When Sarah A. Casey wants to prod corporate executives to sell a greater portion of their own company's stock to diversify their portfolios, she poses a key question: If you had that amount of money in cash today, would you spend it on buying that amount of shares in your company?
"If you do not ask this question often times, clients are complacent, especially when [their company's stock] ... is appreciating," says Casey, an advisor at Mason Investment Advisory Services in Reston, Va. whose firm has $2.9 billion in assets under management.
Does just the right word, phrase or even story help planners get their clients to behave in ways they might otherwise resist - even though those actions would boost their financial well-being?
The answer, say advisors and academics, appears to be yes.
A National Bureau of Economic Research study, published in February, says that "simple and small language changes" in written material that companies distribute to employees describing their 401(k) options increased saving rates by 1.9%.
What magic words might financial planners choose to induce their clients to make better choices? More importantly, when do these verbal cues work?
The study's authors write that, in emails, they inserted cues of one or two sentences that shared goals or set savings thresholds, and sent those to employees concerning their 401(k) plans. They then evaluated the effect those emails had on the recipients' savings choices.
Including the phrase "a high savings goal" in emails to employees "raises contribution rates by up to 2.2% of income," the researchers found. And when the emailed messages highlighted a higher savings threshold in the employer-match incentive, contributions rose by up to 1.5% of income, as compared with when the authors highlighted the lower threshold.
When the emails highlighted the maximum possible contribution rate, meanwhile, contribution rates rose by up to 2.9% of income among low savers, the researchers reported.
While few financial planners have gone as far as quantifying the results of using specific verbal cues, many say they have found that certain expressions consistently trigger certain responses from their clients - either pushing clients to action or stopping them from committing harmful acts.
SOLVING A MARITAL DISPUTE
A prospective client approached advisor Paul T. Greenleaf of Round Rock, Texas, with an uncommon scenario. The woman and her husband had inherited a large sum and her husband had insisted that they give away their windfall.
"My husband hates money," the distraught client told Greenleaf. Having had other clients who feared that they would appear greedy, Greenleaf suggested that the woman tell her spouse that it would not be his money. "It's for the children; he is investing it for the kids," Greenleaf says she told the woman.
Gregory Erwin Crawford, a financial planner at Sierra Nevada Wealth Management in Reno, Nev., steers away from the word "greed." He also dispenses with the word "fear."
"They have such negative connotations," says Crawford, whose firm has $110Ã¢â‚¬â°million in assets under management. Instead, Crawford talks about "volatility" and "returns." He tells clients who are concerned about risks: "You are paid over time for volatility."
Dusty Wallace, a financial planner whose Dallas-based company, Lee Financial, has $909 million in assets under management, says, "I am a very blunt person, but I have several clients who don't work well with blunt."
Wallace has trained herself to choose her language carefully with those clients. "I never say, 'You are wrong,'Ã¢â‚¬â°" Wallace says. Instead, when they start to disagree with her ideas, Wallace says, "Here's the problem. Will you help find the solution?"
She says the inquiring approach works wonders. "Then you've got their buy-in," she says.
John R. Levy, a financial planner with Paraklete Financial in Walnut Creek, Calif., cherishes one catchphrase when discussing with clients the significance of tax laws: "Jail is a four-letter word," he says with a laugh.
Levy, who only provides advice to clients and has no assets under management, concedes that most of the language he chooses to prod clients entails a bit more verbiage. "I tend to talk too much," Levy says. "Clients are self-sorting. People who like my long-winded approach stick with me."
To get clients moving in the right directions, Levy says, "I tell little stories, rather than specific words. I use anecdotal approaches. I find people hear it better that way."
What's his favorite? "The John Levy truck story, with an airplane corollary."
Here's how it goes: an 80-year-old man and his recent 18-year-old bride walk into his office and set their financial plans on the assumption that the elderly husband will die first. They leave, and a half-hour later, a truck runs over the bride.
Levy stresses to his clients that they must recognize that "there's a chance for any outcome." That story usually gets the attention of husbands, who tend to assume that their wives will outlive them. Levy tells them, "You need to plan for both alternatives."
Then Levy rolls out the airplane corollary. Consider the things that fall off of airplanes, he likes to tell his clients.
One couple, he says, sat inside their house, and a plane - 30,000 feet above them - dropped a piece of its wing. It landed in their living room, right between their couch and their television.
"A lot of things fall off airplanes, more than people think," Levy will tell clients. Case in point? Meteorites falling from the sky have hit hundreds of automobiles, he says.
And that bride? He tells his clients that she "was looking up in the sky for what was going to fall off of an airplane when she got hit by the truck."
That parable gets his clients to start getting their financial houses in order, sooner rather than later.
One-liners may get people's attention, Levy says - but they won't galvanize clients into action like a good story.
Miriam Rozen, a Financial Planning contributor writer in Dallas, is a staff reporter at Texas Lawyer.