A cornerstone service that many financial advisors provide is education. While strategic advice is crucial, advisors also face the challenge of presenting the strategies to clients in context, explaining different financial planning concepts, and showing clients how to implement these strategies (as well as pointing out any long-term consequences). While curious, proactive clients who are ready to learn may be the ideal, this can become complicated when clients bring ‘good’ advice they’ve heard from unreliable sources that doesn’t apply to their individual circumstance – or, worse, the advice itself is rooted in misinformation. This puts advisors in a challenging situation to re-educate or redirect the client without becoming combative or condescending.
In our 146th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss the “overconfidence gap” that can be created by clients bringing misinformed strategies and suggestions from various sources to their advisors, and how advisors can navigate the conversation to get clients back on track (without also offending them).
One potential dynamic of these conversations might involve the advisor’s bruised feelings from knowing the client had been searching for financial planning answers somewhere else rather than coming to the advisor and asking their questions directly. A natural first reaction might be to prove why the client’s source is ‘wrong’ and how the advisor’s advice is ‘right’ – but in doing so, advisors run the risk of alienating their client who may interpret the response as a suggestion that they were ignorant or gullible in believing obvious misinformation. Instead, leading the conversation by thanking the client for bringing the idea to the meeting can be a more helpful approach, and then asking for context around the problem the client wants to solve with the advice they were given by the outside source. This strategy encourages the client to open up about their intent, problems, and even insecurities, giving the advisor an opportunity to better understand the client and solve more problems for them – ultimately building more trust!
While such one-off discussions with 1 or 2 clients in meetings can be fruitful, multiple clients who bring up the same questions can signal an opportunity to address the misinformation for a broader group of clients head-on. For example, if an advisor has clients who are small business owners, and several of its clients consistently have questions about the same tax savings strategy (or consistently come to the wrong conclusion about where it applies, thanks to either what they find on the Internet or hear by word of mouth), many of the advisor’s clients may benefit from educational resources created by the advisor themselves, perhaps in a written, video, or audio format; this not only allows the advisor to craft the sort of response they want to send, but also reduces the need to answer the question more than once. Alternatively, advisors can hold educational events to address common questions and give clients an opportunity to voice their specific questions or concerns.
Ultimately, the key point is that when clients bring forward ideas rooted in misinformation, advisors have an opportunity to solve a problem in a way that can further enhance trust in the relationship by providing high-quality resources that help clients with their specific needs. And while there may be some upfront work required to coordinate such resources (or events) for clients, doing so may end up helping the advisor save time by allowing them to answer the same questions that crop up more efficiently, thoroughly, and proactively – not just for the client sitting in front of them, but for several clients with the same questions throughout the firm!
