/ by Don Connelly / Managing the Relationship / 0 comments
The widely studied field of behavioral finance has firmly established that many investors’ mistakes can be attributed to their emotions, which can cloud their judgment and overpower their patience and discipline. Ben Graham, arguably one of the best investors of all time, said, “The investor’s chief problem—even his worst enemy—is likely to be himself.”
Many financial advisors think their most important function is to devise financial strategies and help their clients allocate their assets to help them achieve their financial goals. Certainly, that’s important. But that’s what advisors study and train for. It’s what they do.
However, I would argue that the most essential function—the critical role advisors must fulfill—is that of a financial coach. Above all else, a financial or investment strategy rooted in sound practices and principles requires discipline and patience. However, when emotions cause a client to break from the strategy, you are the only person who can keep your clients anchored and coach them through the momentary instinct to act irrationally.
Addressing these behaviors proactively can help your clients stay on track and make sound decisions. Here are five common client behaviors that financial advisors should be prepared to address and strategies to manage them effectively.
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Client Values: How Financial Advisors Can Discover and Use Them to Strengthen Trust and Loyalty
/ by Don Connelly / Managing the Relationship / 0 comments
The first law of financial advice is that clients don’t make financial decisions based on the financial advisor’s reasons; they make them based on their reasons, which are almost invariably based on the client’s core values. While expertise and financial acumen are essential for dispensing advice, advisors must understand that it is their clients’ core values that truly matter to them and are the primary drivers of their decision-making.
Advisors who understand and embrace the importance of aligning their advice with their client’s values can better differentiate themselves and build stronger, more meaningful relationships. This blog post will explore why client values matter, how to identify them, and how integrating them into your practice can foster unshakeable trust, cultivate unwavering loyalty, and ultimately create a more fulfilling and successful advisory experience.
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5 Client Behaviors Financial Advisors Must Put a Stop to and How
/ by Don Connelly / Managing the Relationship / 0 comments
The widely studied field of behavioral finance has firmly established that many investors’ mistakes can be attributed to their emotions, which can cloud their judgment and overpower their patience and discipline. Ben Graham, arguably one of the best investors of all time, said, “The investor’s chief problem—even his worst enemy—is likely to be himself.”
Many financial advisors think their most important function is to devise financial strategies and help their clients allocate their assets to help them achieve their financial goals. Certainly, that’s important. But that’s what advisors study and train for. It’s what they do.
However, I would argue that the most essential function—the critical role advisors must fulfill—is that of a financial coach. Above all else, a financial or investment strategy rooted in sound practices and principles requires discipline and patience. However, when emotions cause a client to break from the strategy, you are the only person who can keep your clients anchored and coach them through the momentary instinct to act irrationally.
Addressing these behaviors proactively can help your clients stay on track and make sound decisions. Here are five common client behaviors that financial advisors should be prepared to address and strategies to manage them effectively.
Read more
5 Scenarios When Advisors Should Fire Clients with Conflict of Interest
/ by Don Connelly / Best Practices / 0 comments
We’ve posted several times on the topic of conflicts of interest created by financial advisors when their objectivity may be compromised, and their interests are not necessarily aligned with their client’s best interests. We talked about the harm it can cause to the advisory relationship. Financial advisors caught up in ethical dilemmas, whether intentional or not, must be ready to take corrective action to save the relationship and keep the trust of their clients.
But what about when the tables are turned, and the client creates a conflict of interest or ethical dilemma? It happens more than you might think—when a client’s personal interests or values don’t align with their advisor’s. The conflict may not be egregious or illegal, but even if it just rubs you the wrong way, it might be time to cut the client loose.
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Winning the “Why Do I Need a Financial Advisor” Argument
/ by Don Connelly / Best Practices / 0 comments
Long before it became a field of academic study, legendary investor Benjamin Graham knew a thing or two about behavioral finance. Graham went on to say, “In the end, how your investments behave is much less important than how you behave.”
For financial advisors, understanding how emotional and intellectual processes combine to influence investors’ decisions offers the opportunity to help their clients avoid costly mistakes and optimize investment outcomes.
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The Slippery Slope from Empathy to Role Reversal, and How to Avoid It
/ by Don Connelly / Managing the Relationship / 0 comments
Successful financial advisors know that expressing empathy is critical in helping them to connect with clients and solidify their relationships. Clients need to know you understand their circumstances and what they may be going through at any given time. However, empathy taken too far can backfire when advisors find themselves sharing the same emotional distress as their clients, which can threaten their objectivity and compromise sound planning advice.
At the extreme, this can lead to advisors relinquishing control of the relationship to their clients and acquiescing to their desire “to fix the problem” in the short-term at the expense of their long-term plan. This type of role reversal is not uncommon for advisors who become emotionally vested in their clients, wanting to do what they can to ease their pain. Suddenly, the relationship is no longer being guided by rational, objective advice; but rather the behavioral impulses advisors are supposed to prevent, such as selling into a steep market decline, or abandoning the long-term strategy just to alleviate the immediate suffering.
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