Dear wealth advisors: Here’s why your advice is hard to take

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The pictures told it all: The grapes were coated in ice, the leaves were curled and shrivelled, and the faces of the vineyard owners were grim beyond all telling. An unusual cold spell in France had brought an abrupt end to a grape harvest that had held so much potential just days earlier.

I own no vineyards, but I’ve often witnessed failed harvests of a different sort: namely, failed harvests of good financial advice, the kind offered routinely by financial professionals. You know, the succession planning agreements that are never finalized, the prudent investment recommendations repeatedly rejected for something sexier, the crucial conversations regarding estate planning that get kicked down the road until it’s too late to do the right thing.

In all likelihood, this implementation failure has nothing to do with the content or correctness of the advice. After all, most financial professionals know what they’re talking about. They’ve been well taught, meticulously examined, fully registered and thoroughly regulated on the core competencies and ethics of their profession. But their technical expertise doesn’t equip them to effectively deliver that advice to affluent families with complicated lives and competing demands on their time and energy.

For advisors in family offices, the trouble lies with the personal side of advising, not the technical side.

Based on my work as a professor and consultant, I estimate that only 20 per cent of financial advice stands a chance of getting fully implemented within the hoped-for timeframe. The rest of it will wither on the vine.

Most team members have to “wing it” when dealing with issues that surface while working with their clients’ families. They’ve not been taught how to handle addicted or mentally ill family members, for instance, or marital conflicts over what constitutes enabling versus supporting, or – shall we say – interesting family dynamics. And since it is largely the personal side of money that drives their clients’ decision-making and sustains their motivation, it is not surprising that much good advice gets ignored.

Based on my work as a professor and consultant, I estimate that only 20 per cent of financial advice stands a chance of getting fully implemented within the hoped-for timeframe. The rest of it will wither on the vine.

Fortunately, it is possible to improve on that dismal statistic. Skills at the personal side of advising are every bit as teachable – and learnable – as those on the technical side. As with most things in life, it all starts with a willingness to go there.

If you need help with developing that willingness, consider this: Responsibility for implementing recommendations is now embedded into the professional standards for the financial planning profession around the world. It is now considered unprofessional to just deliver technically proficient advice. You also have to be adept at getting clear on how it will be implemented.

The following graphic shows the domains involved in financial follow-through. I have given them the acronym FACTS to serve as a memory aid. If you want to boost follow-through, these are the domains you need to consider:

Financial history and circumstances – Viewpoints on family legacy, personal mistakes and successes, values and intellectual comfort with financial decision-making vary tremendously from one family member to the next. As a result, a one-size-fits-all approach to financial advising promises only a mediocre harvest at best. The psychological complexity of money means it is ripe for non-adherence.

Advice characteristics – Some advice is just harder to take than others. The complexity of the issue, the degree of change or sacrifice required in response, and the (un)pleasantness of the topic at hand will all affect follow-through. While it may be impossible to change certain fundamental aspects of the advice, it is always possible to alter how it is rolled out and how much support is provided with respect to implementation.

Client characteristics – Energy levels, motivation, outlook and personality factors each play an important role in determining whether recommendations will take root or fall by the wayside. With the exception of personality factors, most of the variables in this domain are subject to considerable variability. At every point of giving recommendations, it is vital that advice-givers ascertain just how much bandwidth a client has to be acting on the advice.

Team and advisor factors – Of all the domains in the FACTS paradigm, this is the one that you have the most control over: you, and the team that supports what you do. Are your client-facing team members notable for their warmth, empathy, communication skills and willingness to meet clients where they are? Do you have processes for handling impasses and providing support for implementation? These are things that can undergo rapid improvement if the right coaching and hiring practices are in place.

Social and environmental factors – Financial advice always lands in a social context. We ignore this at our peril. Issues such as social support or isolation, family dynamics and the cultural background of our clients will play a huge role in whether our advice thrives or is stunted.

Each one of these domains exerts its own influence on follow-through, but none of them exists in isolation. Each domain interacts with the others, increasing or decreasing the likelihood of follow-through. Add a new in-law to the family, for example, and you’re faced with (1) accommodating a new person’s financial history and circumstances, and (2) new sources of social influence and support. Whatever it is that your family office and its clients are faced with – be it market declines, illness, aging, changes in team membership or rapid business successes – you will find that it is helpful to deal with the FACTS.

Here’s to an excellent harvest!

Dr. Moira Somers is a psychologist, family wealth consultant and professor based in Winnipeg, Manitoba. She is the author of Advice that Sticks: How to Give Financial Advice that People Will Follow. She is a global thought leader in the domains of financial psychology and advice implementation.

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