Obviously, earning new business is a feel good moment for an advisor, but advisors should also understand why they were hired in the first place. That bit of information can be revealing on multiple fronts, including highlighting the soft skills advisors should focus on when it comes to attracting new clients.
Speaking of soft skills, those are increasingly crucial data indicate many clients make the decision to hire a particular advisors based on emotional reasons, not financial ones. That doesn’t mean clients are making emotionally-charged, rash decisions in selecting an advisor. Rather, it does imply clients are prioritizing connection, personal touch and related elements beyond investment returns.
“Emotional” reasons for hiring an advisor range from clients acknowledging they lack discipline when it comes to investing or they lack the foundation to invest on their own to the need for security or just simply having someone to float ideas to.
Point is the group of emotional reasons that lead clients through an advisor’s doors are more plentiful than the financial reasons. While that might be surprising to some advisors, it’s a trend to embrace, not fight.
Proof Is in the Pudding
For advisors that need convincing regarding the role emotions play in clients’ decision-making processes, consider the results of a recent Morningstar survey. The research firm polled 312 clients, asking them to list the reasons why they hired their advisors. That’s not a yes/no query, so it left room for in-depth responses, which are more instructive to advisors.
“In fact, 60% of respondents cited an emotionally grounded reason for hiring their financial advisors. This suggests that although financial issues are a common driver of client hiring decisions, there is an additional aspect of emotional drivers, such as the degree to which someone feels comfortable making financial decisions and their ability to stay the course,” notes Morningstar’s Samantha Lamas.
The survey queried respondents on their comfort in handling various financial issues, their specific financial goals and demands, behavioral coaching, whether or not they were referred to the advisor by a family member or friend and the importance of the quality of the relationship.
Aside from the financial goals and demands category, the others are highly rooted in emotion. For advisors that want to know clients’ financial motivations for hiring professionals – and they should want to know this, too – that list includes desire for outside guidance, interest in annuities, retirement planning and more.
Emotions Are Important
Advisors shouldn’t underestimate the role emotions play in how clients arrive at the decision to embrace a financial professional. Nor should they overestimate clients’ propensity for being forthright about those emotions.
Chances are they’ll be somewhat guarded on those topics at first. Hence, the importance of a solid soft skill repertoire.
“Our research points to the importance of addressing a client’s emotional needs during beginning conversations, but that is easier said than done,” concludes Lamas. “Although three in five clients may end up hiring an advisor for an emotionally grounded reason, we can’t expect investors to be forthright about their need for emotional support. Instead, advisors must address these needs in a subtle and tactful manner.”