Many readers of this blog contact me directly with questions and comments. While often the responses are very specific to a particular circumstance, occasionally the subject matter is general enough that it might be of interest to others as well. Accordingly, I will occasionally post a new "MailBag" article, presenting the question or comment (on a strictly anonymous basis!) and my response, in the hopes that the discussion may be useful food for thought.
In this week's MailBag, we look at a question about what an investment management firm that has only provided investment management services in the past should do when they try to start offering financial planning and clients refuse to provide all of their personal financial information.
Question/Comment: Recently, I received an email from a client of ours. It was in response to the financial data survey I emailed to him in preparation for anupcoming annual review in September. This is a new process. Before me, no one really reached out to clients before the annual review took place. Rather, questions surrounding financial planning matters, or even sources of income for that matter, were asked during the review. Sometimes clients had answers, but more often they just didn't know the answers off the top of their head. Anyway, based on the client's email to me, it seemed like he wasn't comfortable providing me with certain personal information (although he did fill out part of my survey). I know it is probably a matter of communicating the benefits in person during our review, but it still gave me an uncomfortable feeling inside.
I would like to think that I understand why people are willing to share important personal health issues with say a doctor or nurse. But, in my short experience thus far in the financial planning industry, I do not think people are as willing to share personal financial planning information with their financial planners. Maybe this has to do a with peoples lack of trust when it comes to discussing financial anything?
Do you have any advice/suggestions that would help me to cultivate a more open relationship with the clients I work with? OR does that just come with time? How can I provide a meaningful, data driven annual review with a client who wants to explore the financial planning process? Do you think that sending out fact finding surveys to clients beforehand is uncalled for when they haven't filled one out before? Or, is it a step in the right direction toward building a better relationship?
The challenge you’re describing here is not uncommon. The discomfort of clients about sharing their intimate financial information comes up for many firms that have not done extensive financial planning in the past and first try to roll it out as a new offering to clients. In point of fact, it also comes up for many ongoing financial planning firms when they begin to engage clients as well.
Most of the time, the discomfort and concern seems to stem from two directions. The first is to simply recognize that most people don’t exactly wake up one morning feeling a pressing urge to obtain a comprehensive financial plan. The benefits of an ongoing financial planning relationship seems to be something that most clients appreciate far more in retrospect (i.e., after they’ve gone through the process) than they do up front. Which means that ultimately, financial planning still needs to be “sold” to most clients, and you have to show them how they will benefit before they’re willing to engage. Especially when it may involve them sharing their personal financial details, and allocating some of their precious time and effort necessary to participate in the process. And frankly, if your clients were really that anxious to go through a comprehensive financial planning process, they probably would be working with someone else that would already have been providing that service! Again, that doesn’t mean they won’t appreciate it after the fact, but it does mean they’re probably not exactly excited to invest themselves into the process just because you’ve announced that it’s available and asked them to put in the effort on their part (and make no mistake, gathering together all their financial information in the depth necessary for a financial plan, if they’ve never done it before, is definitely an effort!).
The second caveat is that being willing to engage in financial planning involves a high level of trust, and if your clients don’t already have that level of trust, asking them for intimate financial information can be very uncomfortable. I’ve likened it in the past to asking a date to get naked the first time you go out together – in other words, being “way too forward” and asking people for levels of intimacy far beyond what the current depth of the relationship would consider appropriate. Just as in the dating context, trust has to be built and established over time, especially in a low trust industry like financial services (unlike medicine, where our innate level of trust for professionals is dramatically higher). For existing clients, depending on the dynamics of the relationship already, they may also be wondering if these questions aren’t simply another opportunity to try to ask to manage more assets, have them buy more financial services products, or otherwise “sell more” of whatever they’ve already been buying from you. If they weren’t necessarily ready to “take it to the next level” already, a deep ask for data will naturally make them defensive.
So how should you move forward from here? I’d suggest three steps:
- First, you need to explain the value proposition to your current clients to go through the financial planning process with you. In other words, you need to “sell” them on doing planning. Yes, they may already be current clients for some products and services, but if you want them to engage in something new, you still need to show them what’s in it for them – especially given the commitment of time, effort, and sharing of personal information that’s necessary for doing good financial planning. Don’t take your clients’ trust for granted.
- Second, if you personally are new to the picture with the clients, recognize that they may be even more uncomfortable that not only are they receiving a “strange” request for information they’re unaccustomed to, but they’re also receiving it from a “stranger” (you) as well (especially if your senior advisor didn’t already talk to the clients and get their buy-in to engage in the process). So recognize that your clients may need to get comfortable with you, too. Consider just sitting in with them in person at the next client meeting so they can be introduced by the senior advisor and get familiar and more comfortable with you. Introduce doing financial planning to them in that meeting, and assuming they say they want to proceed, you can be introduced as the person who will be contacting them to gather the information to proceed. Now they’ve bought into planning, agreed to provide information, and understand the person on the other end of the data request that’s coming to them.
- Third, consider focusing on modular planning first. In other words, rather than asking clients to take a big leap and invest the time and effort into a comprehensive financial plan – especially if they’re not accustomed to getting such services from you already – explore in the next meeting if there are particular areas of concern that they would like to address, and focus there first. Do a “modular” plan that focuses on the area that’s most important to time. Provide some initial value by (hopefully!) solving their initial problem. Then you can come back to them and invite them to engage in the more comprehensive process; the positive results of the mini-planning experience should help to encourage them to realize the value in engaging more fully.
The bottom line is that going down the road of introducing financial planning services to your clients can be a wonderful way to deepen the relationship, expand your services, improve the firm’s value proposition, and help to differentiate you in a world that still has too many product-centric commoditized advisors. But until financial planning is a service in higher demand, recognize that you may still need to ease clients into the process, especially if it represents something new and different than how they were being serviced, and the nature of their relationship with the firm, up to this point.
I hope that helps a little?
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