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How Advisors Can Go from Good to Outstanding

Business Builders | , ,

Being a good financial advisor requires mastery of a wide range of technical skills. Being a great financial advisor requires having skills as a counselor and psychologist. Being an outstanding financial advisor requires developing your skills as a teacher and coach. Here’s why.

The job of a financial advisor is to help each client get from Point A (where they are today) to Point B (where they want/need to be at some point in the future). The question is always how to maximize the chance that the client will arrive safely and securely at Point B.

But what should you do when there is a significant gap between a client’s need to take risk and their comfort in doing so?

Here’s the dilemma. Say you have a client that has done a poor job of saving over the years.  The client has no choice but to be aggressive in their investment strategy if he is to have any hope of meeting his minimum acceptable return goals. But what if his tolerance for risk is very low?  Do you ignore the client’s discomfort with risk-taking and hope he doesn’t spin off the track when his aggressive portfolio hits a patch of volatility? Or do you dial down the portfolio in favor of a smoother ride, thus condemning him to a future sub-standard lifestyle?
Actually, this is a false dilemma. It assumes that the client’s risk tolerance is a fixed feature like the nose on his face. This is simply not true. Soldiers learn to fight with bullets whizzing by their heads. Athletes learn to maintain their focus in the midst of chaos. Clients can be taught to better weather the inevitable storms they will encounter. Education and coaching is the key.

We all should have had a course in school about the basics of investing, but most of us never did. As a result, most clients do not have a useful frame of reference for interpreting events they experience as investors and are woefully ill-equipped to make good investment decisions. They can be skittish and unpredictable because they do not understand their environment.
Being a good investor requires a fundamental knowledge of the investment world and a solid frame of reference. Exhorting clients to “think long-term” and “stay the course” is not education, it’s sloganeering. Clients need to know what to expect and why things happen the way they do.

Providing this level of education and coaching requires thought, planning and a proactive approach. But like soldiers and athletes, clients can be trained to be better, more confident investors. The effort required pays dividends for advisors and their clients. A client who has been taught what to do and why before a storm blows in is more likely to act appropriately in the midst of the tumult.
If you want your clients to make it successfully from Point A to Point B, you should put as much time into teaching them about the journey as you do developing financial plans and investment solutions for them.