Client Communications
ou can be a brilliant technical financial planner, but if you can’t effectively communicate your ideas, the reasons behind your recommendations, and lead the client through the decision-making process, you will have wasted both your and the client’s time. Clients seldom implement recommendations they don’t understand unless the trust factor is extremely high. Building a high trust relationship takes time, which means initial meetings need clear communication to facilitate understanding and allow the client to see the logic behind your recommendations.
For this case, we are requiring you to write the executive summary in a method that lets clients see that you have deliberated about their situation and picked recommendations from alternatives with thought about the advantages and disadvantages. The design is intended to build trust while making full and meaningful disclosures about the benefits and drawbacks to your
recommendations. Clients know that there are drawbacks, and not providing them creates distrust. Another reason you are writing them is that clients fail to remember details and disclosures, especially in areas with which they are not very familiar. You and the client will have a record six months down the road when the stock market has had a drop and they forget that you explained the standard deviation of their portfolio.
While the written report with clear advantages and disadvantages is important, it is the ensuing dialogue with the clients that will determine whether the
recommendations are implemented.
Some recommendations are so clearly beneficial that there will not be any discussion needed. Others will need to be discussed and possibly explored at a later date with additional information. Leading the clients through the process of exploring and deciding which recommendations to implement, which to explore,
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which to defer to a later date, and which to ignore requires excellent client management and communication skills.
The CFP Board’s Financial Planning Competency Handbook (p. 589) identifies basic skills to include:
Skills to develop a relationship of honesty and trust in client interactions
Ability to assess the components of communications, including linguistic signs and nonverbal communications
Apply active listening skills when communicating with clients
Ability to select appropriate counseling and communication techniques for use with individual clients
In addition, the CFP Board Compliance Checklist we reviewed at the beginning of this course mentions understanding the client’s interpretation of information, not just your disclosure of information.
Our focus in this course will be on the active listening skills used in the client presentation. Note that the written summary of goals and issues is the written result of utilizing active listening and a way of checking whether the adviser’s listening, synthesis, and clarification skills were accurate with the client before the financial plan was developed. Active listening is the skill you need to use to clarify client responses and respond to roadblocks and objections. There are many excellent resources that can provide you an understanding of active listening; however, becoming competent takes practice and feedback.
Getting the client to tell you what they are thinking and how they are interpreting your remarks is almost reverse active listening. You are trying to get the client to feed back to you what you said so you can assess their understanding.
You can set the stage for utilizing this tool at the beginning of a client
relationship by explaining how critical clear communication is when addressing important issues. Explain to the client that you aren’t always a perfectly clear communicator and you don’t always interpret other people perfectly, so the only way you know for sure that you communicated accurately is by asking the client to tell you what they believe you are suggesting. Setting the stage this way makes you responsible for communication errors and lets the client know it is not their
knowledge you are testing when you ask a question, but that you are trying to see how clear your explanation was.
One of the ways you may use this in the plan presentation is to have the client to read one of your recommendations rather than you explaining it. By asking a client to read the recommendation rather than you reading it to them, you are engaging the client’s higher level brain functions, which are critical to decision making. It’s important to sit quietly so the client can focus. When the client is done reading, you can say “Help me out and let me know how clear my written recommendation is. What is it you think I am asking you to do?” Follow it up with “What would the advantage be for you in implementing this
recommendation?” or “I provided a disadvantage. How could that disadvantage impact your financial situation?” These questions will create a dialogue and let you know how well the client understands the recommendation, the benefits, and the risks. You will know much more than if you just asked “Does that make sense?” or “Do you have any questions?”
If a client can’t answer these questions or has misinterpreted your information, you have a chance to try again to clearly communicate. You may choose to identify it as a recommendation that will need to be revisited later with more time or more information. Additional confirmation and probing questions are provided in the following list.
Client Confirmation Questions
Learning to frame questions that elicit a client’s level of understanding takes practice. The key requirements are:
Asking questions that can’t be answered with yes or no.
Asking questions that engage the analytical part of the brain.
Making clients feel like they are part of the discussion rather than being patronized, quizzed, or insulted in any way.
Here are the two common questions to avoid because these questions typically get very little information from clients:
Does that make sense?
Do you have any questions?
Below are some sample questions appropriate to use in client presentations to get you started.
Just to be sure I am communicating clearly, what do you think I am suggesting you do?
What would the benefits of this strategy be to you?
What would the drawbacks be to implanting this and how severely could the consequences be?
What factors do you think are most important in evaluating whether to implement this recommendation?
How would implementing this or not implementing this impact your life?
What will be the consequences for not implementing or delaying implementation be?
