Managing Client Expectations:
This is an area where advisors need to understand client psychology in order to succeed. While managing a client’s portfolio may be a very straightforward endeavor, managing their expectations can be much harder. Many clients have unrealistic expectations when it comes to investment returns and interest rates. Advisors need to be able to show their clients how they add value to the investing equation. One of the ways that they can do this is by helping clients to maintain a long-term perspective in their investing so that they don’t go off track with every movement in the market. Of course, it takes time to do this consistently but clients who can begin to see how their advisor is keeping them on track will be much more likely to remain loyal to their advisor. (For more, see: Trends Challenging Financial Advisors.)
Low Interest Rates: Interest rates continue to hover near historic lows, and it has been a difficult stretch for fixed-income investors and those who would like to live off of the income from their investments. Many advisors have had to incorporate instruments into their clients’ portfolios that carry a higher level of risk than they would have otherwise and the prices of many of these instruments will likely drop once rates start to rise again. Advisors can minimize the impact of this by focusing on a total-return approach to investing rather than looking at yield.
Staying in Touch: Advisors have more ways than ever to stay in close contact with their clients, but many fail to do so when things are going well. A constant flow of communication is necessary in order to maintain a solid relationship with most clients, regardless of what the markets are doing. Advisors may want to take advantage of such services as Skype and instant messaging in order to keep in touch with tech-savvy clients.
Managing Information: Some advisors get caught up trying to stay abreast of the ocean of information that’s available online and elsewhere. Smart advisors focus more on client behavior instead of reacting to the latest news. Advisors also need to be able to direct their clients to reliable sources of data that have stood the test of time in terms of accuracy. This can help to prevent misunderstandings and prevent clients from making mistakes based upon misinformation. (For more, see: How to Be a Top Financial Advisor.)
Emotional Engagement: Many financial advisors are very rational, analytical people who think logically. However, many client decisions are based upon emotion. Advisors need to be able to relate to their clients on an emotional level in order to maintain a working relationship. This may involve explaining the emotional ramifications of an investment or planning decision, so that they client can see how it will impact them on an emotional level.
Group Support: Independent financial advisors may often feel alone in their practices and have little in the way of planning support. Advisors who struggle with this can find support in organizations such as the Financial Planning Association and the National Association of Insurance And Financial Advisors (NAIFA) or the National Association of Personal Financial Advisors (NAPFA). These groups can provide a wealth of resources in marketing, sales, practice management and other aspects of the profession that can make advisors’ lives easier.
Managing Client Expectations: