The Hammond couple was firm: "We want to follow the bond-heavy asset allocation 'All Weather' plan that Tony Robbins recommended in his book, Money: Master the Game." They'd both attended his seminars and felt a strong connection to his perspectives. For their financial advisor, this flew in the face of current research and his existing wealth management strategy for them.
Their next-door neighbors were leaning a different way: Lots of gold and a little mix of moonshot stocks. Where did they get this allocation advice? From a random blogger they discovered on Facebook.
For many of you, non-traditional financial advice can create a lot of confusion on the part of your clients, or worse, steer them away from your research-based recommendations. Popular personalities such as Robert Kiyosaki, Suze Orman and Tony Robbins have published New York Times bestsellers that have sold in the millions — all offering advice that may be perfect for some yet not-so-perfect for others, depending on the client and the circumstances.
With the rise of the Internet and social media, anyone can be published today via digital technology. Thousands of financial advice, stock-picking and investment strategy blogs offer strategies that are only backed up by their hyperlinks, which often point to anecdotal stories or outdated findings.
Ubiquitous content and a growing ability to search-sleuth online or canvass social networks has created a Research-It-Yourself (RIY) economy. In a startling white paper titled The Future Of Advice, investment researchers confirm that "whether buying a car, a new home or financial products and services, consumers are making informed choices largely based on information and research they find on the web, or referrals they receive from family and friends."
For almost all self-served investors, there's a lot of hazard in relying on this advice. In many cases, it leads to bad decisions. Worst of all, according to the Corporate Executive Board (CEB), too much information can lead to buyer overwhelm, which ends up a 'no-decision' result. In your industry, that translates to no implementation of a wealth management strategy.
For financial advisors, one of your greatest challenges is to steer clients towards sound financial planning and away from an undisciplined approach to making decisions. It's not easy, though. Your clients might have a false sense of confidence in their research method or, worse, in the outlets they are getting their information from. Like all unteaching or reconditioning, finesse is required. Here are four steps you can take to recover control of the client conversation, moving them to sound decisions about their future:
Study the competition
You cannot challenge what you do not clearly understand. If a certain book or article seems to be driving your client decisions, take the time to read them or at least become familiar with their main points. If a blog is doling out bad allocation advice or railing against working with financial advisors, invest time looking at the last few months of what it has published. The more you can point to specific flaws in research, advice or market analysis, the easier it is to create doubt in the minds of your clients that leads to trusting you for key information.
Recognize the truth in bad advice, then challenge it
Emotional intelligence is driven by one's empathy for others and respect for their feelings. When a client feels strongly about something he read in a book or online, don't be entirely dismissive of his efforts or the points made in what he read. For example, you can recognize that many funds have successfully used bond-heavy allocations in the past as a way of creating an 'All Weather' plan. Then, based on your research, show them how changing market conditions require a more seasonal approach so as to avoid being locked into a specific allocation, which can leave money on the table or increase risk. Think of this as the 'Yes, But' approach to unteaching, which protects the client's fragile ego yet then steers them back to professional advice tailored just for them.
Introduce commercial insights based on research
At this point in the conversation, give clients insights for wealth management based on your firm's research and best practices. Provide insights into market reality, strategy, timing and investment psychology that point back to your products and, most of all, the value of professional financial advice. Create a strong sense of urgency that decisions must be made, plans must be put into place and continuity of approach must be protected over the long haul. Your client will appreciate anything you can do to simplify their decision-making to the point of taking action now.
Install a framework for sound wealth management
The reason your client has embarked on a Research-It-Yourself plan has to do with her notion that the answers are "out there" online or in the bookstore. To prevent misinformation from clouding their future decisions, council your clients on how they should formulate their wealth management strategies. Illustrate how vetted research, certified financial advisors and a community of professional collaboration increases their chances of outperforming the RIY consumer over time.
In their recent research in financial services, CEB refers to the Unteacher as a "Wealth Challenger," who leads by insight and presses clients to take action. Unteachers cut through the noise, create clarity and take control of the client conversation. They press for action, not more research. According to CEB, they secure higher share of wallet and gain many more referrals than their rapport -based, go-with-the-flow financial advisors.
The views and opinions expressed herein are those of the author, who is not affiliated with Hartford Funds. The information contained herein should not be construed as investment advice or a recommendation of any product or service nor should it be relied upon to, replace the advice of an investor's own professional legal, tax and financial advisors.
Hartford Funds is not responsible for, and does not validate, any information, opinions, assertions, or statements expressed within these articles, or the identity or credentials of the individuals communicating through the site. Some of the articles may contain links to information created and maintained by other, unaffiliated organizations and individuals. Hartford Funds does not control, cannot guarantee, and is not responsible for the completeness, accuracy, timeliness, or the continued availability or existence of this outside information or the information presented herein. This material is intended for use by financial professionals or in conjunction with the advice of a financial professional.