What would the roadblocks to making a decision about this be?
What could I provide or explain more clearly that would be helpful?
*Used with permission from Fiscal Fitness Clubs of America
Behavioral Economics
There has been significant research over the last 20 years regarding client decision making. Some of the concepts that have been incorporated into this course are listed below. It will be worth your time to delve into understanding the biases that are part of the human thinking process and how actions such as writing advantages and disadvantages can help clients make good decisions in spite of our biases.
Confirmation bias. People selectively search and interpret information that confirms their own preconceptions. We look for signs that confirm what we believe and ignore clues that are warning signs or are in direct conflict with what we believe to be true. Clients and advisers can be looking at the same page and see different information. Asking a client to verbalize what they understand is the only way to know (confirmation skill). Checking in by repeating back what you
think the client is implying or saying is the only way to know you have heard and remembered correctly.
False consensus effect. People tend overestimate the degree to which others agree with them. Just because a client doesn’t say anything or nods, doesn’t mean he or she is agreeing with the information or even following the discussion. The
“bobble-head nod” to be pleasant or accepted is a cultural norm. Having clients verbalize what and why can help avoid this effect.
Priming. Everything from the pictures on our walls, to magazines and the pre-meeting questionnaire are priming clients and will impact their decisions. It is all those subtle reminders that surround us besides the direct conversations or papers we put in their hands. How you “prime” clients prior to presenting the plan can shift the entire presentation. Setting expectations for active participation and dialogue during the presentation will get you different results than if the client expects to listen passively while you “present” the 20-page report. Your introductory paragraphs into issues in your executive summary is priming the client on how to think about your recommendation.
Gain vs. loss. People hate to lose more than they enjoy winning. People will take more risk in order to avoid a loss than they will to win an equal amount.
Therefore how we present issues— gaining security versus avoiding loss—is important. People avoid risk when a positive framing question is presented, but seek risk in order to avoid a negative situation. For example, “Would you like to purchase financial security by acquiring disability insurance for $150 per month?” or “Would avoiding having your home foreclosed on if you are really sick for one year be worth finding a way to afford $150 per month for disability insurance coverage?” Which statement creates a stronger reaction?
Information bias. This is the tendency to seek additional information even when it can’t change or affect an action. This concept applies to both planners and clients. For clients, it is especially evident when a client either doesn’t know HOW to make a decision (i.e., lack of understanding about important factors so they can compare options or they don’t quite trust the presenter). A sign that a client doesn’t really understand is when they keep asking for different scenarios
to be illustrated in a financial plan. By writing advantages and disadvantages to strategies, you are providing information for clients to make decisions from.
Ownership bias. A person’s own ideas and solutions are always better than anyone else’s. If clients identify problems, potential solutions, and characteristics of the best solution prior to being asked to implement them, they are much more likely to implement the solution. It doesn’t take much to create some feelings of ownership. Even having a client explain back a recommendation and why it would be beneficial can create some ownership.
Framing effect. How a question is framed can markedly change the results.
Prepping our agenda and pre-presentation talk, how we write our
recommendations, how we ask for client decisions, etc., are perhaps even more important than the financial plan itself. Becoming conscious about our message and how we frame our questions and presentations can significantly impact our ability to help clients make good financial decisions. This is especially important when asking people to make decisions in areas they are not familiar with. By summarizing the issue prior to your recommendation, you are helping the client frame the consequences of not acting. By giving advantages and disadvantages, you are telling the client what should be considered in a decision. If you don’t provide the framework, clients will use ones they know such as cost and hassle versus tax consequences and risk. For example, recognizing that paperwork and time are obstacles gives you an opportunity to reframe this as a cost-effective benefit by stating the advantage to completing the recommendation in spite of the paperwork could result in not having to work an additional month before retiring.
You have then reframed the issue to: time now doing paperwork vs. retiring earlier. You introduced a new variable into the decision-making process.
As you can see from this partial list of behavioral biases and behavioral
economic concepts, there are many implications for our industry. Understanding and crafting your behaviors and practice to account for these biases can make a major difference in your success in helping clients.
Preparing for Your Oral Presentation
In many ways, your oral presentation is the easiest part of this course. You will have already demonstrated your financial planning knowledge by creating your executive summary. You will have done the analysis and thought through why you are recommending your strategies and the advantages, disadvantages, and alternatives. If your executive summary has too many flaws, you will not be participating in the oral presentation until the flaws are fixed.
