Yes, investors expect a competitive return on their retirement portfolios. But there’s another factor, besides disappointing returns, that sends clients fleeing: an inability of their financial advisors to listen to their concerns.
A 2020 survey conducted by Natixis Investment Managers of 300 U.S. finance professionals, including wirehouse advisors, RIAs, and independent brokers and dealers revealed that the two major factors that drive clients away from their existing firms are not communicating with clients in a way that meets their expectations (69%) and not listening to the needs of clients (64%).
Advisors tend be skilled with numbers. Most didn’t hone their listening skills as liberal arts majors. Experts say that advisors can improve their listening skills by eliciting more information from clients and paying more attention to what they say, and avoid coming across as a know-it-all financial whiz.
Most financial advisors spend too much time talking and not enough listening, states Bernard Ferrari, author of Power Listening and the former dean of Johns Hopkins University’s Carey Business School.
“Because they’re financial advisors, they’re interested in providing an answer. They mistakenly think that their competence is revealed in their answers rather than being revealed by the questions they ask,” he says.
Client preferences and priorities for their retirement portfolios are strongly influenced by the questions advisors ask. Ferrari suggests that advisors build a client profile by probing their needs.
Questions such as, “What are the risks you’re most concerned about?” and “What are your cash needs going to be in three years, five years, and ten years?” may best reveal your client’s underlying financial goals rather than dictating preconceived answers to them.
Ferrari invokes the 80/20 rule as a guidepost for most sagacious financial advisors. Hence, advisors should strive for clients talking 80% of the time and advisors speaking 20%.
“The goal of the advisor is to become the master of the questions, not the answers,” urges Ferrari. Help the client come to conclusions rather than telling them everything. Lead them to the answer like an educator.
Ferrari implores advisors to challenge all of their preconceived notions. “Keep your assumptions locked away. Always keep an open mind. Allow yourself to be surprised,” he implores.
“Living up to your fiduciary duty involves doing what is best for your client. How can you do that without listening to what they want?” Ferrari asks rhetorically.
But Mark Goulston, a psychiatrist and executive coach who wrote Just Listen: Discover the Secret to Getting Through to Absolutely Anybody, says too many financial advisors get stuck in their own parochial thinking and fail to entertain unfamiliar ideas.
“They don’t want to hear something that is outside of their lane,” he asserts.
Advisors often want to feel in control and more competent than their client and that closes off listening to what a client really wants, Goulston suggests. “The more specialized the advisor is, the less adaptive they are and can’t handle the curveball,” he says.
He advises financial advisors to treat clients as if they were en route to the intensive care unit. Find out what is most important to your client, most urgent in the next month, the ensuing years, and beyond. “Instead of guessing what the client wants, have them tell you what they want,” Goulston advises.
Many advisors – like most people – are insecure and want to impress their often high-net worth individuals with their business acumen. “The pushier you are, the more unsure you are,” Goulston says.
“If you stop to listen to them, you’ll understand them at a much deeper level. Ask yourself all the time: how much does my client feel listened to and understood?” he says.
Joy Lere, a Napa, Calif. psychologist, who specializes in money issues, says too many advisors “focus on the math. And you need more than numbers to connect with your clients."
Lere recommends that advisors should summarize what clients have just expressed. “That creates an opportunity for clarification,” she says.
Advisors should also focus on a client’s eye contact and body language. If they’re looking away, shifting their weight or staring at their smartphone, it could clue the advisor in that the client is uncomfortable.
Advisors should cut out the jargon, which often closes off conversation rather than deepens it, says Lere.
They should also empathize with the client. “When a client is anxious or in emotional distress, a simple acknowledgement and validation that ‘Yes, this is a difficult time’ goes a long way,” Lere asserts.
Lere also says that advisors should talk less, observe more, and pay attention to what the client is saying and integrate their feelings and sentiments into the overall business plan or retirement portfolio.
In a 2016 Harvard Business Review article with the headline “What Great Listeners Actually Do,” consultants Jack Zenger and Joseph Folkman, who operate a leadership development firm in Orem, Utah, pointed out that most people assume that skilled listeners are “not talking while others are speaking and let others know they’re listening through facial expressions and repeat what others have said.” But they contend that skilled listeners aren’t passive or silent and can’t rely on facial gestures.
Instead, the pair say that good listeners “ask periodic questions that promote discovery and insight.”
Building the other person’s esteem is critical to being an effective listener they say, so the key is making the other person feel supported and conveying confidence in him or her.
Strong listeners make constructive suggestions, offer feedback, and encourage alternative ways of behaving. They also avoid becoming competitive, making the other person defensive, or one-upping them, argue the consultants.
Skilled listeners create a safe environment, avoid distractions like phones or laptops, and focus their attention on the other person, they say.
Advisors should also ask their clients what they could do better to improve the relationship. That sends the signal that you’re not pretending to be perfect and are striving to improve, they say.
Thirty years ago, Karen Altfest, a principal advisor and executive vice president with New York City-based Altfest Wealth Management, which oversees $1.4 billion in assets under management, saw that many new clients were coming to them because they were ignored and weren’t listened to by their previous advisor.
To reinforce the idea that advisors should listen to their clients, it established six core values including “clients first, meaning the conversation isn’t about us, it’s about the client,” Altfest says, and “open communication, where we listen patiently and speak simply and avoid using too many abbreviations.”
Staff is encouraged to ask “open-ended questions that draw the client out,” Altfest says, “not yes and no questions,” which are more limited.
Listening to clients “comes up in every meeting. We don’t want people who are telling other people what to think. We want them to find out what the client thinks about risks and what keeps them from sleeping at night,” she says.
In its Park Avenue office, Altfest has a small technology-free parlor where clients can share personal thoughts with an advisor in total privacy.
Ultimately what kind of person excels at listening? Altfest replied, “A person who’s curious about other people, who wants to hear from other people and get to know them and what’s on their mind.”