Using technology to change clients who don't want to know anything

By Sheryl Rowling, CEO, Total Rebalance Expert on Tuesday, December 2nd, 2014

There are three types of clients: Those who want to know every detail (aka engineers!); those who want to know the basics and those who don't want to know anything.

The first one usually eases up after a certain amount of information overload, the second is the ideal client and the third one is scary. How can you deal with a client that says "I don't want to know anything."?

These "Type 3" clients make it difficult for an adviser to know how to manage their portfolios and can turn into a litigation risk. Thus, the adviser must face the challenge of changing the Type 3 client to a Type 2 client. This is where technology can come in handy.

Most clients who want to offload all responsibility do so because they don't understand finances and are even afraid of the topic. It is the adviser's job to educate in a way that the client can understand, without being or appearing to be condescending.

I've found that three basic steps can be used to help these clients understand their financial situation and investment strategy options as well as give them confidence to make their own decisions.

1. Give them a picture of their current financial situation. By this, I mean literally give them a picture. Use financial planning software, like MoneyGuide Pro, or even the graphic tools in Excel, to create a chart, graph or table — in color — illustrating their assets, liabilities and cash flow. Being aware of the starting point is essential to moving forward.

2. Explain how investment strategy works and how it can impact their future. I find that using presentation software (the ever popular PowerPoint) is most useful for this. Begin with how building a portfolio through regular saving and investment return can provide for long-term needs and overcome inflation. From there, demonstrate the basics of risk and return, diversification and the value of a long range perspective.

3. Give them the tools to make decisions. I like to use Finametrica to determine each client's risk tolerance profile. By taking this short quiz online, clients can instantly read about where they fit into the bell curve of risk tolerance. From there, I provide two or three pie charts of potential investment allocations, for example 60/40 and 40/60. These charts, with expected returns and potential ranges of returns based on standard deviation, can be calculated using allocation software available from Morningstar, Advisory World and other sources.

Going through this process — even with the most financially challenged clients — can help them understand their choices and feel confident about their decisions. And, it enables the adviser to create Investment Policy Statements that will truly be a reflection of the clients' wishes and needs.

This article was originally published in InvestmentNews

Sheryl Rowling, CPA/PFS is chief executive of Total Rebalance Expert and principal at Rowling & Associates. She is also a columnist for both InvestmentNews and Advisors4Advisors. 

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