During your career, you’ll find over and over again that emotions cloud clients’ investment decisions – clients are not always inclined to act in their own best interests. At times like these you need to step in and be a behavior coach for them – otherwise they’ll end up regretting their decisions down the line.
Here are three things that clients want to do – but shouldn’t, and how to counter them.
1. Clients often delay investing until it’s too late
Clients need to give up immediate benefits if they are to look forward to a comfortable retirement or get the kids through college without borrowing money. This is something that doesn’t come easily to many people.
They would rather have a shiny new car, kitchen or exotic holiday than put money away. But delaying investing until it’s too late means paying a high price. So, you must help prospects understand the urgency of starting an investment plan.
When you sit down with prospects for the first time, play their problems back to them. If you discover during the course of your conversation that they need to find a way to fund education for their children – work out how much time they have left to save. Parents with a three-year-old child have just 180 months – or 180 pay checks left before their child starts college. This could be the wake-up call that stirs them into action.
Reinforce your message by getting them to imagine what the future would look like if they haven’t saved sufficient funds. Would they have to borrow from relatives, or go into debt? Once you’ve created an image of the future let them connect the dots.
Make the unfamiliar familiar and drive home the urgency message by using analogies. If someone has an appointment in one hour in a town that’s 60 miles away they will need to drive 60 mph if they leave right away. If they delay their journey by a further 20 minutes, they’d have to drive at a ‘suicidal’ 90 mph to get there on time. Similarly, delaying investing for the future will mean having to save at an unsustainable rate.
2. Clients often keep their assets with multiple Advisors
Some clients believe that they shouldn’t keep ‘all their eggs in one basket’. They have a natural tendency to be diversified and to put money in different firms. Once you’ve established a level of trust with a client, you need to convince clients there are sound reasons for keeping all their investments with you.
By placing their investments with one main advisor they will benefit from working with someone who has a 360-degree perspective on their financial situation. Illustrate your point by saying that money is like a puzzle. You can’t put the puzzle together until you have all the pieces on the table. Unless you can see the full picture, you won’t be able to give the best advice you’re capable of – and you can’t gain the full picture without managing the totality of their investments.
3. Clients often sell when the markets take a downturn
There will be good months and there will be bad months, sometimes very bad months indeed. When the markets fall, your clients will react emotionally – out of fear of losing more. Often their reaction will be to scramble for a way out i.e. cash in their investments.
Prepare your response to this scenario well in advance, because at some point this will happen. Get on the phone to clients to let them know you are on the case. Explain to them that there’s a reason they have their money in the stock market and that reason hasn’t changed. By remaining invested they are safeguarding their future and keeping their money in the safest place, and that they still have plenty of time to achieve their ultimate goals. The Dow rises and falls over the short term – but over the long term it has always ‘climbed a wall of worry’.
When it comes to financial matters clients often lose a rational perspective. It’s down to you to guide them to do the right thing when their instinct tells them to do the opposite. Understand their likely motivations, act decisively, and get them to see things your way.
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