How financial advisors can get "Good to GREAT" with strategic thinking

The story of how the widow who lost $1M within one year after she met with a financial advisor who helped her construct a portfolio to safeguard her money throws up some questions on their ability to help people. It is not about financial advisors giving bad advise - I am sure they have the best interest of their clients in mind - it is really the reluctance of clients to open up their true needs. So financial advisors usually work with half truths and bad information. If there is one thing I know for a fact is that the route to a bad decision is fraught with poor or missing information. So in this article, I use our Strategic Decision Making model to help financial advisors get from Good to GREAT!

Start with the decision question

The decision question starts the discussion. A question like: “How should I use my windfall gains?” should not jump straight into options. Instead, it should lead in to the next step: the strategic intent.

Identify strategic intent

While we normally use the 5 Why’s to identify intent, in this case, it would not be useful because asking why is it important that you should use your windfall gains is a ridiculous question. Instead, I will ask another equally powerful question, “What makes this decision difficult for you?” This opens up a discussion about what is important for the client, and this will then allow us to identify the true intent using the 5 Why’s.

Thinking in time

This is an important segment. We want to know the person’s disposition to stay disciplined to the task of long-term investment. Questions like, “Tell me about a time when you planned something over a long period of time to achieve something of significance to you.” Or, “When you were at school, how much of your pocket money did you save each week?” Such questions will uncover the patterns that will impact future action. It will also indicate whether the client can be relied upon to make disciplined decisions regarding his/her financial future.

Identify constraints & assumptions

As a constraint is a necessary condition for decision success, we need to identify the client’s constraints including the lifestyle he/she wants and the costs involved with that, the commitments that he/she needs to keep, the concerns that he/she needs to address. There are costs to achieve these which will impact on how much the client can finally invest in the future.

Reframing for more options

From the strategic intent, the client can already identify the options to take. However, there may well be a need to reframe the situation for more and better options. Reframing includes taking their assumptions and stretching them like, “What happens if you get a job overseas that you cannot refuse? How will that impact your decision?” Or, “What if your parents move into your home? How would that change things?” These are not meant to poke holes at the decision, only to get the client to see things differently, which will then give them a better appreciation for the challenges of keeping up with a commitment of this nature, and the resolve to stick to it.

From good to great

Like consultants, all financial advisors are not cut from the same cloth. The ability to suss out important information like these without offending the customer is a skill that is not taught but ought to be. Technical skills are indeed important, but the ability to help the client think more strategically, not just at the point of making the decision but throughout the course of the investment, is what will make a good financial advisor great.


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Written by Ian Dyason

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