Advisor-Client Communication Tips

Good communication in the advisory business is essential for client success as well as the health of your business. When communication between the advisor and the client breaks down, misunderstandings can multiply. Such misunderstandings can strain relationships, decrease client satisfaction and increase the possibility of a claim.

To minimize these risks, it’s crucial to help foster good communication between you and your clients. Here are eight advisor-client communication tips to help improve communication at your firm.

1. Practice Active Listening

Active listening is a strategy for listening and responding that can improve mutual understanding. It can be a useful skill in the advisory business, since advisors will better understand their clients and the clients will feel heard. Advisors can provide cues to show they’re actively listening, such as nodding while listening, verbally acknowledging client statements, rephrasing client questions during a response and asking the client for confirmation they understand answers and advice.

2. Ask Open-Ended Questions

Clients also need to listen carefully and understand what is being communicated to them. Advisors can help aid understanding by asking clear, easy to understand questions that cannot be answered with a simple “yes” or “no.” These open-ended questions help better engage clients, lessen the chance for a misunderstanding or confusion and ensure advisors fully understand their concerns.

3. Avoid Interrupting

Personality differences can play a big role in an advisor’s communication with clients. A wide range of personalities is possible, with no two clients alike. When asked a question, some may be more reserved, while others will have a lot to say. Make sure to let talkative clients answer fully without interrupting. Avoid talking over or cutting off a client, which could lead to you missing out on important information.

4. Make Time for Questions

Important questions can come up when you least expect them. A client could interrupt you while you are reviewing their portfolio. They could also call in or email after hours. It’s all too easy to put off these discussions for later and then forget about them. Instead, make time for questions. Get in the habit of acknowledging questions when they are received and create a process for providing complete answers as soon as time allows.

5. Understand Their Perspective

From the advisor’s perspective, clients often arrive with questions where the answer seems obvious. But from the client’s perspective, such an answer may be much less clear. With more limited knowledge and experience, clients may find the complexity and seriousness of many financial matters overwhelming. Advisors can help by being attentive to these concerns.

6. Maintain Your Professionalism

Advisors often work very closely with their clients on important matters over a number of years. In some cases, strong bonds are established. While some clients may prefer less formality, most still have the expectation for their advisor to behave in a professional manner. Remaining professional can be particularly important when it comes to client communication, where the exchange of precise information is required to make strategic decisions.

7. Be Truthful in Your Communications

Honesty is important in all business communications, particularly for advisors, where client communications and recommendations are required to be truthfully documented and archived under SEC rules. At times, clients will ask difficult questions and advisors will sometimes need to deliver bad news. Practice honesty with your clients. Communicate frankly when information is negative and where unknowns exist. Most will appreciate the candor.

8. Set Expectations and Follow Through

Communication that is inconsistent can worsen the professional relationship between a client and an advisor. Good communication involves setting clear expectations for how and when you will communicate with your clients and then following through to meet those expectations on a consistent basis.

Protect Yourself With Lockton Affinity Advisor

Financial professionals in the advisory landscape face an increasingly litigious environment. These days, it’s not hard for a small misunderstanding to snowball into a costly E&O claim. Advisors practicing good communication can greatly lower their risk. However, some risk always remains. Claims can and do happen even when you’ve done everything right.

In these situations, it’s imperative to have the right E&O coverage in place. With E&O Liability Insurance from Lockton Affinity Advisor, you can help protect yourself and your career from claims brought by disgruntled clients.

Our tailored E&O coverage protects against risks associated with a broad range of professional services. Plus, it includes fiduciary coverage automatically. This coverage meets ERISA standards, including services as an ERISA 3(21) and 3(38) advisor, ensuring any fiduciary duties you perform are covered.

Help protect yourself and your career today with an Errors and Omissions Liability policy from Lockton Affinity Advisor.