How understanding the emotional needs of clients has become more important
Financial professionals are required to complete a minimum number of continuing education courses to maintain the various licenses, certificates, and designations that they hold. These courses are essential in helping producers keep up with the latest industry regulations and practices. .
However, merely completing the requisite continuing education classes may not be enough for financial professionals aiming for long-term success. For a practice to really thrive, learning how to understand clients and respond to their needs has become more important than ever. .
Often referred to as “empathy training”, the idea that developing your soft skills can help you grow your business and retain clients is certainly not new. Dale Carnegie’s How to Win Friends and Influence People, based on his “human relations” and public speaking course, has sold more than 30 million copies since it was published in 1936. It became especially popular among financial professionals when Warren Buffett cited it as a key influence in his career as he rose to prominence.
American Express Financial Advisors attempted to quantify the value of such skill building through its “Emotional Competence Training Program,” which it began offering in the early 1990s. One early study showed that advisors who had completed the training increased their sales revenue by 18% over those who had not. Another showed that advisors working with supervisors who had had the training grew their business at a rate of 18.1%, compared to just 16.2% for those whose supervisors had not..
Connecting on a holistic level
In 2023, it’s even more important to develop the skills needed to understand your clients on a deeper lever, says Global Atlantic Consulting Program Director Bill Sweeney.
“It may sound touchy-feely, but it’s legit,” he says. “You have to connect with your client on a more holistic level.”
Producers need to think of what they offer not as simply a service, but as an experience. Rather than just focusing on the technical aspects of managing a portfolio, it’s important to be aware of your client’s particular circumstances and respond accordingly. It’s the difference between going to the dentist and going to a spa, says Sweeney.
"The world is becoming so highly automated, if you add that personal dimension it really stands out.”
Offering that spa-like experience has been shown to pay off for producers. One 2018 study indicated that the median client portfolio size for an “experience-centric” financial professional was $1 million, nearly double the median client portfolio size for a traditional financial professional, and their client retention rate was significantly higher.
That personal touch has become even more important as robo-advisors, which provide automated portfolios based on pre-set preferences, have become more common, says Global Atlantic Consulting Vice President Pat Scanlon.
“I think people feel like anyone can run some Monte Carlo simulations and hand them to you,” says Scanlon. “Where you add value is in understanding and responding to their personal life circumstances. The world is becoming so highly automated, if you add that personal dimension it really stands out.”
Understanding how different personalities work together. And how they don’t.
Scanlon suggests that, for a producer hoping to improve their empathy skills, a good starting point would be participating in a personality assessment workshop such as CORE Four. Developed by psychologists, the assessment helps you determine which of the four dominant personality types you are and understand the strengths and weaknesses of each. You also learn how to determine the personality type of your clients, so you can understand how to best respond to their needs.
Through the workshop, you’ll learn to recognize how your personality and their personality work together—or not, says Scanlon. Perhaps you’ll decide that a client would be better served if you enlisted the help another member of your firm’s team who is a better personality with them. In the end, that could improve your firm’s overall retention rate.
For example, a recent Morningstar Investing report found that 70% of women fire their male financial advisor within a year of her husband’s death. If you want to be in the 30% of advisors that retain her as a client, it’s essential to adjust your approach to fit her personality, rather than her husband’s.
Scanlon says that kind of tailored, sensitive approach has become more important as the potential client base in the U.S. becomes more diverse, with more women and minorities than ever seeking financial guidance. Indeed, 50 years ago, women couldn’t apply for a credit card without a male co-signer. Today, it’s estimated that by 2025 women will control more than $1 trillion in assets. Asian American and Latino investors are also a rapidly growing market segment.
Moving through life stages
In addition, it’s important to understand how your client is changing as they move through the stages of life, Sweeney says. For example, Global Atlantic’s Fragile Decade workshop walks you through the very specific changes clients go through in the five years leading up to retirement and the five years after. It’s a period of upheaval, and it’s also when they are likely simplifying their portfolio and paring down the number of producers they work with. Communicating with them in ways that generate positive feelings about retirement throughout this stage of life will help you to be the one they retain.
Vision- and hearing-loss simulators included in Global Atlantic’s Ageless Wisdom workshop allow you to truly empathize with older clients. After you experience the world through their eyes and ears, you can more effectively come up with ways to make your interactions with them less frustrating and more positive.
Maintaining those empathy skills is not a one-and-done proposition says Scanlon.
“Just as the industry is ever-evolving, so are your clients,” he says. “Sometimes it’s important to just take the market out of it and focus on the person, the emotional side, the experience.”