Executive summary:
- Advisors may focus on performance, fund ratings, and metrics like beta – but investors do not
- Investors want to understand if their investments will help them reach their financial goals
- Adopting investor language – talking about their goals, needs, and circumstances – can help advisors better understand their clients, and their clients better understand how and why they are invested
My father is 86 and the topic of financial markets and his investment accounts invariably comes up at every family gathering. Mainly, he talks about how my mother and he have lived from their retirement accounts since they both retired more than 25 years ago.
I admit, my father is better versed in the financial markets than the average investor, given he spent most of his professional career working on Wall Street. But I’ve noticed that even he has become less and less focused, over time, on his portfolio’s performance during these dinner table conversations. Rather, he talks about his feelings, stories and anecdotes of memorable moments that his investment portfolio has helped fund over the years. For instance, when equity markets are up, he talks about the future trips they have planned, like the one they plan to take with their church friends, and how excited they are. When markets are choppy, he talks about how he and my mother would be tightening their financial belts and perhaps not taking that trip they had planned to visit family in Egypt, where they both grew up.
I’ve noticed over the years that in these family meal discussions, he rarely shares what his portfolio is invested in or the performance of his investments. He doesn’t mention the Morningstar rating or what decile of performance his portfolio falls into. In fact, when I ask him how his portfolio is allocated, or how it is weighted in U.S. vs. non-U.S. assets, what percentage he has in bonds, his answer is quite simple: As long as your mother and I can live our lives with dignity and comfort, and we have choices to dictate the terms of our lifestyle, that is what matters most to us. I am always struck by how devoid his answer is of data points, benchmark comparisons and account values. Instead, it is filled with values-based terms like dignity, choices and lifestyle. These heart-felt interactions have left me wondering: Is the language clients use to discuss their financial picture different from that of financial advisors’ language?
Client language is different from advisor language
Well, hundreds of conversations I’ve had with clients over nearly two decades prove that my father is not the exception. In fact, he is the rule.
Client language is different from advisor language. And that matters when you’re communicating with your clients. If you want them to understand you—and more importantly, if you want to understand them—you need to adopt client language.
As an industry, we have become fixated on communicating with clients using facts, numbers, statistics and data. That is our language as professionals in the financial services industry, and we are comfortable using that language because that is how we are taught to share our value and insights. We are trained to position investment products using a performance track record, citing facts and figures.
But let me ask you: When was the last time a client walked into your office and said: I want to beat the S&P 500® Index by 200 basis points, with a standard deviation of 8% over the next rolling three-year period. Me neither. I haven’t met that advisor, nor that client.
Yet this is how we typically share and communicate insights with clients during client reviews, check-ins or during an introductory meeting. We share performance figures, risk measures, upside and downside capture ratios. We compare their account balances from the previous quarter and share track records over a one, three, and five-year basis. That’s not to say these are not important data points. They are important.
But the language that clients use to describe these characteristics is markedly different: Their language reflects their personal goals, circumstances and preferences. It is less about quantitative data points, and much more grounded in a qualitative, human perspective. After all, money isn’t just measured in dollars and cents, it’s measured in the infinite possibilities it can afford us to experience this thing called life.
In reality, client language sounds more like this:
I’m 55 years old, I’m married and have three children. By the time I reach 65, I want to retire, my partner and I want to buy a second home on the lake and have enough money to pay for my children’s education. Can you help create a plan for me to do that?
There’s nothing about wanting to beat an index. There’s no explicit reference to a standard deviation, capture ratio, information ratio, tracking error or any of those other metrics advisors rely on.
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Getting to the heart of clients’ goals, circumstances and preferences
I believe we need to think about how we speak with clients and start to use language they will understand.
At Russell Investments, we believe advisors can get to the heart of their client’s goals, circumstances and preferences through our notable and differentiated client discovery process which is based on client language and uses simple prompts through our popular discovery cards.
This foundational first step allows advisors to fully understand why a client feels the way they do and connect with them on a more personal level to help develop a plan that allows them to achieve their goals and financial outcomes.
Through this process, financial advisors have the opportunity to truly elevate and differentiate their client experiences by shifting to client language and reframing how they execute discovery conversations, client reviews and client engagement. With something as simple as speaking the client language, advisors can differentiate themselves from their peers, leading them toward the financial practice of the future—which is more client-centric, holistic and authentic. This can potentially lead toward higher levels of assets, revenue, client retention and loyalty.
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The bottom line
What did my dad say about the client discovery experience when I took him through it at our recent family gathering? He revealed that his top priorities are preparing his heirs for wealth transfer and planning for his long-term care. Turns out, he’s much less concerned with the standard deviation of his balanced portfolio or how much his retirement account beat the S&P 500 Index last year.
What might your clients reveal? And how might the trust you build in those conversations change the trajectory of your business? Reach out to your Russell Investments regional team for your copy of the client discovery cards.