In your oral presentation, you are demonstrating your communication skills that were discussed earlier. When you read the scoring rubric on the student learning portal, you will notice that it focuses on interaction with the client, such as the use of confirmation skills, more than your ability to explain your strategies. In summary, here are the critical components for passing your oral presentation:
1. Be familiar with the rules concerning recommended strategies that are important to the client. Know the tax penalties and rules for flexible spending accounts, Roth and traditional IRAs, etc. You don’t need to know what their employer alternative qualified plan choices are because these clients have no influence on that. Focus on knowing what you are recommending and those rules and limits.
2. Remember that there are two people involved, so it should be a conversation, not a speech. We know you understand. How do you know the client
understands? We will be looking for your use of confirmation skills that were described in the Behavioral Economics section.
Your examiner will be acting in the role of the client. They will ask the types of questions clients ask. They are not going to try to trick you or test your ability to recall specific calculations. Just like clients, they will be asking the questions to help them understand what you are recommending and what it means to them, along with pitfalls. If you don’t know the answer, it is acceptable to say, “Let me research that and get back to you. I am not 100% sure.” One way to fail is to say something emphatically that is not true, like, “Roth IRAs are deductible. I’m sure!”
Primarily, this will be an opportunity for you to receive feedback on your communication patterns, which are critical to success as a financial planner.
Many students have told us that this is perhaps the most valuable component of the course.
To prepare for your oral presentation, review your recommendations to make sure you know the rules surrounding them and prepare some confirmation questions that will elicit a client response that signifies they understand.
Summary
he purpose of this course was to help you integrate all of the knowledge from prior courses through the development and delivery of a financial plan. You have identified the clients’ issues and developed a plan within their constraints that will help them achieve their goals. If they follow your recommendations and continue to work with you, here is what you really accomplished:
Made sure that if one of life’s common crises occurs to this family they can weather job loss, death, disability, lawsuits, and property loss. They
definitely had gaps prior to working with you.
You have helped them efficiently fund their child’s education.
You have made sure they can retire with a comfortable lifestyle, even though they may not get their ideal lifestyle. While they were saving before, this would not have occurred without some changes. You created some of this money from tax savings, debt management, and restructuring strategies.
Their legal documents will provide for their family according to their wishes, where it may not have happened without you. Jim is also better prepared to deal with his parents’ financial situations as a result of meeting with you.
You did all of this while maintaining their same lifestyle. I’d say that’s a good job!
We are pleased that you will be helping real clients achieve financial security and are proud that we could provide the education for that.
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Appendix A
Sample Summary
The case utilized in the My Choice Mentor classes and the sample executive summary was based on the Dudella case. Below is the information that was used to answer the questions and create the financial plan. You can find the Sample Executive Summary and Cash Flow Changes Tracking following this case information.
Meet the Dudella Family
David and Nancy Dudella
David and Nancy, both age 42, believe that family comes first—even when it doesn’t make financial sense. This is how they open their introductory meeting with the adviser. They have been married for 24 years and have one child. Their daughter is 18 and completing her first year of college. They plan on supporting her through four years , and are currently taking out loans to cover her expenses.
She is a reasonably good student and good with money, as she has already saved
$2,000 toward the car they committed to purchasing for her at graduation.
Providing educational assistance is the number one priority for both of them.
They accept that this may mean they have to work longer or live “in the basement,” if necessary, in retirement. Retirement is their second goal priority.
They have never had a retirement projection done, however, and do not have any idea what their income will look like in retirement other than “it will be horrible and we are way behind.”
David was recruited to be a regional manager for a firm eight years ago. He had received several options and restricted stock grants. Because of his achievements, he had received an especially large grant that had a five-year cliff vesting
schedule. Unfortunately, the company changed management and decided to lay off many senior managers prior to going public, and David and many other managers were laid off just prior to the vesting of the large grant. At the time, they offered him a restricted stock agreement for part of the value even though he had not vested. He will be able to access the shares in three years. While the
stock is doing well, he is not sure how to assess the value and is carrying it on his balance sheet that he gave you at 0. He does not want to count on or include the value of it at this time.
David was unemployed for a little over two years. As a result of the layoff, counting on the grants that had not materialized, and not changing their lifestyle to accommodate these setbacks, they built up some debt in addition to depleting their reserves and non-qualified funds. David talks openly about the lessons he learned from counting his chickens before they hatched and the need to do a better job managing their resources this time around. While he will be eligible for
David was unemployed for a little over two years. As a result of the layoff, counting on the grants that had not materialized, and not changing their lifestyle to accommodate these setbacks, they built up some debt in addition to depleting their reserves and non-qualified funds. David talks openly about the lessons he learned from counting his chickens before they hatched and the need to do a better job managing their resources this time around. While he will be eligible for