Expert advice

Feb 15, 2014,19.12 IST

Should you have a financial adviser

Lovaii Navlakhi
International Money Matters

The financial planning profession is indeed noble. What planners do is to help their clients meet their life goals by removing the worries associated with the money required for that. This certainly requires multiple skills. Technical skills to make complex calculations seem simple; economic skills to know the right numbers to plug in for inflation estimates and projected returns; sociology skills to determine life expectancy. As they meet more and more clients on whom these skills can be honed and tested, the advisor gains confidence and strengthens his convictions. At the same time, they find that their biggest issue is to get clients to implement the plans even after their acceptance.

For most clients, personal finance is an acquired skill – it is not taught in schools. Money management is important to each one of you; but most often, you do not want to spend time and effort working on this skill. Because these skills are difficult to test, the learnings tend to be experiential rather than formal. They may though not necessarily be applied correctly. For example, you may implement diversification by employing multiple advisors without understanding that each of them is investing your money in the same products and in fact, creating greater concentration in your portfolio.

Does the gap exist because financial advisors are unaware of what clients truly want? In a white paper published by Beddoes Institute’s Leading Practices Program in Australia last year, 82% respondents chose interpersonal skills (communication, building rapport, caring about clients, understanding needs, listening and empathy) as the most important quality that they sought in their advisor. Surprisingly, technical skills, knowledge, service and quality information & advice each got a score of under 20%. Just goes to show that while advisors are flaunting their left brain expertise, clients are seeking right brain skills.

It is then about time that financial advisors divert their attention from “How” the goals will be achieved to determining the “Why” that drives clients. These softer skills have been appropriately highlighted at the Annual FPA conferences that I have attended over the past 5 years in the USA – this drove me to enroll for the Certified Financial Transitionist course recently. Some of the questions that were raised at a workshop earlier this month asked if we as advisors understood the learning style that our clients followed. If they preferred the auditory style, but our delivery was in visual form, no wonder we often felt “they don’t get it”! (Possibly the client felt the same way about us.)

Asking a few clients about their communication preferences has been an eye-opener: understanding how they prefer to be told, if at all; has suddenly made me appreciate why some clients were faster at responding to recommendations than others, for example. There were times when I have been trying to get my clients to take the next steps quickly – “because it was for their own good, and they didn’t even know it!” – whereas all they needed was a decision-free zone: a time to proactively keep away from taking any decisions that were not important. Don’t we sometimes face this in our day-to-day life? As soon as we are able to push these interfering, non-essential decisions out of our mind, and focus on the important ones, we feel totally in control.

We recently acquired a client for financial planning after some efforts and time. She was happy to share all her financial details as well as her goals, especially since we had a couple of good references. She got a fixed salary; her husband was self-employed, but not quite sold on the idea of financial planning. With his income details missing, our planning team was unable to make headway as monthly cash flows were negative. The left-brained financial planner said that the plan could not be made, and that the goals were unachievable. All it required was a conversation with the lady to understand that her income was mainly to ensure her retirement goal, and for us to calculate the annual income that he would need to provide for in order to the meet the other goals that he was responsible for.

The clients that we consider in the A+ category are really those that we enjoy spending time with, and look forward to their meetings. A deeper analysis will indicate that we have been able to connect with them emotionally – with the right side of our brain. While we learn our technical skills from our qualifications, it is time that we together raise the bar for advice in India by focusing on acquiring “right” brain skills. A study shows that much of the reason why clients do not follow advice is because of the way it is delivered. By understanding how to make clients more receptive to their recommendations, financial advisors will ensure that their financial planning expertise is implemented.

The author- Lovaii Navlakhi, CFP is the CEO of International Money Matters and The Financial Alphabet.

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