The essence of turning prospects into clients is convincing them that their relationship with you as their advisor will be a lifelong journey. You will have their best interests at heart for many years after that introductory meeting, whether their priority is protecting assets, growing wealth, insurance planning or all of the above.

Winning their trust is difficult because so much is at stake, namely their money and the fear of losing it. So those initial meetings must also include syncing their expectations with what you deliver. They may be approaching your office or that introductory video session clutching a goal to beat the market with little risk in their portfolio or thinking that supplemental health insurance will cover catastrophic medical expenses. If the advisor hasn’t aligned their expectations with reality, then during the next bear market or when they realize their coverage was not what they thought it would be, those clients might be making an angry phone call accusing you of overpromising or simply being a bad advisor.

The beginning

Aligning expectations calls for educating your clients, and that process can start with asking open-ended questions and listening. That discussion also should include an adult-to-adult conversation where the advisor holds clients accountable, said Elke Rubach, LL.M., CLU, a five-year MDRT member from Toronto, Ontario, Canada.

“Your job as an advisor is to advise, not tell them what to do. Don’t lead with product recommendations,” Rubach said. Rather, you should ask questions: “What do you want to do? Why do you want to do it? How is doing that going to put you in a better position? What does that look like and how does that feel? And you also hold them accountable. ‘You said you wanted to do this, but for that you need discipline (to get there).’ You need to get rid of expectations and reach agreements because expectations are loose.”

Scott F. Thompson, LUTCF, a 16-year MDRT member and four-time Court of the Table qualifier from Cranberry Township, Pennsylvania, USA, lets the prospects do most of the talking as he asks those questions during his introductory meetings. He’ll also learn where their assets are and if they’re on track to reach their goals. But before delving further into financial planning, he’ll tell them point-blank that he will never say that one company or one financial plan is the best one out there.

“Therefore, our relationship is a two-way street,” Thompson said. “You are going to share with me what you are looking for, and I’m going to share with you what I recommend.” He explains to clients that he expects their input about any changes they would like to make. “If they’re not happy with something I recommend, I want to know now, not 10 years down the road.”

If clients are unsure what their goals should be, Priti Ajit Kucheria, LUTCF, CFP, a 21-year MDRT member and 18-time Top of the Table qualifier from Mumbai, India, tells them they should plan for living too long, dying too early, getting sick, and maintaining expenses to accommodate their current or desired lifestyle. Then she delves in with open-ended questions: What does retirement mean to you? What is your dream for yourself, for your family, if money was not an issue? Do you have a bucket list?

“After having them list all their aspirations, I tell them that we need to segregate the list into needs and wants, in order to prioritize the deployment of existing and future wealth,” Kucheria said. “I assist them by simply defining the two terms: A need is something that you think is necessary for your own and for your family’s well-being. All the other desires are wants. I am conscious of not advising while the distinguishing happens. (An advisor) has to remove one’s blinders and be open to the client’s perspective, which substantially varies from client to client.”

For Douglas S. Grant, LUTCF, RICP, an eight-year MDRT member from Hilton Head Island, South Carolina, USA, setting expectations involves discussion during the initial meetings about three different buckets of investments. He specializes in working with business entrepreneurs and scores his clients’ risk tolerance and capacity for loss in three ways: retirement assets, nonretirement assets and their whole portfolio. Depending on their goals and circumstances, he may put some of their money in longer-term annuities or retirement funds, but he’ll suggest keeping access to cash, perhaps through a loan from a life insurance policy, should an immediate need arise. During the height of the pandemic in 2020, a client had an opportunity to buy a warehouse near his manufacturing facility and needed $20 million. Through some withdrawals and a couple of loans, Grant was able to tap in to the more liquid of buckets and raise the money. The client purchased the property and had since repaid most of that money back to his plan.

“Seeing those expectations and letting clients know that we have different pockets or buckets of money and places where we can grab cash if it’s an emergency or if the markets are down, so they don’t have to take a hit, they really appreciate that,” said Grant.

The risk and fees talk

Any advisor worth their fees assesses prospects for risk tolerance and their capacity for loss. Presenting those analytics clearly will not only educate prospective clients but help sync expectations as well.

Helen Jayne West, APFS, a 23-year MDRT member from Plymouth, England, UK, has prospects complete a questionnaire before the first meeting as part of a profiling tool that scores risk tolerance on a scale from one to 10, with 10 being the most aggressive investor. Next, she creates a dummy portfolio based on the score and explains that the projected return is based on past performance so there is no guarantee that returns will repeat. She will then show her prospects a color-coded pie chart representing how their money would be allocated and the projected return in the example portfolio. For example, if the individual is a low-risk investor who scored less than four, she’ll use that opportunity to explain that most of the expected annual return for that portfolio would be canceled by what she charges and would not be a worthwhile investment for them.

