As their advisor it’s your job
to stop clients from worrying unnecessarily and making bad decisions. You need to find a way to check their behaviors and reassure them that they should follow your lead.
Analogies are a great way to allay clients’ concerns and get across why what you say makes perfect sense. Here are three situations where it will pay you to use analogies to keep things on track.
If you want to start using analogies more actively to simplify your message and better communicate with prospects and clients, reserve a seat at Don Connelly’s full day workshop on Nov 22 where you’ll learn how to confidently educate, inspire and influence clients. See event details and reserve your seat.
#1. Use analogies to help clients understand volatility
Right at the start of your relationship with clients make sure they understand volatility. You need to make them see that markets will rise and fall over their investment journey and that this is a natural part of the investment process.
Analogies offer a useful way to make clear the nature of volatility
so that you lessen their anxiety in the event of bad market conditions.
Tell clients that when we talk about investments going up and down, we’re talking about the ‘price’ of the investment – not its value. Just because something goes down in price doesn’t mean it’s lost value.
Ask clients if they like a bargain? Of course, they do, everyone snaps up a bargain when they see one.
When we see an item that’s marked down, we don’t consider it inferior – it’s just ‘on sale’. If we find an item at a low price on eBay, it doesn’t change our perception of the item – we think we’re getting a great deal.
Investments are no different. A discounted price in a portfolio does not mean it has lost value – it’s simply on offer at a great price for a limited time.
#2. Use analogies when markets dip and panic sets in
It’s up to you to stop clients rushing to the sidelines
and cashing in their investments when the markets dip.
To allay their fears, use an elevator analogy. Investments are like elevators. If you get on the investment elevator at the 30th floor you can predict that by the time you reach the 100th floor your investments will have come to maturity.
If, however you get off the elevator before the 100th floor you won’t know what floor or stage your investments are at.
By staying for the ride you’re giving yourself every chance of ending up on a higher floor than the one before.
#3. Use analogies to convince clients to stop watching the evening news
If you find that your clients are obsessively checking and re-checking their investments’ performance, use analogies to curb their behavior.
Explain that they wouldn’t dream of constantly digging up their plants by the roots every day to see how they’re growing. It would kill the plants.
Similarly, checking every tiny movement in their investments’ performance daily won’t help them grow.
Just as with the plants, If clients step aside and give the investment plan a chance, investments will get established and gather pace over time.
Or use another elevator analogy. If someone steps on an elevator and sees two buttons with the choices ‘soar’ and ‘plunge’ instead of ‘up’ and ‘down’ what would they do? Naturally, they’d jump right back out of the elevator. In reality what they’re reacting to are just words – the words ‘soar’ and ‘plunge’ sound infinitely more frightening than ‘up’ and ‘down’.
So next time your clients read the newspaper, browse the internet or watch the TV news
tell them to remember that they’re simply being bombarded with words – manipulated to stress a (usually) negative point of view. They don’t need to be frightened by these words.
Another analogy to help prevent obsessive stock checking is to imagine waking up feeling sick. On calling the family doctor the receptionist tells them they don’t need an appointment because the doctor can send the prescription right to the drugstore.
When they ask ‘how does the doctor know what’s wrong with me?’ the receptionist replies with ‘we only have one prescription for everyone’.
This is the same as an article in a newspaper or on the internet – it’s about as useless as one prescription for all patients.
When you want to get your point across
so that it’s perfectly understood and acted upon, use analogies. Analogies are an invaluable tool for making the unfamiliar familiar and demonstrating that your message makes sense.