Mortgage rates are up and investment portfolios down. This has got to be one of the most difficult times to be having conversations with clients.
But what if it was the best time?
A study by Gartner for Financial Services (Oct 2020) identified that ‘Businesses and high net worth individuals who receive strong advice from their providers are more likely to engage in revenue-positive behaviour, especially if they receive advice after an unexpected financial event.’ Today, more than ever, your clients are facing unexpected financial events.
A few months back I reached out to my own bank to have a conversation about my upcoming mortgage renewal. With rates on the rise I was eager to learn how I could protect my mortgage from expensive increases.
I hopped on a call with my Financial Advisor to discuss my options. My first question was, predictably, “What is your five-year mortgage rate?” She promptly replied it was 2% higher than my current rate. She calculated that our payment would increase by 20%. My <gulp> reverberated through the air waves. She noted my apprehension and said she’d try to secure the best rate possible for me, but she needed higher approval and would get back to me in a few days. Our scheduled-for-30 minute meeting was over in 10. I was left holding my breath, waiting to see what she’d come back with.
How many of these conversations are bankers and advisors having today?
They start with clients asking about rates, and advisors taking the baton and keeping them there. Fears and anxieties flow below the waterline: clients are insecure about cash flow, pushing future goals farther, wondering if they’ll ever buy their first home, be debt free, or send their daughter off to med school. Advisors don’t want to reveal how nervous they, too, are, about rising rates, losing clients, and falling short of their KPIs.
Unfortunately, every short, fear-infused, rate-only conversation contributes to eroding trust, disengaging clients, and reducing advisors to transactional sellers.
If you find yourself in these situations more often than you’d like, you’re not alone. Proactive, holistic, and transformational client conversations are a rarity. According to J.D. Power, only 14% of investors using “full service” advisors are getting comprehensive financial advice. Which means 86% of advisors are letting an amazing opportunity slip away.
This is where you can claim your edge!
How can you lean into this economic climate, with clients who are fearful, and create opportunities to build trust and loyalty? Here are 3 things you can start doing differently right now.
1) Stop being an order taker and start being an opportunity maker.
Clients will call you and ask for your best rates, returns, products, and features. These are important details they’ll consider when they make their final decision. However, as their advisor, you can slow down the conversation. Price and product features are not the star attraction; rather your aperture needs to zoom in on the person and the problem they are having.
For instance, clients are calling about rate, but the problem they’re really having is cash flow, debt management, or saving for an important goal (like a home, or college). By all means, address their rate concerns. But you can also step back and do good by them with a thoughtful conversation about the impact rates will have on their important goals and needs. For instance, while markets are down, there’s opportunity to invest from within a TFSA for tax-free growth. Or ease from a fixed mortgage rate into a blended rate. Or use tax returns to pay down principal instead of contributing to the RRSP. Don’t shortchange your clients with a surface level interaction when you can give them a deep and discerning dialog.
2) Stop being reactive and start being proactive.
Don’t wait for clients to call you. Your fingers should be bruised from typing so fast and dialing so hard to get clients on the phone, on Zoom, or in your office. That’s a bit dramatic, but I want you to hear the point. Instead of clients calling you to question the impact of current rate hikes and market downturns on their finances, you can be the one that gets to them first to reassure or advise them. If you don’t, your competition will.
Clients are emotional about money and relationships. This is marvelous, as you’re in the business of managing both. But where financial service providers are falling short is not in the functional value they provide (the mortgage that gets a client their home, an investment portfolio that gives them a lifestyle retirement, or a loan that kick-starts their business), but rather the emotional value they fail to provide.
For instance, a client may be worried and anxious about headlines they’re reading, increasing gas prices, and their skyrocketing grocery bill. By proactively acknowledging and validating the emotions your clients are experiencing, you give them room to talk about what’s at the heart of their troubles. It’s not the rate itself that’s causing them stress, it’s the trepidation that they may need to make some unplanned lifestyle choices. Being invested and interested in your clients’ overall financial wellbeing isn’t only about the functional or transactional value you bring. It’s about the very human, empathetic, emotional experience you create for them.
3) Stop being a financial representative and start being a financial partner.
There’s an invitation waiting for you. Do you want to be a financial representative or a financial partner?
A few weeks ago, I came across a post on Linked In in which a financial advisor described precisely what it means to be a financial partner. He shared that a high-level executive client of his was recently given abrupt notice of an impending layoff. After his client shared this shocking news with his spouse, the first person they called was their financial advisor. Their financial advisor had earned the right to be part of his clients’ ‘First Response Team’. Could you say the same?
We have all quoted the corporate line, read off the value proposition from company brochures, many of us truly dreaming of becoming the kind of partner that gets the first call or referral. Few ever get the privilege.
Financial services is a trust business. Financial representatives are there to represent the firms they work for. Financial partners, on the other hand, are invested in their client outcomes.
Now, it’s over to you.
- What will you do to be an opportunity maker?
- How will you proactively demonstrate the emotional value you bring?
- What will it take for you to become your clients’ financial partner?