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The Assumption That Costs You Clients

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The Assumption That Costs You Clients

April 5, 2016

by Dan Solin

Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

As advisors, we’ve been trained to understand how incorrect assumptions can devastate one’s chances of achieving a successful retirement. That’s true in financial planning – and it’s even more important in your interactions with clients. Indeed, there’s one assumption that can instantly cost you a client relationship.

Here are two stories that illustrate the danger of making incorrect assumptions.

The peril of making assumptions

Susan Lacke, an endurance athlete, related this experience: One day, while training in the swimming pool at her gym, a guy came up to her and started yelling, “Hey! I’ve been trying to talk to you. You don’t have to be so rude.”

What he didn’t know is that Lacke is deaf. She doesn’t wear her hearing aid while swimming.

A financial advisor told me this similar story about an assumption that she made. She was fielding a telephone inquiry from a prospect. The prospect expressed concern about risk. She launched into a lengthy explanation, patiently describing the role that standard deviation plays in measuring the dispersion of a set of data from its mean.

The prospect listened and then said, “I have a Ph.D. in statistics and have published papers on standard deviation.” She didn’t convert this prospect into a client.

The solution to problems caused by making assumptions is self-evident: Stop making them.

The assumption few can resist

In my experience, there’s one assumption advisors consistently make. They assume prospects want an explanation rather than an empathetic response to their concerns.

Here’s an example of how this issue typically arises. A widow (or some other investor) tells you that market uncertainty is causing her extreme anxiety. She’s not a sophisticated investor. She wants to wait until “things settle down” before investing. Until then, she prefers to keep her money in a bank account that pays minimal interest.

How do you respond?

If you’re like most advisors, you will explain why keeping savings in a bank account is actually a risky strategy in this low-interest-rate environment because it assures loss of purchasing power. You will present data demonstrating the long-term results of a conservative portfolio, showing how those returns beat the rate of inflation. You will discuss how risk is actually a “good thing” because it’s the reason why investors in stocks earn a premium over the long term.

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Assumption Perils

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