Establishing trust with prospective clients is top of mind for many financial advisors – especially when dealing with investors who are apprehensive about choosing the right advisor.
An Angus Reid Institute poll of 1,087 Canadians conducted in April on behalf of Advisorsavvy found that nine out of 10 investors have fears when choosing an advisor to work with, the most common reason (23 per cent) being that advisors will “selfishly prioritize their interests ahead of my own.”
Survey participants also said they fear an advisor would commit fraud (21 per cent), charge too much in fees (18 per cent), lack credentials (14 per cent) or experience (7 per cent), or treat their clients like a number (7 per cent).
For many advisors, these fears are all too familiar as they’ve met prospective clients who express a misconception of the financial services industry because of one-off cases that dominate the news cycle.
“In any industry, you’re going to have a narrative somewhere in which there’s fear or concern over wrongdoing because of some unfortunate story or case,” says Gillian Stovel Rivers, branch manager and senior wealth advisor with the Stovel Hawryluk Mohammed team at Assante Financial Management Ltd. in Burlington, Ont.
“‘For many other advisors in Canada who are grand, upstanding citizens, it’s unfortunate that we get painted with the same brush as those one-in-a-million cases,’” Ms. Stovel Rivers says, noting that the silver lining of these stories is that they often lead to regulatory reforms.
And while many prospective clients form these beliefs based on media attention and hearsay rather than on first-hand experience, there are a segment of clients who form these opinions around negative experiences they’ve had with advisors in the past.
“An awful lot of investors who … don’t work with an advisor, have worked with advisors in the past and, in their view, had a different experience. And so, I think there, the bar is even higher, because you have somebody who has a negative predisposition,” says Dan Richards, chief executive at Clientinsights in Toronto.
Regardless of how investors develop a fear of working with advisors, the key to winning them over is to earn their trust. To Édith Beaucage, portfolio manager with the Beaucage Bruneau Advisor Group at Desjardins Securities Inc. in Montreal, “building trust is an ongoing process that can never be taken for granted.”
She says she works to develop trust with prospective clients through active listening and affirming their feelings.
“Validating our understanding of his or her fears will most often create the space to start a personalized process” with a client, Ms. Beaucage says. “In a trusting relationship, it is obvious that honesty and transparency become the standard in serving clients.”
Mr. Richards agrees that hearing out clients’ concerns is essential from the get-go. He says many advisors have a tendency to begin a meeting with a prospect by delivering information about themselves – their success rate, fees and so on. But what’s far more effective in making clients feel comfortable is sitting back and letting them do the talking instead.
“The more quickly you get them talking, the more quickly you engage them, the sooner you start asking questions, the better off you are,” Mr. Richards says.
He also suggests sharing anecdotal stories and case studies rather than charts and statistics to illustrate your value to a client. Real-world examples tend to feel much more concrete and tangible for a first-time investor.
Mr Richards advises saying to clients, “I’d like to share with you a client situation who I think had some similarities to you: Here’s the situation they dealt with before we began working together, here’s what we did, here’s the solutions that we put in place and here’s what happened as a result.’”
“What’s persuasive is not statistics and facts and figures, what’s memorable and persuasive are stories,” Mr. Richards says.
Similarly, Sara Gilbert, business strategist and mindset coach at Strategist in Montreal, suggests framing introductory conversations around clients’ lives rather than around financial milestones.
“Have a different kind of conversation,” Ms. Gilbert suggests. “Not just what is the product, what is the return ... really focus on what is their dream, what is their ambition, and position yourself as the guide to help them get there.”
She notes that keeping these introductory conversations jargon-free and easy to understand helps keep first-time investors engaged.
“When advisors ‘win’ the conversation is when they make life simple for the client. When they show them that the process is going to be be simple,” Ms. Gilbert says.
Ms. Stovel Rivers works to build trust with her clients through routine processes of transparency and accountability. She strives to centre meetings with clients around their needs, but makes sure to end each one with a discussion of fees and honest admission of how the firm benefits from the relationship.
“The structure of those meetings is designed to deliver on what it is that they need, not what it’s in it for us,” Ms. Stovel Rivers says. “Then, the tail end of every meeting is, ‘Oh, by the way, here’s what’s in it for us.’ So, we’re transparently telling them, every single meeting, what their current cost is for working with us.”
In the few instances in which clients have pushed back on the fees she charges, Ms. Stovel Rivers says her approach is to break down exactly what they’re paying for.
“We say, ‘Well, here’s who gets paid for what happens for you,’ and we show them the payroll, basically. ‘This is what money management costs, this is what trading costs are,’” Ms. Stovel Rivers says. “Usually, when you break it down and you help open that black box and show [clients] all of the people behind the process that resulted in the delivery [of the services] they just received, they say, ‘OK, now I see the whole picture.’”