Key Takeaways
Please note: I am aware I am making a comparison of grown adults to children. This is not saying adults can act like children, it is simply saying we need to be mindful of our approach for anyone.
You cannot deliver the same message to each child and expect them to respond the same way. The same goes for our clients.
Understanding what drives each client (and child) and finding a unique way to communicate with them is what drives successful outcomes.
If clients, like children, cannot understand your advice, how do you expect them to follow it – and stick to it?
As I dropped off my son Bode to start his freshman year of college, I started thinking about my time as a parent. There was plenty my wife and I did well for Bode and his younger brother Ty who still has another year of high school. And there were plenty of things we could have improved upon, especially me. I’m thankful that both boys are growing into fine young men, but they have very different personalities, very different approaches to life, and require very different nurturing. Just like our clients.
One has been a bit more introverted, the other has been an extrovert. One has been highly disciplined about schoolwork, athletic training, and life in general. The other has been more of a dreamer and innovator. One has been a risk-taker; the other is more cautious. You cannot deliver the same message to each child and expect them to respond the same way; the same goes for our clients. Each is unique when it comes to their goals, their values, their relationship with money, and how they digest and process information. If you noticed, I used "has been" to describe their state at the time. We all change overtime and so we need to adapt as the changes occur.
Personal And Personable Relationship It’s great if your advisor has processes and systems in place to make their practice more consistent and efficient. But how you approach planning with each client needs to be crafted in a way that resonates with them. If you fail to recognize how the information and guidance are being received, then the connection and the content you are trying to share is worthless. Checking in with clients and asking them to repeat back to you what they think you are telling them is a simple process I use to gauge how well they’re understanding the advice being given. The greater the comprehension and validation, the greater the likelihood it will lead to acceptance and action.
The other day, I drove my younger son Ty to school, giving me the opportunity to get in a quick focused conversation. He’s taking an advanced economics course this semester and getting discouraged. I can’t tell a person like Ty to buckle down and study harder. I have to frame it in a way that he’ll relate to. For instance, he loves snow sports and dreams of owning a ski shop someday. So, I told him, the economics class will expose him to all kinds of business concepts that will help him in his entrepreneurial career. Trying to get an A in the class won’t motivate him. But if he sees a purpose to the class or a tangible metric he can grab onto, then he'll start to believe in the value of it. It’s the same nuance we use with our clients.
Understanding, Evaluating, Educating and Patience: A couple we work with recently sold their business for over $30 million. They suddenly found themselves with a lot of money. They always thought of themselves as modest folks and never realized how valuable their business was. They lived in a modest home, drove regular cars, and were never big spenders. They never devoted much time to thinking about how the financial markets work, how different asset classes behave, or how investing works long-term. Because of this, they wanted to do what was familiar, put their money in CDs and buy stocks that they heard about on the news.
We had to be patient with them when it came to educating them about investing and retirement basics, because they had a substantial amount of wealth on the line, but they weren’t very far along in their financial education. We didn’t try to overwhelm them with charts, graphs, and tons of numbers; we tried to keep it simple. For instance, we broke down the concept of a diversified portfolio in its simplest terms (a broad basket of holdings from many different financial options) and how it’s helpful to their long-term success. They began to see the connections and were able to invest properly and find confidence in their situation.
The approach we took with the newly wealthy business owners was very different from how we approach other clients who’ve had a lifelong fascination with the markets. They understand basic market concepts, so we may expand and reinforce their learning while focusing on other elements to ensure success. For these types of clients, we may have to help them break bad habits or reeducate them about the danger of chasing the “next big thing” and how that behavior can erode their wealth. Hint, most people don't know they have a bad habit. Understanding what drives each client and finding a unique way to communicate with them is what drives successful outcomes.
Family History Provides Clues To help establish that understanding about how our clients communicate and respond, we ask that they be open with us and share details about their family history. We’re not being nosy. We know that the money messages people receive as children can heavily influence their relationship with money throughout their lives. I haven’t known my clients their entire lives. So, before providing recommendations for them, we need to get to know them. We hope they open up and start sharing what their relationship with money was like while they were growing up. What money messages did they receive? What does success look like to them? What does failure look like? We try to get their entire big picture of what makes them unique, so we can partner with them and help them make good financial decisions based on what's truly important to them. Again, we try hard to figure out what’s going to resonate with them.
Just like I can’t parent my two children the same way, I’ve know that I can’t talk to a client who’s never made investment decisions the same way I’d talk to a client who’s invested in stocks, bonds, and real estate their whole life. You can’t talk to someone who grew up during the Great Depression (or whose parents did), the same way you’d talk to a person that has comfort with money all their lives. It's going to be an entirely different dialogue.
Do the advisors you are working with go into this kind of depth when you meet with them? Do they know you? Are they speaking your language? Are they providing you with what you need to feel confident about your financial situation? You don't have to settle for a cookie-cutter solution. Fee-only financial planning firms such as Novi follow this type of holistic approach.
Conclusion If you’re not confident that your advisor knows you or what’s most important to you or has way too many clients, why stick with them? If you or someone close to you has concerns about your portfolio allocation or retirement plan, contact us any time to discuss. We’re happy to help.
ROBERT B. DUNN, CFP® is the President and Managing Partner of Novi Wealth
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