When certain sectors or stocks heat up, the calls from certain clients start coming. They want in on the action, says Rob Tétrault, senior vice-president and portfolio manager with the Tétrault Wealth Advisory Group at Canaccord Genuity Wealth Management in Winnipeg. Usually, he advises them to wait until the market euphoria calms down.
“Take the cannabis bubble. Everyone wanted to participate,” Mr. Tétrault says. “But we felt it wasn’t prudent. So, we had to prevent those who wanted to make the trade from doing so, at the risk of losing them as clients.”
That’s just one of the many difficult conversations financial advisors face as they guide clients along the paths set out in their financial plans.
Many situations can trigger such talks. Mr. Tétrault hasn’t just had to rein in overexuberant clients. He’s also had to tackle everything from client overspending to the risk of clients losing their cognitive abilities because of Alzheimer’s disease.
“I have a fiduciary responsibility toward my clients, and sometimes that means telling them what they don’t want to hear, or pushing back when what they want is not in their best interest,” Mr. Tétrault says.
How can advisors have such conversations in a way that preserves their client relationships, while continuing to advance their clients’ financial goals? Having solid information on hand is key.
“I present data that has all the assumptions, such as rate of return, years of employment and cash flow needed in retirement,” Mr. Tétrault says. “Then, we go through what the client wants or doesn’t want to do, and look at how that affects their plan.”
Chet Brothers, founder of Brothers & Co. Financial Consultants in Regina, says it helps to come into a challenging discussion armed with solutions.
Consider a client who wants to retire early but doesn’t have enough in his or her portfolio. Maybe suggest that the client work just a year or two longer, get a part-time job or liquidate an asset like a family cottage.
“It can be hard for people sometimes to see alternatives because they don’t have an objective perspective on their lives,” Mr. Brothers says. “That’s why people engage with us: to provide an informed view and help them make the right financial decisions.”
Sometimes, the challenge is getting clients to open up about a touchy subject like running out of money or estate-planning. To bring these tough issues to the surface, Jennifer Watson, wealth manager at Peter Watson Investments in Oakville, Ont., which operates under the Aligned Capital Partners Inc. umbrella, asks a lot of probing questions. Persistence and the ability to “read the room” are key, she says.
“You need to be able to pick up on a person’s tone and body language and adjust your approach accordingly,” she says. “When a client is reluctant to open up, I’ll often switch to another subject then come back to the one they obviously didn’t want to discuss later.”
It can take more than one meeting to address certain issues, Ms. Watson says. Continuing the discussion by e-mail can also be a good idea for clients who feel more comfortable expressing their feelings in writing.
“Sometimes, you do have to go back and forth and get further into the discussion each time until you have the full picture,” she says.
Jeff Woolley, president of Ancaster, Ont.-based Global View Capital Advisors, says many clients find it difficult to talk about health risks and death, let alone plan for these adverse events. It’s important to raise these issues early.
“People often want to believe nothing’s going to happen to them or that they’ll have lots of time to take care of these matters way down the road,” he says. “If you have those tough conversations right from the start, then you’ll get a feel right away for how a client thinks and reacts in certain situations.”
Mr. Tétrault says it’s also critical for advisors and clients to understand each other’s values at the outset.
“I’m clear in laying out the ground rules of our relationship and do that in our first meeting. Then, I do a recap e-mail that’s fairly comprehensive,” Mr. Tétrault says. “Later on, when certain clients start pushing to get into stocks that we know are part of a bubble, we’ll sometimes review these early discussions and remind them what we had agreed on.”
Taking courses that focus on human interactions can also help. The Financial Planning Association in Denver for instance, teamed up recently with the Financial Therapy Association in New Jersey to offer an online course on difficult conversations.
Advisors must persevere in these discussions, no matter how sticky they get, Ms. Watson says.
“The key is to never shy away from having those tough conversations,” she says. “As advisors, we often need to pull personal details that could be somewhat sensitive, or deliver bad news – that’s part of our job.”