Client Engagement

Who is Your Client?

I have had some really interesting conversations with advisors during the past few weeks during presentations. In particular, when I have been talking about family dynamics and asking the question who is your advice really impacting?

Generally, the obvious answer would be that your client is the person who currently has the wealth for which financial planning is required (the Wealth Holder). What about the beneficiaries of the wealth? Their lives are generally being impacted by the decisions that get made in the financial and estate plans. To some degree arent these beneficiaries also your client? In providing advice, you need to understand the unique behavioral styles of BOTH the Wealth Holder and the beneficiaries. If you do not take into account the unique financial personality of the beneficiaries then the plan could be useless once the wealth does transfer to them. Isnt this at least partly why we see so many financial and estate plans practically fall apart, breakdowns in family relationships, and generally dysfunctional behavior?

Also, as an advisor by learning to discover who the beneficiaries are during the life time of the Wealth Holder will help you cement long-term relationships with them.

Another interesting scenario that often comes up is that the person requesting the advice and/or managing the wealth is different to the Wealth Holder. For instance, if a son is managing the financial affairs of his mother whose behavioral style do you need to understand? Is it the mother or the son, or both? I have seen many financial advisors get into difficulties by not truly understanding the financial personality of the son. To a large degree you are dealing with the behavior of the son. You will need to know how to communicate with him and also how his view of the world impacts the planning for his mother. After all, the son will see the world through his lens.

Advisor-Client Chemistry

Do you have the right clients? This is a very topical issue for many financial planners, particularly those who have already built a business to a reasonable level. Actually, it is as important as the client selecting the right advisor.

In the end there must be a mutual relationship with the parties comfortable with each other. The relationship cannot start out (but it often does) with the client simply having dollars in the bank account and some financial planning needs, and on the other side the client believing the advisor has the skills and the necessary integrity. In fact, these are all assumed to get to the point of the first meeting. Bob Veres of Inside Information (www.bobveres.com) has written a great article this month called “Segmentation or Bust” mainly directed at advisors to consider the structure of their client base.

Our business is all about looking at the behavioral style of the clients and also the advisors. So, not unexpectedly, the approach we take is to match clients and advisors based on their behavioral style. This is very much an inside-out approach, however all great relationships start below the surface. Human behavior is at the core. The great thing is that the Financial DNA system measures natural behavior which means we can reliably predict the behavioral style of the advisor and client in terms of how that person will always be, particularly under pressure. I would say that our approach must still be blended with a number of other more traditional selection factors such as client size, service style, values, expertise, etc. that are mentioned in Bob’s article.

To help the advisor we have developed an Advisor/Client Compatibility Matrix. The matrix is a one page grid which matches profile styles based on the level of modification that will be required between advisor and client. To be clear, it does not say you cannot work with someone, but it does say who will be easier (green box on the matrix) based on less behavioral modification – this is where communication, chemistry, etc. is likely to be higher. Hence, this is where the relationship will be naturally more sustainable over a longer period with less stress. So if you are an advisor wanting to segment your client base a reliable starting point is now provided.

I do not necessarily advocate that you fire those clients who will require more behavioral modification (red box on the matrix). This will be a warning sign that you have to put more work into adapting to maintain the relationship. Although what you may wish to do is allocate these clients to a partner who is different to you or hire someone who is different to you to provide a complementary style. Many advisors have found this approach to be foundational for selecting their next hire. Or in how they deliver client service with a team-based approach. Hence, the planner may get the relationship started and then another person on the team steps in.

Are you interested in the value of your practice? Importantly for advisors, this approach also helps you to identify to whom you sell your business. The sustainability of the relationships and hence the revenue is critical to business value.