A financial planner must be able to build strong relationships with clients as well as skillfully managing their money, delegates to the Financial Planning Standards Council’s Vision 2020 Symposium were told.“Financial planning professionals must not only demonstrate the technical knowledge and competence required to serve their clients, but they must also possess the skills to set the relationships with their clients apart from all others,” Cary List, president and CEO of the Financial Planning Standards Council, said in his opening address at the sixth annual symposium, which was held in both Toronto and Vancouver on the third week in November.
Kenneth Cole, founding partner of Epstein Cole LLP in Toronto, emphasized the importance of earning clients’ trust in building relationships with them. He began his presentation by reading from what is known as a “Nigerian letter” that he received from a bank official overseas who promised him an inheritance of $10 million if he would advance $10,000 to cover administration costs.
“That was an opportunity to make $10 million from a $10,000 investment. Why don’t we respond to opportunities like these?” he asked. “Because there is no trust. We don’t know who we’re dealing with.”
Trust, Cole said, “is like love, faith or courage. We know what it is but it can be difficult to define.” A trusting client is one who knows that the professional he is working with will always put his interests first. “A trusting relationship,” he said, “requires the total elimination of bias. Your recommendations must be based on the special needs of your client.”
And the bottom line is that building clients’ trust is good for your business. “A client who trusts you will remain your client,” Cole said, and satisfied clients are likely to refer others to you. “We tend to trust professionals who have been referred to us by people we know.”
The business relationship is further cemented when there is a connection between the financial planner and the client based on mutual likeability, Cole noted. “And there are things you can do to increase your likeability.”
Be honest and candid. “It’s always tempting to tell clients what they want to hear, rather than what they ought to hear,” Cole said.
Actively listen. “There is a difference between hearing and listening. Don’t answer the phone during the meeting. The client should feel that his business is important to you.”
Be patient. “It’s important that the advice you give is the right advice, not the fastest advice. And it’s important to be patient with the financially unsophisticated client.”
Be authoritative. A sense of authority comes with confidence in your abilities, “but don’t confuse authority with arrogance or undue importance.”
Be prepared. Preparing yourself for the client interview gives you confidence and nurtures trust. “And it’s as important to understand the client as it is to understand the product and services you can provide.”
Do your research. “Appreciate how quickly things change and that it’s necessary to do the appropriate research for each and every client. Clients have come to expect up-to-the-minute advice.”
Cultivate a personal touch and personalize the services you provide for every client.”
Be flexible. “Sometimes we make mistakes, so we need to be flexible and make the appropriate adjustments.”
Request feedback. “Inquire whether all is going well – and make adjustments if it’s not.”
Be friendly. “People expect a friendly face and an accommodating manner.”
Dress appropriately. “As a professional, you need to present yourself well. You have to feel comfortable, but you also need to be aware of what clients expect.”
And from the very outset of the client relationship, full disclosure of how you will be remunerated is of upmost importance in building a client’s trust. “Surprises about fees and bills will really undermine trust,” Cole said.
Steven Blum, a U.S. lawyer and investment advisor who teaches at the Wharton School of Business at the University of Pennsylvania, added that the financial planner and the client should both be satisfied where the other stands. “You know what I’m going to do and I know what you expect,” he said.
Blum said there are two challenges to the fiduciary duty that planners have to their clients: conflicts of interests, such as financial incentives to put clients into certain investments, and the fact that financial advisors know much more about finances and investing than the average investor, “which makes it easy to for them to take advantage of clients.”
Financial planners will always face these challenges, he said, “but professionalism denotes an implied duty of caretaking, in addition to advanced skills and knowledge. As professionals, they need to be mindful of their responsibilities.” If they don’t, he added, they can lose their licences and their livelihoods.
“This is your opportunity to act as you want the professionals who serve you to act.”