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I felt it was important to have a discussion about risk because over and over again in my interviews with my advisor clients, client misunderstanding of risk keeps coming up as the #1 reason that advisors lose clients. Or, that a problem with the client’s understanding of risk creates so much tension that it puts the relationship in turmoil.
I have seen even the most experienced advisors, those with 30 years in the business, struggle with getting this wrong and losing clients. It’s a serious problem. Of all the things that cost your business money, losing a client is one of the most costly. Plus there are reputational, morale, and legal issues that may come along with it.
The advisor and client seem to be diametrically opposed in some cases.
- One on side, you have the advisor whose probably number one liability is getting sued over a portfolio performance issue.
- On the other side, you have the client who wants to maximize the value of your services by achieving better performance than what they could get on their own. Some clients want this more than others, but in the back of their minds, they all expect you to do better than they could do. (Real talk). You can say all you want about the value of planning and tax advice but if you’re managing their investments, this is what they expect.
How do you make the client see risk from a rational perspective without boring them or talking in technical mumbo jumbo that goes over their head? How do you really grasp the level of risk they are really comfortable taking? How do you do all of this without misleading them or creating a legal liability?
It takes skill and knowledge and that’s what we’re going to discuss today.
Take control back by getting a handle on how you discuss risk with clients. I’m honored to have one of the industry’s best to talk about that here with us today, Aaron Klein of Riskalyze. Enjoy the show!