How to Talk to Your Clients About Volatility

The most successful financial advisors are excellent communicators and connectors. Financial planning is emotional and needs a delicate approach. Each person has different ways they communicate. When we understand how people are unique based upon their style, we can better serve them as a fiduciary. According to the DISC communication theory there are 4 main styles, and most clients will be a blend of two:

D- Dominance
I- Influence
S- Steadiness
C- Compliance

When we understand how the client communicates, we will be able to guide them better.

D- Styles are Decisive. They will not have a problem making a decision. It’s our job to make sure they take their time to fully understand the implications of their investments. But it’s important to provide them multiple options and alternatives because the D personality wants to make their own decisions. They love winning, so when their portfolio is down it hurts them deeply. They need to be reassured that this was the right portfolio and made the right decisions at the time. 

When volatility hits, if a D personality feels like you took advantage of them, you are going to lose them as a client. For D personalities we need to help them recognize they need to be patient for their long-term goals to be met. For them it’s important to emphasize the opportunities that the market disruption brought. And we can turn this setback into a win by following their plan, which can include changes due to the new opportunities provided by the volatility.

Influence clients are the most likely client to be impulsive, and consequently talk you into being in the wrong risk basket. As a fiduciary we need to slow them down and explain the risks clearly prior to getting into any investment. So obviously this takes us back to having the right conversation before the volatility happens. Most likely they are investing because they want to have a boat, a vacation home, retire on Miami Beach. They are probably also the client who called you up and said they wanted to buy bitcoin at 60,000 but are not interested now that its fallen. It's our job to guide them away from the trends. To do this with an I-client, we don’t need to focus on facts and figures, instead focus on testimonials and success stories. We need to guide them to recognize their emotions might be leading their decisions, and we need to follow up on them to see through all the details. 

When volatility hits, they are afraid of being left out, so they might think that they are the only person who lost money. Reassure them that everyone else is in this together and once we recover everyone will be on board and having the same good time.

Steady people are very concerned about change. They will have patience and are most likely working toward a family goal rather than personal. We need to present their financial plan in writing and give them space and time to decide. It is helpful to ask questions to draw out their personal goals and objections. They are likely to have a calm approach and the challenge for us as advisors will be we need to be able to talk them into making a change which can be difficult for them. The best action is to emphasize why the change is good for the family and how everyone is going to benefit. They can be indecisive, and opportunities don’t wait so we may have to give them a gentle nudge.

When volatility hits, if it impacts them personally, they can have hurt feelings. Empathy is your friend, and we need to be sincere. Give them time to speak, and ask them questions about how this is affecting them. They will be slow to adjust and might need a deadline if we need to move them into a new investment.

C- Critical styles are cautious clients, and they will be most interested in the numbers and stats. You can be more direct and straightforward with a C style. They love the numbers and stats and want to be able to glean some hidden knowledge from them that gives them an edge on the competition. When discussing investments we will build credibility with a C by critically examining both sides of the issue. And the C personality will need guidance to make decisions when they feel like waiting for more information.

When volatility hits, we need to reassure C clients they did nothing wrong and made the correct decision about their investments at the time they made them. They are skeptical of change but will act when the facts show it is time to do so. Finally, we need to guide them to understand its ok, that life isn’t perfect. 

Communication is key to financial planning. Understanding who you are talking to is worth examining. When it comes to something as emotional as a clients life savings, hard earned money, retirement, kids college fund, down payment for a starter home, they need to be understood, and understood at an emotional level.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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