By Martin Watkins
- Build trust
Building and nurturing my client’s trust is paramount to my work as a financial planner. Working with a financial advisor can be intimidating for clients, so it’s my job to make the process as painless as possible. By building my client’s trust – through actively listening, and by being client-centric and transparent in my work – I’m able to earn their trust, and therefore, their business and confidence.
Building that foundation of trust allows me to discuss complex financial ideas with my clients. For example, I can discuss the differences between defined contribution plans and defined benefit plans, and explain why I think a certain strategy will work best. Trust lays the groundwork for my clients to be receptive to new ideas and concepts.
- Make it Relatable
Have you ever started talking with a client and noticed their eyes glaze over? It happens to even the best of us. For people who don’t live and breathe finance, the topics and concepts we deal with everyday can seem dry and, well, boring. When discussing a complex topic, I suggest moving from broad concepts to personal examples. You must make the topics specific and relatable to your client if you are to keep their interest. I often do this by teaching through examples.
You need to know your clients well enough to present information in a way that aligns with their core goals and personal metrics. For example, perhaps a client wants to retire at the age of 50. Use this information as a crux to position the complex financial information you’re trying to get across. The client will be more interested in hearing information presented around this specific issue rather than hearing a blanket statement. Explain to them why specific numbers matter to them, and present the information in a way that’s clearly relevant to their personal situation.
- Be Concise and Plain-Spoken
One of the hardest parts about explaining complex financial information is the temptation to overshare. As financial planners, we want to ensure our clients have all the information they need to make informed decisions. The problem occurs when we over share information and details that are not necessary. Giving too much information can be overwhelming and actually complicate a topic instead of simplify it.
Work on the way in which you present your messaging. The goal is communicating clearly and easily whatever financial topic you need to discuss with your client. To do that, simplify your message. Be concise and plain-spoken. It’s not the time to throw in convoluted “big words” to showcase your vocabulary. Talk with your clients in a straightforward way. Avoid lengthy explanations and jargon that might be unfamiliar to those outside the financial industry.
- Use Visual Images and Graphs
When presenting complex information, be sure to break up your discussion with visual aids and graphs. Many financial concepts are best explained this way but we financial advisors often tend to present the numbers first. To us, these numbers make sense and hammer in the importance of whatever financial concept we’re explaining. To the layman, however, these numbers are often confusing and intimidating. Without context and understanding, the numbers are meaningless figures on the page. By using visual imagery and graphs, you can bring the client onto your same page.
For example, you can talk about the power of compound interest until you’re blue in the face. But until clients actually see a visual representation of how accounts grow over time, they may not grasp how big of a difference compound interest can make to their financial health. The following graph shows this example in a way that’s easy to understand.
Source: JP Morgan
- Present Information in a Logical Sequence
It may seem obvious but it’s worth repeating: Present information in a logical sequence. Too often when presenting complex ideas, we either jump from one topic to another or we assume the client has a base understanding level that’s different than reality. Instead of, for example, starting a conversation by diving into the complexities of changing interest rates on the bond market and how that affects their portfolio, slow down and start at the beginning. Explain what a bond is and why its value is tied to interest rates. The key is to ask clients questions to assess their level of understanding and then present information in logical sequence based on their personal understanding.
- Use Consistent Metrics
Ensure you provide consistent metrics to your clients. These metrics should be meaningful and presented to clients thoughtfully. Know which metrics to include and which to leave out. The key is to ensure the metrics you present are tied to your client’s personal goals and their financial portfolio. Presenting the daily, weekly or monthly changes in the Dow might be helpful to some but meaningless to others.
The key metrics I like to present are: net worth, debt-to-income ratio and overall portfolio value. These three key metrics provide meaningful insight into each of my clients’ personal financial situations. Using consistent metrics serves as a reference point that allows me to present complex financial concepts with clients in new ways they understand.
Martin Watkins, CFP, is the CEO at the Salt Lake City-based wealth management firm, TrueNorth Wealth. He has been advising individuals and organizations on their finances for more than 20 years. He may be contacted at firstname.lastname@example.org.