects based on conflicting styles. Anthony cites the example of a highly analytical advisor dealing with an enterpriser-client who just wants to get to the bottom line. Another possible mismatch: clients who emphasize personality rather than data working with an analytic advisor. The conflicting styles could cause a problem, he says. “We’ve done a lot of work in the last 12 years in the industry helping advisors understand that as much as you might love your own personality, the chances are you’re disconnecting with about 50 percent of the people you meet,” says Anthony.
Dan Grover, CPA, CFP with Ronald Blue & Co. in Charlotte, N.C., follows a systematic approach to profiling clients’ communications preferences. He has new clients‑both spouses or partners for couples‑complete a profile designed by Waxhaw, N.C.-based Team Interplay. The profile identifies four types: analyzer, taskmaster, participator and energizer.
The key distinction among each type is what drives them. For analyzers it’s data; taskmasters are results-driven; participators value relationships and it’s change that drives energizers.
Additionally, Team Interplay provides materials highlighting strategies for communicating effectively with each type. Grover and other staff members have also completed the profile to enhance their self-understanding and match-ups with new clients.
Grover claims excellent results from using the profiles and frequently refers to clients’ results before speaking with them. “I am very cognizant of what they need in order to process the decisions that we are making,” he says. “So I refer back to it. I keep it in my folder at all times. Before a call that may require intense communication, I will make sure I remember what their profile is. I look at what I need to do as a taskmaster (Grover’s personal profile), communicating with them and what works best for them.”