Most of the time wealth management clients’ needs are transactional: opening accounts, transferring money and managing their cash situation. At times though the client will have more complex requirements and will need the assistance of their wealth management advisor, and where emotion is involved, human interaction is called for. This article discusses the expert strategies that can be employed when navigating tough talks in wealth management.
These conversations, however, carry high stakes. There is much scope for things to go wrong, not least if an advisor misses the mark. Just one bad conversation could see an entire client relationship unravel.
Compounding matters is the generally low levels of satisfaction with wealth management advice currently. Capgemini’s 2023 World Wealth Report found that just 18 per cent of “affluents” in the US – those with investable assets of $250k to one million USD – are satisfied with their current provider. Those who are not, will have no qualms about switching to a new advisor.
Difficult client conversations broadly centre on a handful of scenarios. They usually go like this: Service: “We messed up”, “you filled out the form wrong”, “we’re withdrawing a service that you use.” These conversations are tricky because they can make customers feel undervalued or undeserving of special treatment. Nobody likes to see things they’ve become used to suddenly taken away.
Performance: “Your funds didn’t do so well”, or “your portfolio value has declined”. Conversations about underperformance can be hugely emotional, especially when it puts financial objectives in jeopardy. Clients look for reassurance that their investments will do better next year, so wealth managers must effectively justify past performance and build confidence in the future.
Fees and charges: “Our fees are increasing”, or “the cost of your new service will be extra.” Clients broadly understand the value of service. According to EY’s 2023 Global Wealth Research, 71% of clients believe providers charge reasonably for their services, and most – 73% – understand what their fees pay for. However, levels of trust over fair charges have fallen since 2021. The percentage of those unhappy with the value they receive has increased from 6% to 10%. In general, price increases are often hard to swallow, especially when no obvious tangible output or additional perceived benefit exist.
Long-term objectives and priorities: Wealth managers can find themselves in difficult, even hostile, environments when advising families. Family members will often have very different objectives, and it is down to advisors to broker those conversations. It’s also common for advisors to have to address sensitive subjects like bereavement, disability, and even parents’ attitudes towards their offspring’s suitability for managing their inheritance.
Though AI has come a long way from the basic chatbots of a few years ago, it is far from being able to have high-value, emotional, nuanced and personal conversations about wealth management needs.
It’s entirely plausible that some sensitive conversations – such as around fee increases – could potentially be automated. But, AI is unlikely to put significant numbers of wealth advisors out of work soon, for the simple reason that it cannot meet client expectations.
It can’t empathise, draw on prior knowledge of a client, or consider what the future might hold. And it has no way of discerning a client’s unspoken needs or nonverbal communication.
For now, then, these difficult conversations remain in the human realm.
Nonetheless, it is essential that wealth advisors are highly adept at having these difficult conversations. Communication and influencing skills, rather than deep product insights and financial expertise, will be what sets outstanding advisors apart.
These skills help wealth managers to move seamlessly between empathetic client servicing, into wealth management advisory, or a product discussion, without losing trust or the client feeling like they got the “hard sell”.
Being skilled in the softer side of communication also enables advisors to understand reciprocity and timing for introducing difficult conversations. Negotiations can go wrong in minutes, not hours. Giving clients space at the beginning of the meeting to slow down and reset negative energy will pave the way for a more constructive conversation. Difficult conversations can then be introduced more naturally, and clients are much more engaged and accepting of those complex topics.
Get these skills right, and it’ll pay dividends for fostering trust and building long-lasting relationships. Getting it wrong could signal the costly end of a high-value relationship.
The need for these skills is becoming more acute. Many factors are driving the increased frequency of these conversations; a growth in the number of clients each wealth manager looks after; a rise in multigenerational wealth, where multiple people in the same family need advice, regulation, and remuneration.
Learning and development managers are on the hook to deliver the proper training. Equipping wealth managers with the skills to navigate difficult conversations successfully is more critical than ever. It’s time for L&D managers to act now to train their teams in the skills required to navigate the most challenging client conversations.
Our latest ebook explores these new challenges and opportunities, and outlines our approach to equipping advisors with the right soft skills to retain clients and thrive.
Download The Art of Balancing Generations ebook here.
Wealth management is evolving. Contact Alpha today to learn more about the complex art of balancing multi-generational relationships as well as the wealth management advisory skills that are now required to stay ahead within the estate planning/inheritance arena.
19/09/2023
