Practice Management

Uncovering the Advisory Blind Spot

Dictionary meaning: blind spot a subject that you do not understand well, often because you do not want to know or admit the truth about it.

Most clients have a blind spot when it comes to financial management; but equally most advisors have a blind spot about who their clients are. The advisor often believes he or she can read people but it is natural the advisor will not be able to get a complete and objective understanding of the client regardless of their intuition or level of experience. Uncovering these blind spots has two powerful outcomes in the financial advisory process.

Advisory Blind Spots, Behavioral Finance, Financial PersonalityFirstly, for an advisor it increases their understanding of the importance of asking clients the right questions. Getting to know how clients are financially wired is a key to building relationships. Secondly, it uncovers the need for advisors to acquire skills that assist them to understand different client communication styles and how to use that knowledge to moderate/adjust communication styles to draw out information about clients financial behavior and decision making patterns, and from there adapt advice to better meet their needs.

The challenge for clients is that they dont know what they dont know and this leads to blind spots. They may well not be able to see opportunities in risk nor risk in opportunities, and advisors need to be able to expose these blind spots and the possible history behind them. Being able to discover their future plans, their aspirations, their background and what has driven or influenced where they want to go in terms of wealth management ensures that advisors give targeted advice that will undoubtedly build stronger client/advisor relationships.

Sarah and Michael recently engaged to be married decided to speak to a financial advisor about planning their financial future. The advisor encouraged them to save and invest; to work towards owning their own property and gave them reading material to support the advice.

Sarah and Michael left confused and dissatisfied. They had wanted to talk about handling money responsibly; they wanted to ask questions about separate or joint accounts; they wanted to start a college fund for the future education of their hoped for children; they wanted to avoid debt but use and manage credit sensibly; they wanted to ask about a self-managed pension scheme; they wanted to share their dreams for the future and how they could build wealth to enable them to realize them.

Did the advisor give advice? Yes. Did the advisor uncover anything significant about these two potential clients? No. Had time been invested into asking questions, discovering their financial personality style uncovering their history, revealing any blind spots ? the advisor would have discovered that Sarahs parents divorced after mismanagement of finances that led to bankruptcy and she was determined that this should not happen to her but knew she had many concerns about never taking any risk with finances. Michael came from a long line of financially astute family members. As a family they openly discussed finances and understood the importance of encouraging the younger members to do likewise.? Michaels family through careful management had built up a significant wealth.

http://www.communicationdna.com/newsite/wp-content/uploads/2012/04/cdna-solutions-slide-enterprise1-130x60.pngHad the advisor been behaviorally smart; had they objectively known the different behavioral styles and emotions of these clients which comes from using a formal behavioural discovery process; had the advisor been equipped to navigate human differences by discovering and aligning how to uncover different communication styles, behaviors, solution preferences and blind spots this story would have had a happier ending. As it was Sarah and Michael took their business elsewhere.

To learn more about uncovering the advisory blind spot, please visit the Financial DNA website.


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Why Helping Your Clients Know Their Number is an Old School Approach

Have you ever had a client tell you their number? You know, the net worth number that will make them happy. Or that number they ask you to calculate so theyll know theyll be okay?

Focusing on this number is outdated, a mistake and I contend will actually hurt someones chances of reaching their long term goals. Heres why:

You are encouraging your client to focus on the wrong thing. When someone focuses on a future number they arent focusing on what they need to do to get there. Unless they are planning for a short term liquidity event, such as selling a business or winning the lottery, having a big number in their head doesnt do anything to move them toward the goal.

Helping Clients Know Their Number is an Old School ApproachClients may very well use this number to gauge their progress. One of the positive impacts of goals is that they give us a target to move towards. One of the negatives is that when we dont hit them we feel as if weve failed. When we put our attention on missing a goal, our energy is on the failing as opposed to the achieving of the goal.? For example, if your goal is to drive to Denver and you hit a detour and find yourself in Birmingham it doesnt get you to Denver any more quickly by feeling badly youre in Alabama. Instead, if you get a map or use your GPS to guide you to your preferred destination youll have a much easier time actually getting there.

In his Psychology Today blog Ray Williams surveys various research articles looking at how goal setting doesnt work. He quotes L.A. King and C.M. Burton in an article entitled, The Hazards of Goal Pursuit, for the American Psychological Association. They argue that goals should be used only in the narrowest of circumstances: “The optimally striving individual ought to endeavor to achieve and approach goals that only slightly implicate the self; that are only moderately important, fairly easy, and moderately abstract; that do not conflict with each other, and that concern the accomplishment of something other than financial gain.”

Williams continues:? There is an addiction in our culture to getting more, the going for the goals hype is disconnected from peoples’ authentic selves, and their values.there are psychological manifestations of not achieving goals that may be more damaging that not having any goals at all. The process sets up desires that are removed from everyday reality. Whenever we desire things that we don’t have, we set our brain’s nervous system to produce negative emotions. Second, highly aspirational goals require us to develop new competencies, some of which may be beyond current capabilities. As we develop these competencies, we are likely to experience failures, which then become de-motivational. Thirdly, goal setting sets up an either-or polarity of success. The only true measure can either be 100% attainment or perfection, or 99% and less, which is failure. We can then excessively focus on the missing or incomplete part of our efforts, ignoring the successful parts. Fourthly, goal setting doesn’t take into account random forces of chance. You can’t control all the environmental variables to guarantee 100% success.

