The world of financial planning can be a scary place for investors. It’s not that they don’t trust financial advisors with their investment portfolios, but they may feel uneasy, due to a lack of understanding. Financial advisors may think they have all the answers; after all, they’ve done their homework, but they can’t answer the questions clients are afraid to ask. Investors may have fears advisors don’t even realize, which is why a big part of financial planning help is finding the client’s comfort level when discussing complicated investment strategies.
There are legitimate reasons to feel uneasy in financial investing, especially when markets plunge. Clients may get spooked by big drops in stocks, a generally unstable market, or poor performance in the short term. Financial advisors have the training, the knowledge, and the experience to ease these fears, but first they need to know what those fears are and understand where the fears come from – that’s a big part of providing financial client services.
When asking questions and listening to clients, financial advisors would be wise to follow the 70/30 ratio, which recommends advisors allow their clients to talk 70 percent of the time. This also means advisors are listening 70 percent of the time. Through focused listening, an advisor gains an understanding of what clients want, don’t want, or are confused by. By listening, financial planners are able to deliver better advice in that 30 percent, than they ever could by monopolizing the conversation.
Discovering client fears about their portfolio’s performance, retirement accounts, or insurance coverage is the only way to address them. Fear comes through a lack of understanding. Clients don’t just want reassurance, they want to understand. They want to feel as if they are in control of the decisions affecting their lives.
Some clients may not be as financially savvy as others. They may feel they don’t know the lingo well enough to even express their concerns. This is the reason they need financial planning help. They’re not the experts and it is up to financial advisors to address those fears and concerns, to make them feel comfortable, and to explain the long- and short-term benefits of their decisions. Financial advisors need to know what their clients are afraid of before they can conquer that fear together.
Summit Brokerage Services is part of Cetera Financial Group, RCS Capital Corporation’s (NYSE: RCAP) retail investment advice platform.
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