A 6-Step Model to Turn Client Trust into Action in a Down Market
Aug 24, 2022
auto_awesome
In this podcast, Ken Haman discusses the importance of trust in the advisor-client relationship during market volatility. He explores the impact of client experiences on trust and the significance of disciplined communication in uncertain markets. Haman introduces a 6-step model to address hesitant clients in uncertain market conditions and guide them towards understanding their situation and proposing solutions to protect their portfolio.
Trust is crucial in client-advisor relationships during market volatility, and advisors must consistently deliver experiences that demonstrate goodwill and show their competence to build and maintain trust.
Understanding clients' needs, such as feeling understood, competent, and important, is essential for building trust, and advisors must focus on creating experiences that meet these needs, even during volatile market conditions.
Deep dives
The Importance of Trust in the Client-Advisor Relationship
Trust is identified as the crucial factor in successful client-advisor relationships, especially during market volatility. The level of trust influences the client's confidence in their advisor and decreases anxiety. Trust is built over time through consistent experiences of goodwill and professional competency. Advisors must understand what puts trust at risk and how to maintain it, particularly during challenging market conditions. The trust equation is introduced, highlighting the importance of consistency, goodwill, and competency. Advisors must consistently deliver experiences that demonstrate goodwill and show their competence to build and maintain trust.
Clients' Needs and Expectations from Advisors
Understanding clients' needs is essential for building trust and maintaining successful relationships. Clients have seven key questions that express their needs: Do I matter to you as a person? Do you understand me? Are you competent in your profession? Are you better than me at this? Are you paying attention? Is your fee fair? Can you help me create the future I want? These needs must be addressed over time through multiple experiences to strengthen trust. Advisors must focus on creating experiences that meet these needs, even during volatile market conditions.
The Role of Experiences in Trust Building
Experiences play a crucial role in building or eroding trust. Positive experiences of goodwill and professional competency increase trust, while negative experiences can damage it. Positive expected experiences, unexpected positive experiences, and expected negative experiences all contribute to trust building. However, the most detrimental experience for trust is an unexpected negative outcome. Advisors must ensure they provide consistent experiences that align with clients' expectations and improve their ability to predict future outcomes.
A Six-Step Conversational Model for Action in Volatile Markets
To motivate clients to take action during volatile markets, advisors can utilize a six-step conversational model. The first step is to introduce a problem and explain why it needs attention. Then, reveal the mechanisms behind the problem and describe its implications for the client's portfolio. Next, propose a solution and explain how it addresses the problem. This is followed by helping the client understand the proposed solution and its mechanisms. Finally, suggest a specific action and when it should be taken. This model provides structure and emotional motivation, enabling clients to make informed decisions.
The first six months of 2022 have served as a stark reminder that market outlooks can quickly shift. Advisors who want to retain business must now prepare clients for the possibility of greater volatility, abiding inflation and muted returns. Clients have many reasons to be skeptical of change and financial advisors (FAs) who don’t have these conversations now risk having painful discussions with disappointed investors. AllianceBernstein Advisor Institute’s, Ken Haman discusses key insights about human decision-making and research in behavioral finance to look at the practical challenges of managing client trust during uncertain times.
Note to All Readers: The information contained here reflects the views of AllianceBernstein L.P. or its affiliates and sources it believes are reliable as of the date of this podcast. AllianceBernstein L.P. makes no representations or warranties concerning the accuracy of any data. There is no guarantee that any projection, forecast or opinion in this material will be realized. Past performance does not guarantee future results. The views expressed here may change at any time after the date of this podcast. This podcast is for informational purposes only and does not constitute investment advice. AllianceBernstein L.P. does not provide tax, legal or accounting advice. It does not take an investor’s personal investment objectives or financial situation into account; investors should discuss their individual circumstances with appropriate professionals before making any decisions. This information should not be construed as sales or marketing material or an offer or solicitation for the purchase or sale of any financial instrument, product or service sponsored by AllianceBernstein or its affiliates.
The [A/B] logo is a registered service mark of AllianceBernstein, and AllianceBernstein® is a registered service mark, used by permission of the owner, AllianceBernstein L.P.