Nov 01 2023 / Round the Table Magazine
Asking and listening
By Howard E. Sharfman
Regardless of how well you know your clients or believe you understand what they want, they may still surprise you. That’s why asking the right questions is critical to ensuring that you have all the information required to provide them with the best solutions.
Ultimately, information in equals information out. Many senior executives in various industries erroneously believe they can diagnose any problem from sitting at their desk alone. The reality for financial advisors is that we must obtain accurate information directly from the client because every person and every set of facts are unique.
My firm recently conducted a client survey that included the question, “Why did you buy life insurance?” One respondent, a retired doctor with no reasonable liabilities, stated that his key motivation was asset protection. I could have given you 20 reasons why I thought he should own a policy, and asset protection wouldn’t have been on the list. Yet that was his hot-button issue. The survey reinforced to me how crucial it is to ask clients what is most important to them since those answers can be quite unexpected.
Another client who ran a large private equity fund once said to me, “If my father had cared enough to get life insurance, life wouldn’t have been so hard for my mother, sisters and me after he passed away. But he didn’t, and I would never leave my family in that situation.”
Although this client is wealthy enough that his family will be well provided for even without insurance, he feels that having a policy serves as an important symbol of how much he cares. Priorities and wishes such as these are often only discovered by asking the right questions.
One key question that I ask clients is, “What should we know about your health or anything that might affect your mortality?” The responses could reveal health issues you’d never know about otherwise, particularly if the client appears perfectly healthy. One might also learn if a client had a health scare earlier in life or was once involved in a terrible accident that has strongly influenced their perspective. Factors like these can potentially drive client decision-making and are very important to understand.
I also make sure to ask clients about who is counting on them in life. Beyond the nuclear family, there might be friends or in-laws who rely on them for financial support. I met with one client recently who had about 20 people listed as beneficiaries of their trust. Wanting to help that many people is great, but it was important for us to know about it so that we could address the gift-tax ramifications. If I didn’t ask the client specifically about this topic, I might not have been able to ensure everything was handled in the most tax-efficient way.
Additionally, toward the end of client conversations, I’ll often say, “What didn’t I ask that I should have?” This type of catch-all question can help reveal details that might otherwise slip through the cracks.
Finally, I always ask the client, “How long would you like this process to take?” This will allow me to manage the client to their desired outcome and keep the project on track.
Importance of information
I tell clients that while these conversations may not always be fun, they are necessary for adults with responsibilities and resources. If we don’t have these discussions, then the government is free to substitute its judgment — and most likely not in the manner a client would prefer. The government implemented its own plan for every citizen and their money the day they were born. If a new plan isn’t created, the government’s plan prevails.
In addition, advisors too often make bad decisions for clients simply because they haven’t obtained enough information from them. For example, it might seem logical to assume that an 85-year-old client will have a short life expectancy. However, compared to a 65-year-old client with significant health issues, that person could live another 10 years.
These are all important details to know to properly represent clients. Therefore, if someone would rather not answer health-related questions, an advisor needs to decide whether to continue working with them. It’s OK to say, “If you don’t feel comfortable providing me with this information, then I advise you to find someone you are comfortable with. I simply cannot do the best job for you without being fully informed, and you deserve me at my best.”
Letting clients lead
I find that letting clients take the lead during conversations is an effective way to acquire needed insight. People enjoy talking about themselves. When I come to a meeting with a list of questions and then allow the client to respond to them at length, they’ll probably feel like we’re having a great conversation, and I’ll be able to gather relevant information.
I think too many professionals feel a need to justify why they’re sitting at the table, so they talk too much. It’s important to recognize that the client has already decided the merit of why they are there, so the focus should really be on the client and their needs.
When I’m meeting with clients, my job is to listen and put their wishes into action, even if I don’t necessarily agree with everything they want to do. In those cases, maybe I’ll say, “I might do it a different way if I was in your position, but that doesn’t mean I’m right.”
I have a friend who is a famous professional golf instructor, and he shared with me an intriguing aspect of his teaching approach: There are only about 10 different things that he’ll say to the golfers he instructs, but he has 10 different ways of saying each of them because people learn differently.
Similarly, advisors should be able to say the same thing in multiple ways to ensure that we successfully communicate with our clients. Some people might grasp concepts better with graphs, while others prefer numbers, pictures or stories.
Whichever is the case, professionals who aren’t asking the right questions during these conversations will likely miss out on significant details — not only about the money itself but what that money means to each client. Furthermore, we should pride ourselves on providing the best solutions.
For anyone who isn’t asking the right questions because they’re too busy or don’t have the time to prepare, I don’t believe those reasons are good enough. We need to dedicate the time. If you don’t feel you personally can spare it for a client, then at least ensure an associate at your company does so for you. Because the time it takes to ask those questions and gain important insight could turn out to be far more valuable to a client than how many decades of experience you can offer.
Howard Sharfman is a 28-year MDRT member from Chicago, Illinois, USA. Contact him at email@example.com.