Most advisers haven’t been trained in psychology, counselling or medicine. But in many instances, we find ourselves broaching topics that require a little bit of knowledge in these areas.
Why? Because your clients’ ability to implement your advice is strongly linked to their mental and physical health, and their life circumstances.
The client going through a divorce probably isn’t in the best headspace to launch an aggressive expansion strategy for their business. The young client who is overweight and smokes might need to hear a tough set of truths when it comes to their future insurance options.
For this reason, we are often required to look beyond our clients as a collection of credits, stock options, properties and insurance policies, and see their bigger picture. Below are three considerations beyond finances that can have an impact on the effectiveness of our advice.
The mental health of your clients not only largely determines whether they will follow through on your recommendations, but also should factor into what those recommendations are in the first place.
Go back to the example of the divorcing client. We had a client who was going through a messy divorce at the same time as attempting to set up a business. Battling feelings of grief and loss, she was ready to give up on the business when we had only just begun speaking about launching an aggressive growth strategy. Once she’d confessed to her emotional struggles, we knew our approach was no longer appropriate.
We instead focused on simply ensuring she didn’t lose any clients in the short term while she recovered emotionally. Fast forward two years, and she’s now firing on all cylinders with our original growth strategy. But we wouldn’t have been able to implement this today if we’d attempted it two years ago and potentially triggered a nervous breakdown!
Our clients’ physical health affects so much of our advice, and an obvious area this influences is insurance.
One client continuously shied away from exploring health insurance options, despite being the primary breadwinner for her family, requiring income protection. A bit of sensitive prying later, and we discovered that she believed her higher BMI would disqualify her for any coverage. She didn’t want to face any uncomfortable questions about her weight or go through the humiliation of rejection.
This quickly made us aware that the best option for her was to undergo a (slightly) less painful pre-assessment test, to see whether she qualified. She found that she could get income protection after all, albeit at a slight premium, which was extremely lucky, as she needed to make a claim just six months later!
The process took a great deal of sensitivity and discretion, but was absolutely vital to safeguarding our client’s wealth.
Lifestyle, events and life stage
Most advisers are aware of the impact of life stage. Younger clients are building wealth, older clients are protecting it, etc.
But there can often be much variety when it comes to lifestyle factors within each age category. One of our clients is a 65-year-old who spends his weekends canyoning and cave diving. He leaves our younger clients in his wake when it comes to risk-taking levels of activity! So, we have a set up of extreme sport insurance cover for him that will ensure he’s taken care of in the case of an accident.
This is, of course, not hugely typical for someone his age, so it definitely pays to ask a few questions about what your clients get up to on the weekend. You might find it changes your entire approach.
Katrina Haskew is managing director of Leading Advice (www.leadingadvice.com.au), a family-run financial advisory firm that helps its clients and their families build and protect their wealth, now and into the future.