If you've ever courted a client, you've been rejected. Like any spurned suitor, you have probably anguished over where you went wrong. What could you have said or done to make it work?
When wealthy clients say no to a rep — after all that schmoozing, research and wining and dining — it's especially painful. To learn why they do, we surveyed 105 investors (each with at least $5 million in investable assets) who had rejected proposals from a financial advisor in the preceding year. The results were decisive and illuminating.
Almost 87 percent indicated that the financial advisors they decided against hiring did not understand the clients they were pursuing. A similar percentage thought the advisors' investment recommendations were off the mark. Only a handful said that they did not understand the recommendations an advisor was pitching.
First Things First
If the majority of affluent clients feel misunderstood, something is amiss in how advisors approach them. Obviously, affluent clients want to make a personal connection with the people who will handle their financial affairs. Rapport and trust are prerequisites. If the connection is not made at the outset, there is little hope for a relationship.
The fact that so many wealthy investors disagreed with the investment recommendations is equally sobering, if not surprising. If the clients felt misunderstood, and if their goals and unique circumstances were not put into proper perspective, it is unlikely that any recommendations would be on target.
Interaction at the Outset
So what can a financial advisor do to avoid being part of those negative statistics?
First, it is important to remember that the discovery process with any new client is not just about assets. To truly connect with prospects, it's important to know who they are — their goals and objectives, as well as their interests and relationships. That kind of personal probing may be unfamiliar territory for some advisors (and even for some clients), but it sows seeds that will blossom later in the relationship.
Also, the discovery process is not a one-way street. It is an opportunity for the client to learn more about you and the way you do business. An essential part of developing mutual trust and understanding is helping them know how your experience and expertise have helped similar individuals.
It is also important to identify lifestyle issues that a client has not articulated. For instance, surveys of the affluent often reveal a desire to establish a charitable legacy and instill philanthropic values in their children. The right questions will lead you to that fruitful area of discussion (see special report on charitable giving, p. 40).
Make Sure You're on the Same Page
Before making any recommendations, make certain that you understand what the affluent prospect is seeking to achieve, the complications he envisions and what concerns he has. Additionally, it is helpful to know if there are any preconceptions or interests about particular products that should be investigated more fully or excluded from the recommendations. If a client has an aversion to hedge funds, for instance, find out why. If the issue is as simple as a lack of understanding of alternative investments, your ability to shed light on the subject can raise you in the client's estimation.
By reviewing recommendations together, you can ensure a shared acceptance of goals and convey a level of understanding and comfort to the client that your service and your solutions will be tailored to them.
Writers' BIOS: Russ Alan Prince is president of Prince & Associates.
Hannah Shaw Grove is managing director at Merrill Lynch Investment Managers.