4 Financial faux pas to avoid

Every advisor wants to give their clients the best experience possible. But sometimes, they focus on the wrong things. Yes, the numbers are important, but with AI advisor tools cropping up all over the place, advisors need to differentiate themselves, and fast. 

A Vanguard study recently found that three-quarters of consumers were most looking to ‘develop a connection/relationship’ when seeking a financial advisor. That's one thing an AI advisor tool can’t replace. 

The hint’s in the word - ‘connection’. It’s pretty difficult to form a meaningful connection with an AI advisor (although probably not impossible!). Sure, advisors should take advantage of AI tools when it comes to forecasting, market monitoring and so on - after all, crunching big numbers is what AI is really good at. But the relationship stuff should stay firmly in the hands of humans. 

Of course, no one said that developing trust and building relationships were easy. Luckily for advisors, there are some common ‘Faux Pas’, that Morningstar has unearthed in new behavioral research. Address these, and you can bring your client experiences up to scratch in no time. 

1) Setting unclear expectations 

Advisors are notoriously time-poor, balancing administrative tasks with complex compliance procedures - all while trying to connect with their clients. And clients are noticing. ‘Taking more than a week to complete tasks’ was one of the most disliked ‘Faux Pas’ that Morningstar’s research found. 

But, with most financial advisory tasks taking place over longer-term time frames, Morningstar suggest that this dissatisfaction could be less down to time taken, and more to expectations. Completing tasks over a longer period is unlikely to have any impact on financial success and in fact, there are few aspects of financial advisory services that can be completed in a short time frame. 

It seems more likely that advisors are struggling to set realistic expectations when it comes to timelines. This could be from the very outset, or from a lack of updates during the process itself.     

So how can you avoid this? 

Regardless of if this dissatisfaction comes from dropped plates or unclear expectations, there’s a way to solve both issues in one fell swoop. 

Start implementing task management tools like kanban boards as an easy way to keep track of your to-do list and set client expectations. They’ll serve not just as a nudge for you, but also a clear way for your clients to see all of the tasks you’re working on and your progress with ease. It can also be used to set realistic expectations for clients by highlighting when certain tasks need to be completed in the longer term, avoiding any disappointment in the short-term. 

2) Unclear fees 

It’s far from a surprise that failing to provide an adequate breakdown of fees was the single most disliked behavior. It’s not an unexpected result, fees are historically a bit of a sore spot in financial advisory services. But, as a central factor in building trust with clients, it’s an essential part of the puzzle to ‘get right’. 

Much of the pain around fees came from confusion around payment structures, with clients unclear on how each service contributed to their overall bill. Without clarity on the value-add, it’ll only become harder for advisors to build up that trust. 

But how do you add more clarity? 

Using some client experience tools, you’re now able to link your client’s life goals directly to the services that power it, and the associated fees. So not only can clients see exactly where their fees are going, they can also see how all of the services you provide are feeding into their overall goals. This might be something you revisit annually, or each half-year, whatever works best. No matter what way you go about it, your clients can now be confident in their investment and build up their trust in you. 

3) Getting lost in translation

Many clients also reported feeling frustrated with their advisors on occasion, due to feeling confused by financial jargon. 

Understandably, it can be tricky to drop some of the more niche jargon and phrases when you meet with clients. Spending all day, every day, in and amongst these terms inevitably embeds them in your vocabulary, and it’s a hard habit to kick.

It’s a common error, but it can have devastating consequences. Imagine a doctor trying to explain your health to you, but they keep using complex medical abbreviations and they don’t explain them. Or, you have to keep interrupting and the whole process ends up taking at least twice as long. It’d be frustrating, right? 

It’s the same for your clients. When discussing something as important as their finances, using abbreviations and jargon that aren’t familiar can be infuriating. And if you’re not communicating effectively, how can you possibly build a relationship? 

But how can you kick this habit? So much of your client communication is likely centred around the numbers. Which areas of the portfolio are doing well, how the market is impacting them and so on. Naturally, in these conversations, it’s easy to slip into the ‘advisor-jargon’, using unfamiliar market acronyms and jargon. 

But what happens if you centre the conversation around something different? Instead of leading in with how your client’s portfolio is doing, talk to them about their goals - the ‘why’ behind their work with you. 

For them, it’s not about how much money they have in the bank. It’s about what they want to achieve with their money. For some, maybe it’s to travel the world after retirement. For others, perhaps purchase a holiday home or set their kids up for life. That’s the point, it’s unique for each client. 

Relate the charts and the spreadsheets to these goals to trigger meaningful discussions with your client about their progress towards them. We guarantee you’ll find yourself using jargon less and less, and your clients will get a far better understanding of your work. 

4) Feeling disconnected 

The final piece of the puzzle came from values. Clients felt let down by advisors who they felt didn’t have a comprehensive understanding of their personal values and how this might affect their financial goals. 

The adoption of new technologies like AI has significantly increased client expectations. It’s no longer enough to just ‘crunch the numbers’. They’re looking for a personalized experience, with their values and goals accounted for and their best life mapped out alongside the financial planning that will get them there. 

No wonder they’re left disappointed when advisors don’t take anything but the numbers into account. Failing to get to grips with your clients’ best life could have disastrous impacts on your relationships - namely, that you might lose what little connection you’ve already built. 

Want to salvage those relationships? 

Turn your attention to having meaningful discussions with your clients. Get under their skin to discover what their needs, goals, and values are for their finances. 

Break down your financial plans not by the numbers, but by how they feed into your client’s long-term goals and values. Establish yourself not just as the ‘numbers person’, but as someone your client feels truly cares about them. Become a trusted and irreplaceable part of their life and watch that relationship build.

Get started on the journey 

So you see, it’s not all doom and gloom. Yes, that’s a pretty detailed laundry list of mistakes and yes, you’ve likely recognized one or two that you’ve been guilty of. But, it’s not the end of the world, no matter what Faux Pas you’re guilty of, there’s a way to move past it. You can still give your client experiences an overhaul.

Don’t let poor client experiences and ‘Faux Pas’ erode your client trust and relationships any longer. Addressing and upgrading some of these common mistakes will bring your client experiences up to scratch, trading out costly errors for a new, client-focused experience. 

With 40% of client assets following their advisors when they moved firms, your greatest assets are those client-advisor relationships. Put the time in now to strengthen those now and you’ll see the dividends - we promise! 

Want to find out more about how Lumiant can transform your client experience and help your advisors kick these Faux Pas habits? Book in a demo today: https://www.lumiant.io/get-a-demo