Part of your job as a financial advisor is to answer clients’ questions. They ask about the markets, their portfolio, when funds will be available and what you think about political events. As an advisor, responding to queries is in your job description.
While the questions that clients ask are interesting, I think that the unasked ones are fascinating. These concerns remain unspoken because they’re socially awkward. If they ever were voiced, the advisor-client relationship would become strained. Ask your AllianceBernstein wholesaler for the AB Advisor Institute’s white paper Inside the Mind of the Uniquely Successful Investor for a full discussion of these questions.
Seven Inevitable Questions
In the paper, we discuss seven inevitable questions that clients have. The first two reveal that a client is uncertain about the quality of the relationship he has with his advisor. The client wonders: “Do I matter to you?” and “Are you paying attention to what’s going on in my life?” Financial advisors should be instantly alarmed if a client expresses these concerns. They signal that something is terribly wrong in the relationship.
The next five questions reveal that a client has doubts about his advisor’s professional capabilities. These often emerge when markets are volatile or investment results are disappointing. Clients want to know: “Are you great at what you do?” “Do you know more than I do?” “Are you paying attention and staying current?” “Am I likely to get the future I want?” “Am I getting a good deal?”
If you imagine that your clients are silently asking these questions and you preemptively take action to answer them, you can elevate the value you provide. Inside the Mind of the Uniquely Successful Investor provides more details about how to answer the seven inevitable questions in a proactive manner.
The Most Dangerous Question
There’s one question that’s more dangerous than all seven combined. It’s so dangerous that it needs to be answered before you start working with a client. I don’t consider it an inevitable question because if a client ever asks it, you never had an advisory relationship with the client, and any working relationship you did have is now most likely beyond repair.
The question is: “Isn’t that what I pay you for?”
When a client asks this, it reflects betrayal, extreme disappointment and a feeling that the advisor has failed. It most typically arises after a portfolio has lost value because of a market correction and the client believes that the advisor was supposed to protect him from the pain of that loss.
Most advisors have several clients who believe that they’re paying for this type of protection: that the advisor’s job is to predict the future, sort out the impossible complexity of the markets, pick the right investments and provide a satisfying return regardless of the conditions that surround them—and to do so for a fee somewhere around 1% (or less).
The One Right Answer
There’s only one way to respond to this question that offers any hope that the relationship can be salvaged: “It sounds like you are really disappointed that I didn’t do a better job of predicting the future. I certainly wish I could do that, but I know that I cannot and that nobody else can, either. Besides, if someone could do that, would they sell that ability for a 1% fee?”
This provocative reply is the only way I know to bring the disappointed client back to reality. The origin of the question is wish fulfillment, as if there’s an advisor who can actually do the impossible. Yet I know that many advisors have heard this question many times from different clients.
Prevent the Question
The good news is that there’s something you can do to protect your practice from this dangerous question: answer it thoroughly as part of the onboarding process with everyone before you start working with them. By explaining up front exactly what they’re paying you for, you’ll prevent new clients from starting the relationship with unreasonable expectations.
While the question itself is quite dangerous, having a great answer to it is a powerful way to differentiate yourself as a superior provider. It also allows you to ensure that you’re working with people who recognize and understand what you do and who can appreciate the value of your services.
So, with all this in mind, here’s my question to you: What are your clients paying you for?
For more resources from the AllianceBernstein Advisor Institute visit http://alliancebernstein.com/go/abai.
The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams.