Learn to Manage Client Expectations
Running the business gets in the way of growing the business. That’s a fact of life in the Financial Services industry. As the business gets bigger, an Advisor has to make a decision. Am I going to manage money or am I going to manage client expectations? It’s almost impossible to manage both. In my travels, I find most elite Advisors opting for outside management. They choose to manage their clients and their clients’ expectations.
Managing client expectations can be one of the more frustrating aspects of life as a financial advisor. But it’s a skill you need to have in your toolkit if you want to keep clients invested for the long haul. Make sure your clients’ expectations are realistic and that they match their goals. And, equally importantly, ensure you raise awareness about the inevitable volatility of the market to keep your long-term relationship with clients in good shape.
See things from your clients’ point of view
Take the time to understand what your clients really want to achieve in terms of their investments. Their perception of risk, for example, may differ from yours so you need to get inside your clients’ minds and understand how they view things. Only then will you be able to understand how to meet their expectations.
Financial advisors and clients often differ in terms of what they call ‘risk’. When asked whether their ‘top tier’ clients would agree to an aggressive long-term growth plan most advisors will reply with a resounding ‘no’ explaining that these clients are generally older and planning for retirement – and not inclined to gamble on their future.
But ask the clients themselves and they may well feel that their investments should be put into riskier funds in order to ensure they earn enough money for them to retire on. And risk to clients generally means beating the bank by a bit. The phrase ‘aggressive return’ means something completely different to Advisors and clients.
So a client’s belief that they need to go riskier to achieve their goals is misguided. It’s just that their perception of risk is different from yours.
Don’t promise more than you can deliver – you don’t need to
The takeaway is that when you’re assessing your client’s expectations don’t simply ask generic questions about risk. Take the time to pin down exactly what your clients expect from their investment – what’s their ultimate goal?
Nine times out of ten you will find that most people are pretty modest in their investment aims. So there’s really no need to overpromise to clients. If you overpromise in the mistaken believe that clients expect you to get them on the rich list, you will underperform.
Deliver what you say you will deliver – for the most part that’s a modest rise in clients’ investment to secure them a comfortable retirement.
Manage expectations to cut through the noise
Clients are influenced by the internet, their family, co-workers, economic conditions and financial media all the time. They are constantly bombarded with news about the markets. Nobody can control the market. Not you and not your clients. All you, as a financial advisor can do is control your clients’ reaction to the market.
It’s essential you learn to manage your clients’ expectations and ensure they understand that markets will go up and they will go down – and that this volatility is nothing to be afraid of. So you need to monitor your client expectations with regard to market performance on a regular basis. Addressing possible dissatisfaction or confusion early will make a hugely positive difference.
Don’t let the best performing stock become the benchmark
In the same vein, if you don’t manage expectations, then your clients may see their best performing investment as the benchmark with everything else second-best. Set clients straight and let them understand that while some investments may decline when the overall market seems buoyant, these very same investments may increase when the markets decline.
To ensure you meet and exceed your client expectations make sure you get off on the right footing with clients. It’s your job to keep them invested for the long term – without your input and reassurance their dreams of a comfortable retirement will be unfulfilled. So take the initiative and make sure your clients are fully aware of what to expect and put your relationship on a firm basis for the long term.