A doctor’s exam may only last 7 minutes or less to accurately prescribe medication to an illness, but it’s not unusual for a first meeting between a Financial Adviser and a potential client to last in excess of 1 hour and still not yield the best prescription for his/her financial health.
The financial language is overly complex. Like other technical professions, we have our share of jargon. As a financial educator, the number one comment I receive is that financial complexity is maddening.
Complexity is dangerous to our financial health because it clouds our ability to make confident decisions. It makes the advisor-client relationship less efficient and less fruitful by creating a roadblock to an organized means of communication. According to a study conducted by Knowledge@Wharton and State Street, clients are less satisfied with the relationships they have with their advisors than advisors believe. This mainly derives from a lack of efficient communication. 70% of clients state that their advisors have never asked them how to improve their relationship.
Mitch Anthony, expert on building client relations in the financial services industry, says that advisors damage the relationship with their clients by believing the More Time myth. The advisor’s excuse is that they have too many questions and cannot be bothered to ask more questions given the constrained time. However, the key to efficiency is not in asking the most number of questions but asking the most useful ones. The three fundamental questions to ask are about the client’s financial past, present, and future. It seems simple, but it is effective. The goal is to gather the relevant information about the client without wasting time in confusing jargon.
But this is a two-way street. Clients are also responsible for asking their advisors the right questions. Just like a patient would not go to a doctor without being able to clearly articulate where it hurts, an individual should not go to a financial advisor without being able to communicate where he/she needs help.
Oftentimes clients don don’t ask questions because they are overwhelmed by the complexities of the financial world. Too much information. Too many experts. Too many people telling us what to do with our money. However, the intricacies of the financial landscape do not need to be detailed. First, a client must understand why he/she is seeing an adviser. On my March 12, 2012, TV interview 12 on the Money with Rebecca Surran, I outline the three main reasons to consult an advisor: to organize financial resources, understand what’s not working, and make better money decisions (http://bhwealth.com/2012/03/rebecca-surran-of-12-on-the-money-interviews-jaimie-blackman). Clearly defining the motive can help equip the client with better questions.
So how should an individual prepare?
Decision experts say that confident decisions are made when the information is organized in a way which leads to understanding. After all, how can we ask a good question if we don’t understand the language? And remember; even if a Financial Adviser offers a great answer to the wrong question, it’s of little value. Just like preparing questions when meeting a doctor for the first time, think about a similar strategy when interviewing a financial adviser.
Try these 7 process oriented questions the next time you are shopping for a Financial Adviser.
- I want a jargon-free relationship. How will you meet my requirement?
- How will you structure our meeting so I control the agenda?
- How will your process help me make more confident decisions?
- I’m a visual person. What will you show me?
- Describe your process to help me organize my financial life and keep it organized?
- How can you help me sort out my priorities?
- How will prepare me to make better money decisions?
Removing the jargon makes the process more transparent and the interaction more valuable to both parties. This builds trust between the client and the advisor since both understand the client’s ultimate goals and the approaches taken to accomplish them. It reduces the fear of the client and makes the relationship less about blind trust since a knowledgeable client can actively partake in decisions with his/her advisor. Excess complexity is not only unnecessary, but harmful, to the advisor-client relationship.