Financial Adviser Engagement and Building Client Trust

Question 1
Having a deep understanding of a client helps financial advisors design investment strategies that coincide with the wishes or values of their clients. Clients value different things, and some want their investments to align with their values. A client could, for example, desire legacy or philanthropy. As a financial advisor, one should be able to guide such a client in making sure their investment portfolio reflects their desire. A deep understanding of a client’s financial literacy is crucial in helping shape the simplicity or complexity of the discussion. A client with advanced financial literacy is best placed to have a more complex financial discussion. However, a client with limited knowledge could end up feeling intimidated and eventually refuse help.
Understanding a client’s situation, needs, and goals can also help the financial advisor develop a priority list for the client. Even though clients believe they know what they want, their timing can be wrong. For example, a client may want to acquire a fixed asset (house), but their needs require them to be highly liquid. It is the financial advisor’s job to help the client realize that their best option is not to acquire the fixed asset but to get into an investment or investments they can easily liquidate. Tolerance for risk is also crucial information that a financial advisor needs to establish before building a client’s portfolio. However, risk tolerance needs to be considered alongside other issues concerning risks. For example, a client’s risk capacity, risk a client can afford to take at their current state, can be low. However, their tolerance for risk could be high. Having such an understanding makes it easier for the financial advisor to offer their clients investment options that are more meaningful and affordable at their capacity.
An example of Tristan trying to build this deep understanding of his clients happens when he asks Sally and Peter their expectations for the meeting ((Tristan Scifo: 18:48). Having already been made comfortable by Tristan through the introduction, Sally and Peter speak freely and even go ahead to share personal details of their current situation. For Jeremy, one instance he tries to develop a deeper understanding of the client happens when he asks his client what her goal of retirement is (Jeremy Chiel: 13:38). Here he is simply trying to have the client share their vision or objective or drive to retire. This makes it easier for him to understand how to help his client.
Tristan does not seek to build this understanding when he cuts Sally off as she tries to explain how difficult it has been to adjust from renting to a mortgage (Tristan Scifo: ). Here, he takes over the conversation instead of allowing the clients to share their experiences in totality. On the other hand, Jeremy does this when he tells the client what she needs before he gives her a chance to say what she needs. He tells Fiona that most clients need $50,000 for their retirement ...