“I’m honest with the client,” West said. “I remind them of my fee and tell them I wouldn’t want to pay a fee for something where I’m not going to get my money back.”

Still using the simple pie chart, she explains the difference between a profile scored as a four — where no more than 50% of funds are in equities and there’s a one-in-20 chance of the real inflation adjusted value could drop 11.5% in any 12 months — and a five, which puts more money in equities that could yield a higher return, yet carries 2% more probability that the valuation could drop compared with the four profile. The pie charts visually show the trade-off between risk and return, and that client might become more comfortable taking on a couple more percentage points of risk.

But West isn’t strictly married to the profile that her scoring tool suggests. For example, for a couple with a nest egg of £200,000, the husband was a seven while the wife was a six. West learned that he dabbled in day trading, and she wanted to be conservative with what would be their retirement fund. At their next meeting, West will talk more about volatility and find what risk would suit the couple — perhaps a blended portfolio with the risk and reward they’re both comfortable with, or they can set aside a small amount of money he can play with and invest the bulk of the funds in a portfolio with a five-risk score for her.

“My way of dealing with clients’ comfort for the future is knowing what they need so they can sleep at night. That is my test throughout the conversation. If they can’t sleep at night, they shouldn’t buy the investment,” West said.

Holding hands during the down times

Even if your onboarding was thorough, stuff happens. A bear market sinks your client’s portfolio, and they have forgotten your explanations about market volatility and the gains that can come from riding the peaks and valleys for the long term.

“You cannot prevent a client from complaining,” Rubach said. “The best you can do is work on the relationship and keep super-detailed notes about your meeting. You will never have enough details, so send summaries to your clients after each meeting and ask them to confirm: This is our understanding. Are we on the same page?”

When Jonathan Peter Kestle, CLU, B Com, fields a complaint from a client whose portfolio declined within the first three months of signing on with him, he provides historical perspective. He’ll zoom out and show the average return on those investments for six months, a year, three years and so on. The graph will show that the variance becomes smaller over time.

“I’ll say, ‘The three months looks terrible, but you told me you’re 15 years from retirement, and that’s when you’ll need the money,’” said Kestle, an eight-year MDRT member from Ingersoll, Ontario, Canada. “Let’s look at the 15-year window. It’s a steady line (of appreciation) with hardly any variation. Now that you experienced a short-term fluctuation, do you want to go back to your risk tolerance questionnaire and change some answers? If you’re too uncomfortable at this allocation and you just didn’t know it, that’s fine. We can make an adjustment and go forward. It won’t be so rocky, but it will be at the expense of a higher return.” Most of the time his clients keep the allocations as is.

Other advisors said they’ll try to allay clients’ fears and remind them they’re investing for the long term by benchmarking the portfolio against the performance of investments in comparable sectors, which might have posted larger declines. Reassurance also might come from pointing out that the client bought on the cheap in a down market and now owns more shares or units than when the portfolio started. So, the valuation could increase when the market bounces back.

“The majority of the time, it’s not a complaint as much as it is a misunderstanding,” Thompson said. His client may say, “The market is down. Should I worry?” Thompson goes back to the file. “I say, ‘You told me you don’t need the money for 10 years. But if you’re worried at six months, has something changed in your thinking?’ And I try to find out.”

Communicate early and often

Communicating throughout the year is another opportunity to reinforce expectations and mitigate surprises. Although West contracts for an annual review, she’ll contact her new clients after six months by phone to see if they have looked at the valuation reports sent in the mail. If not, she’ll review those results during the call.

Grant meets with his VIP clients every quarter and his A clients twice a year. Both groups account for three-quarters of his annual revenue. For the VIP reviews, the first-quarter session looks at objectives; the second-quarter review focuses on returns and reexamines risk tolerance; tax strategy is the main topic for the third quarter; and risk protection is the fourth-quarter focus.

“I don’t get a lot of complaints or phone calls because we stay on top of things for our clients,” said Grant.

Building a relationship and syncing expectations will require a series of meetings. If turning a prospect into a client takes six or more sessions, those are more opportunities for Kestle to accumulate credit in what he calls the relationship bank.

“When there is a complaint, you can ask to use some of that credit and remind the client what you talked about and signed off on. Sometimes the longer it takes to build that relationship, the better because you get through the process in the right way,” Kestle said.

CONTACT

Douglas Grant douglasgrant2@financialguide.com

Jonathan Kestle jonathan@ianmoyer.com

Priti Kucheria priti@kucheria.co.in

Elke Rubach elke@rubachwealth.com

Scott Thompson sthompson@dpainsurance.com

Helen West helen.westfm@gmail.com