Understanding how a client thinks is the key to getting your message across, says Robert Skinner.

Have you ever had a client seemingly sabotage their own financial plan, be slow to take up your brilliant advice or just not as excited as you are about the strategies you have recommended? You might even feel as though your clients are just going through the motions at your reviews. Worse still, you may not know that your clients are just going through the motions.

You may have even met with a prospective client, outlined a great strategy, and they decided not to proceed?

Don’t worry, you are not alone. I had to battle with one client for 18 months to get them to commit to a transition to retirement pension. The numbers showed that they would save $8000 a year in tax – yet I had to drag them kicking and screaming. On the flipside you can recommend a strategy to a client, only to find the client changing their mind in two months’ time, wanting to do something differently – or they have found a new opportunity.

An easy trap to fall into is assuming the client just does not get it; or it is the client’s fault that they are shooting themselves in the foot by not embracing the plan with the same excitement or vigour that you are. Trying to get them across the line by explaining the logic does little to help.

When you notice resistance, it is important to remember that your clients have individual behavioural preferences, which may or may not be the same as yours.

If your financial planner recommended a 20-year $1000-a-month savings plan – which used up 90 per cent of your surplus – would this do it for you? Or are you more opportunistic – did you jump on tech stocks in 1999, or do you like to have fingers in a few pies to keep things interesting?

Some clients love the idea of saving regular amounts over a long time period – a brick at a time – yet others like to chase tactical opportunities and would find a 20-year savings plan dull and boring.

Having a client adopting a strategy or financial plan that does not suit their natural preferences leaves you and the client vulnerable to sustainability risk.

Sustainability risk relates to the reduced sustainability that occurs when you attempt to follow a strategy or plan that simply doesn’t suit your preferences. So if you find a regular savings plan boring, you probably won’t stick with it for too long. If you find a large amount of investment debt risky and scary, then it won’t take long for you to abandon the strategy.

The added complication is that generally you won’t know your client’s preferences – at least not with valuable accuracy. Herein lies a massive opportunity for the financial planning industry. By getting to know your client’s behavioural preferences, and helping your client understand these too, you can talk with the client about which parts of your plan will appeal to them and which parts won’t.

Knowing your client’s preferences may not change your advice to the client; however, more importantly, it may change how you communicate with your client.

Keep this in mind for the next time a client gets six months into an ongoing savings plan and wants to cancel; or a client borrows money to make a one-off investment and six months in they are feeling uncomfortable. The advice could well be sound, or even great, yet the client still wants to sabotage the plan. When this happens, it often indicates that the type of strategy the client is attempting to follow may not suit their preferences. The client does not feel aligned or engaged with the strategy.

Interestingly, preference testing has been available for more than 80 years, and to date it is mostly used in workplace situations. This kind of knowledge and understanding of clients would assist the planner take their relationship with their client to a totally new level. Imagine a client saying, “My planner knows me better than I know myself”.

This level of “knowing your client” has not been embraced by our industry – yet.

Robert Skinner is a co-founder of innergi – www.innergi.com.au