Originally published on Advisor Perspectives, December 03, 2018
Clients frequently face crises: loss of a job, divorce or death of a loved one. They may even perceive less negative events as a crisis, like inheriting a large amount of money or relocating to a distant city.
How you handle these situations determines whether it becomes an opportunity to enhance your relationship or a risk of losing them as a client.
Recognize opportunity and appreciate the risk
In her book, Advice That Sticks, How to Give Financial Advice That People Will Follow, Moira Somers notes that people are much more inclined to seek out financial advice when going through a personal crisis. She writes that “between 70% and 80% of new clients in an advisor’s practice…are people who are anticipating or have just gone through a major life event.”
Some of those clients already had an advisor and weren’t happy with their advice during this challenging time.
When a client comes to you in crisis, recognize the opportunity, but appreciate the risk.
Difference in behavior
Somers believes there’s a big difference between pre-crisis and in-crisis clients.
A client in crisis is more emotional, easily distracted, given to more extremes of behavior, socially withdrawn and has a decreased tolerance for stress and pain.
Significantly, clients in crisis will have more difficulty making decisions and experience increased mental rigidity. These traits make giving them advice challenging and potentially frustrating.
Once you recognize the impaired state of your client in crisis, avoid being the “know-it-all” advisor who rattles off a series of quick fixes. Doing so will drive the client to seek another advisor.
Somers recommends a series of “adherence boosters” for coping with the depleted mental capacity of clients in crisis. I’m going to combine her suggestions with my own, based on my research.
Show an understanding of what they are going through. Recognize their depleted capacity to make decisions or undertake more tasks. Be patient, kind and thoughtful.
Listen intently. Ask a lot of questions that start with the phrase, “Would it be helpful if…?”
Somers notes that clients in crisis may need to feel empowered to spend money to alleviate stress. Ask questions like: Would you find it helpful to hire a caregiver (or take a vacation or pay for household help)? That kind of gentle suggestion indicates your view that the client can afford the suggested expense.
For clients feeling overwhelmed, ask if you could help prioritize their tasks. Suggest resources they might use, like a bookkeeper to pay bills, or even a therapist, who specializes in crisis counseling.
Here’s the major takeaway: Your approach to clients in crisis should be markedly different than the way you deal with clients who aren’t.