Giving financial advice can be a dicey game to play: speaking financial goals aloud in a professional office tends to set the expectation that those goals will ultimately be met.
And yet, if clients set goals that are on the far-fetched side and leave your office expecting them to come to fruition, you’ve set them up for long term disappointment.
But how do you offer financial planning services that excite your clients about retirement planning without allowing their expectations to get out of hand? It’s a tricky balance to achieve, for sure.
Don’t worry though: we’ve got some helpful tips and tricks you can use to walk the tightrope effectively.
Why Setting and Managing Expectations Matters
Expectations dictate reality. While that sounds like something we read on an Airbnb throw pillow, it actually comes from an article in Psychology Today.
No, we’re not saying that if you expect to win the lottery it’s going to happen (sorry). What this means practically is that people’s expectations heavily influence their happiness.
If you expect a client your closing has around $10,000,000 in AUM, but it turns out it was only $1,000,000, you’re not going to be too pleased. On the other hand, if you expected them to have only $50,000 in AUM and it turns out they have $750,000, you’d be thrilled.
The same logic applies to your clients’ perspective. If they expect 10% growth and only get 7%, they won’t be thanking you anytime soon. But if they expect 5% and get 6%, they’ll be rather pleased.
If your clients’ expectations are going to dictate how they react to the way their investments perform, it’s in your best interest as an investment advisor to ensure that their expectations err on the side of realistic.
Understanding Clients’ Expectations
The thing is, clients may come in with pre-existing expectations for how their investments will perform in the long run.
It’s essential, then, for any financial advisor to take the time at the outset to understand what a new client’s expectations are so you can manage them if necessary. But how?
Ask questions
In basically every article we’ve written about building rapport with clients (and there’s a few), we harp on the importance of asking genuinely curious, open-ended questions.
Our advice is not going to change here. However, rather than coming right out and asking “what do you expect from our relationship?” (though you may want to go ahead and do that too), you can discover a lot about a client’s expectations by asking about their goals.
What led you to want to find a financial advisor? What financial products are you interested in? Have you considered estate planning?
Asking questions like these not only give you information about what your clients expect to gain from your relationship, but also demonstrate that you have a genuine interest in serving their needs specifically.
Listen actively
Of course, asking questions won’t do you any good whatsoever if you aren’t paying attention to the answers your clients give.
Active listening involves more than just hearing the words that come out of your clients’ mouths, though. You need to pay attention to their non-verbal cues in order to key into how they’re feeling about whatever they might be discussing.
If a client gets particularly excited around the discussion of retiring at 55, that tells you a lot about what they expect in terms of results, and you can plan accordingly.
Follow up
Gleaning initial expectations from a first meeting is all well and good, but if you truly want to be of excellent service to your clients, you’ll do more.
Checking in and following up throughout your working relationship to track progress towards goals and update expectations accordingly will not only help prevent clients from expecting too much, it’s also another way you can demonstrate the level of care you have for them.
Setting Realistic Expectations
We know that ensuring clients expectations can be reasonably met is important if you want them to feel good about the advising services you provide, but how do you manage expectations that may be unrealistic?
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Open a dialogue
If a client ever expresses expectations that are simply not possible, your first goal is to figure out what caused them. It’s likely they have a misunderstanding of how some key financial concept works. Through conversation (and more genuine, non-judgemental question-asking), you’ll be able to discover what caused this expectation, which will allow you to begin to mitigate it.
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Be candid, but considerate
When a client says something just absolutely wild, like they want to buy a mansion in Malibu by 35, your job is to not make them feel stupid when you tell them that’s probably not going to happen. But you should be honest and tell them if they have expectations that simply won’t be met short of a lottery windfall. You just need to make sure you do so in a way that won’t lead to any bad feelings on their end.
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Provide education
Even better than correcting misconceptions that lead to wild expectations is to educate clients as to why those misconceptions are incorrect. If your client comes out of a meeting with you having learned something that improves their ability to be financially self-sufficient, you’ve provided value beyond basic expectations.
Handling Unmet Expectations
Of course, nobody bats 1,000, and every once in a while you’ll miss the mark on even the most reasonable of expectations. Here are a few things you can do in order to make those moments as painless as possible:
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Prepare for unmet expectations
If, at the outset, your client believes their expectations will be met 100% of the time, you’re sort of guaranteeing that they’ll be disappointed sooner or later. On the other hand, if you’re honest about the fact that even the best laid plans of mice and men often go awry, when it inevitably happens, they’ll be mentally prepared and it will sting less.
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Inform proactively
If you’ve set goals with a client that seem unlikely to be met due to some shift in the financial winds, it’s best practice to let them know sooner rather than later. When it comes to financial setbacks, ripping the band-aid off is probably not the best choice.
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Be honest always
You probably don’t need us to tell you this, but pretending like everything is okay when it’s not is a great way to lose the trust of your clients, which means losing them as clients altogether. Always be honest with your clients, even when it might be a bit painful to do so.
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Provide solutions
The best thing you can do for your clients (and yourself) if expectations aren’t met is to have a plan for how to move forward in a way that maximizes value. Being able to identify why things didn’t work out in the first place and articulate a solution that instills confidence going forward will do a lot to dull the sting of an unmet expectation.
Next Steps: Beyond Managing Expectations
Now that you have the tools you need to ensure your financial advising clients are having their expectations met or exceeded by your service, why not consider upping your game in other ways?
Planswell offers all sorts of helpful services for financial advisors to grow their practice and provide excellent service to their clients. From weekly executive peer group meetings to an encyclopedic knowledge base to prospecting support, we’re a one-stop-shop for financial advisors to ensure they have what they need to help more people meet their financial goals.
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