If youre not buying the danger of goal setting argument, then consider that making the number the goal is the wrong goal. People think that having a money goal will motivate them to achieve it. Actually, they are focusing on the wrong incentive. People may think they are motivated by money or advisors may think clients are, but really people are motivated by what they money will do for them. The money might help them leave a job they hate, pursue a hobby they enjoy, give to causes they believe in, etc.

Build better relationships with clients and do a better job supporting them in getting to where they want to go.The number is a meaningless moving target. I had a client who told me at our first meeting that his number was $5,000,000. When he got to $5 million he said, Oh, I guess that number doesnt really make me feel like Im there. I think its really $10 million that would have me feeling okay. Guess what, $100 million might not make him feel okay. The feeling of security or knowing that well be okay isnt typically related to the number, but rather our beliefs about what okay is.

As advisors, many of us create financial plans for our clients, run projections, make assumptions etc. We help our clients create a road map for their financial futures. Anyone who has been in business over the past ten years knows that our projections are just that, projections. The world often changes in ways we cant anticipate. What we are really doing for our clients by creating a financial plan is to provide them with a plan that satisfies their logical minds and really serves to ease their concerns about the future. When we can calm our clients worries we help them to make much better decisions with their money.

There are real benefits from the financial planning process. As advisors we need to expand our views about all the benefits a plan provides. When we move past the left brain logical benefits and expand our focus to the more right brain behavioral benefits well build better relationships with our clients and do a better job supporting them in getting to where they want to go.

As a 21st century advisor make sure you understand your clients well enough to know:

  • What they want their retirement to look and feel like.
  • The most important people in your clients lives and how they want to be involved with them in the future.
  • The causes important to your clients and what impact, if any, they would like to have on these causes.
  • How strong their internal barometer is for making adjustments in their financial lives based upon whats happening in the world.
  • What they really need from you to make solid financial decisions.

Helping clients to tap into their motivation behind their number will allow us to be much more effective in helping them get to where they want to go. People are motivated by avoiding pain and moving toward their passions. To succeed as an advisor in the coming years it will be crucial to expand the conversation from just the numbers to instead, focusing on intentions and passions. This is what it will take to truly move people closer to their desired outcomes.

Ellen Rogin, CPA, CFP
is the co-author of Great with Money: 6 Steps to Lifetime Success and Prosperity. She speaks and consults to the financial services industry on business building strategies and working successfully in the women’s market. To learn more and to sign up for Prosperity Tips visit www.ellenrogin.com.

Whats Certain is Uncertainty

As a financial advisor, you have done a good job of helping your pre-retired clients dream, define their ideal goals and manage a portfolio to achieve those goals. But that may or may not have anything to do with their reality. Why?? Because so much of retirement requires managing the mental, social and physical aspects and each of your clients is a unique individual.financial personality, behavioral management, retirement planning

Helping your clients plan for retirement requires you to use a whole brain approach to financial planning.? Consider these facts recently released by the Employee Benefit Research Institute: 57% of U.S. workers surveyed reported less than $25,000 in total household savings and investments excluding their homes.? 28% of Americans have no confidence they will have enough money to retire comfortably.

Beginning with the left-brain side of the business, you are already starting with a deficit: a lack of money and confidence.? Pre-retired couples assemble their budgets and that action alone can bring on a lot of uncertainty. Like the markets, people dont like uncertainty. How does it feel to live on the withdrawal side when your clients have always lived in the accumulation phase?? What about the possibility of another Great Recession?? Are health care costs really that high?? How do I know how much to plan for home repairs?

That left-brain conversation can take a sharp turn into the right-brain hemisphere.? A client may confide in you that even though they never liked their job, at least it gives them a sense of purpose. The reality is that when people don’t feel they are doing something meaningful, they become bored and pessimistic. Failure to address things like how much time they will spend together, changes in household responsibilities if one retires before the other, or how their golden years will be affected by financial issues such as supporting an aging parent can quickly remove the luster and shine from their golden years. Couples can, and probably will, have different priorities and attitudes about retirement and that identifying those differences is critically important to their compatibility, and success in retirement.

The emotional side of retirement coupled with the numbers side can add up to stressful conversations during your meetings with pre-retired clients.

So how do you continue to create a priceless unique experience for your pre-retired clients?

