I am new to financial advising as a profession. It is a second career for me after spending almost 20 years in the legal field as a matrimonial litigator and mediator.
While there are many new skills for me to learn (thankfully, I am surrounded by an experienced and supportive team), I have gained invaluable insights and experience from my past work that can be helpful to every adviser as they seek to best serve their clients. The following are some key mediation techniques that translate perfectly to use in initial client meetings and regular investment reviews.
Active Listening
Active listening is not merely sitting at a conference table with a client and paying attention. There are various techniques that help to extract maximum information from a client, thereby better enabling an adviser to address all of a client’s needs and create a truly comprehensive plan.
Conducive Environment
It seems obvious, but it is amazingly often overlooked. The first step to active listening is creating a conducive environment where it can happen. Ideally, a meeting should be held in a quiet, private room where you are face-to-face with your client. Interruptions should not be permitted and cellphones should be muted.
Open-Ended Questions
We all fall into communication pitfalls that hinder our ability to truly listen to our clients, such as making assumptions or following a set agenda. In those situations, we are not extracting all of the pertinent information. The most effective way to derive information from your client is to ask open-ended questions. The more, the better.
When offering a market perspective or sitting down with a client for a portfolio review, word choice can make all the difference.
Some basic queries might be, “How is your family? What has happened with your work since we last met?” As an attorney, you are trained to never ask a question for which you did not already have the answer. However, as an adviser, the opposite holds true – the more questions that you ask that you do not yet know the answer, the more valuable that discussion will be.
Reframing
Finally, the technique of reframing is a most valuable tool. Reframing is the process of summarizing and restating what you believe a client has expressed to you. Typical reframing statements might be: “It sounds like you need … ” or “Am I correct to say that … ” The act of frequently reframing shows that you are listening, that you care, and your client will know that you understand them.
Focus On Needs, Not Positions
I found that in divorce and even in pre-nuptial negotiations, when confronted with the unknown or the uncomfortable, people tend to hunker down, dig their heels in and cling to a position. Our society tends to be more zero-sum, as opposed to win-win. For instance, a woman going through a divorce with young children at home might adopt the position that she is adamantly against selling the marital residence. I have heard this position countless times over the years. Yet, inevitably, after exploring a client’s concerns, it always comes to light that it is not the position that matters the most, but rather the underlying needs — the need to feel financially secure; the need to be reassured about the continuity of the children’s schooling and lives.
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Key steps that can help prevent family conflicts from getting out of hand.
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Planners can build a long-term relationship, but only if they know what to focus on.
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The same holds true for the adviser’s clients — be it spouses, multi-generations or individuals. Focusing on your client’s positions has a way of limiting options. Instead, take the time to uncover the client’s underlying needs. For example, a retired client who is stressed by trying to sell property in a soft real estate market is also indicating to you that he or she has a need for cash flow. Depending on the situation, this need could be addressed by rebalancing the client’s portfolio toward income-producing assets. Focusing on needs and interests opens the possibility for more creative options for handling a client’s overall finances.
At a time when regulations are changing the industry and how advisers can charge – it is essential for an adviser to utilize as many positive techniques as possible to add value. The tried and true mediation techniques of active listening and focusing on needs will help to better serve clients and deepen the relationship.
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