By understanding where to focus the conversation depending on the type of client sitting in front of you.? If your client is primarily a goal-setter, then helping them with ideas to redirect their time, energy and talents into new ventures will help reduce the tension.? An information seeker will need more details and research on retirement ideas and will probably be more at ease with identifying and following detailed cash flow projections.? Your client who is more lifestyle oriented would do better with you telling stories about your other retired clients who have successfully made that transition. And, finally, a security seeking clients mind will be at ease when you combine both their feelings and very concrete, specific ideas about retirement.

financial planning process, client confidence, advisor trustHelping your clients prepare for retirement requires you to move from the clients outer world to their inner world with grace and ease.? Instilling confidence and a sense of certainty in these uncertain times is your number one priority.? And to do that, you need to have a heightened self -awareness to show both your logical, and emotional side.? Your payoff is loyal clients who will stay with you and provide referrals for life.

For more information on how you can determine the financial personality of your clients to guide them in all financial planning conversations, visit the Financial DNA website.

Investors Eat the Behavior of Advisors

When discussing financial planning issues, there is so much talk about investor behavior. However, rarely does the discussion get to the advisors behavior. Our recent whitepaper: Dealing with Financial Planning Risk ? Directing Portfolio Decisions or Navigating Human Behavior opens up the discussion on the importance of advisor behavior as the advisor is the behavioral guide of the client.

Have you ever considered how much the advisors behavior impacts the investor’s performance? The reality is that advisors are human as well. They have strengths and struggles which impact their decision-making and how they respond to the financial markets. Even more important is that advisors need to realize that their behavioral style could be different to that of the clients, and therefore they have to be aware of what this means. ?You can also learn more by visiting the following blog by Samantha Allen:? http://www.financial-planning.com/blogs/Forget-Investor-Behavior-What-About-Advisor-Behavior-2681735-1.html

Research shows that some advisors themselves have a myopic loss aversion resulting in extreme caution. Then there are other advisors who have extreme over confidence and can be blinded about the potential dangers of the strategy they have recommended. There are also advisors who just get stuck in their own strategy because that is what they know and believe in but do not know how or when to adjust. Ultimately, the problem can become that the clients portfolio starts looking like the advisor.

Our experience has also been that if the advisor has high levels of personal awareness then they have a greater chance of managing the influence of their behavior on the clients portfolio. This ability is increased if the advisor uses an objective behavioral discovery process for themselves and the client. This will help the advisor more clearly and confidently navigate the differences.

If you take the graphic below which compares the behavioral style of Chris Coddington? as the advisor and Helen Jones as the client you can see the differences that have to be navigated.

Financial DNA Comparison Report

Chris is a driven pioneer and risk taker who will be focused on performance. But will he push Helen too far out of her Content lifestyle zone? Will Helen be able to control herself when she hears new ideas at the dinner party?

To learn about your style, complete your Financial DNA assessment and then start seeing how different you are to clients. Please visit www.financialdna.com.

If you would like to access the whitepaper: Dealing with Financial Planning Risk? – Directing Portfolio Decisions or Navigating Human Behavior“, click here.

4 “Must Have” Apps for Financial Advisors

Advisors wear many hats. Advisors need to be great networkers, great money managers, great bosses, and a great wealth mentor. Salesforce can help with some of these activities inherently just by keeping you organized, but the real ticket is inside the Salesforce Appexchange where independent software providers have developed apps to make your life easier.

I have selected 4 cutting edge apps to help with your marketing, client service, workflow management, compliance, document creation processes, and keeping a watchful eye on your clients portfolio.

Communication DNA | Customize your marketing and client service activities

Communication DNA is a customer engagement app used by advisors to discover the emotional decision-making patterns of clients to allow for the real time customization of marketing and client service activities. You as an advisor, use this information to understand what drives your clients decision making, and help establish the environment that your clients need in order to financially perform.

Communication DNA delivers your clients communication keys, preferences and contact details directly to your Salesforce account without you lifting a finger.

More about this app

How Communication DNA works:

Process Composer | Workflow Management for your Advisory Team

Process composer is a smart engine to build and automate simple or complex repeatable processes. Create a firm-wide consistent client experience, enable visibility by seeing the status of client requests, & drive Salesforce adoption by imbedding routine processes in CRM.

CREATE CONSISTENCY: build sales, service, HR, and compliance processes so they happen the same way every time.

CREATE VISIBILITY: empower employees with the ability to graphically see the status of client requests.

DRIVE ADOPTION: imbed your routine processes inside Salesforce CRM to create dependency and drive usage.

More about this app

How Process Composer works:

Conga Composer | Easily generate your documents for Compliance
Easily generate custom proposals, account plans, contracts, presentations and emails with content from multiple objects and related lists. Works with Word, Excel, PowerPoint, PDF forms and HTML email in single, batch and scheduled operations.

More about this app

How Conga Composer Works:

Sycamore | Client and Compliance Manager
A simple, easy to use application designed specifically for a financial advisor. Automated workflows, Client communication and seamless data integration help you manage your customers more efficiently and effectively.
A complete client balance sheet is tracked. Assets include bank accounts, financial accounts, holdings and insurance policies. On the liability side, both short term debt like car loans and credit cards are tracked as well as long term debt such as mortgages and home equity loans.

Plus, Sycamore provides checks & approval processes to ensure you stay compliant.

More about this app

How this app works: