The tip of the iceberg is what matters

Recently I worked with an advisor who was redoing his client brochure and web site. His goal was to provide clients and prospects with an outline of what value he brings through his practice.

“I want them to know that I have a lot of experience and that I have a thorough and systematic approach to investment management”, he told me. “One of the things that I am most proud of is my eight-step investment process and I want to make sure that this is reflected in my brochure.

Since his brochure was going to be just six pages long, he intended to take a lot of valuable space to focus on what he felt was his most important value as an advisor. How many clients and prospects are really interested in an eight-step investment management process? Do all clients want to know the details about how the advisor chooses investments, or is this explanation only of value to a few? How much does an advisor has to explain to every client to build trust and gain client confidence that he or she can help?

The answer to the last question is easy: the advisor has to explain to clients as much as they want to know about the process or the advisor’s methodology. That simply means that the explanation for the advisor’s system has to be geared to the client, rather than to assume that all clients want as much detail as possible.

Many advisors want to tell the client every possible detail about their planning or investment system before they assess how to best communicate with the client to make sure that the client is actually interested.

I call this the “deep dive” and it reminds me of an iceberg. We all know that 90% of an iceberg is below the water line. Generally there are at least two levels of the iceberg below the water line that can’t be seen from the surface.

Start above the water line and then work down

Most clients only want to know the information that is “above the waterline”. Basically, the client is saying “tell me what I need to know and why I should care”.

Why then do so many advisors feel the need to flip the iceberg upside down and start with as much information as they can come up that the client probably doesn’t care about? It is almost as if the advisor feels that the more details the client receives, the smarter and more professional the advisor must be.

There will always be clients who are interested in the details and will want to know more. If the client wants you to do the deep dive, you will be able to tailor your explanations more effectively to ensure that the client is getting just what they need. Just don’t assume that everyone wants the same degree of detail.

For those advisors who provide information to clients or prospects in a brochure or newsletter, it is best to focus on general information rather than to assume that all readers have their CFA or understand the details of tax planning.

In the case of the advisor’s brochure text, my suggestion was to avoid the description of the eight-step process and focus in general terms about his overall investment philosophy. That description should be relayed in client terms and focus on what how the advisor’s system would benefit the client.

For example, “My investment philosophy for my clients is to first understand their specific needs and then tailor an investment management plan that is unique to them. I take a systematic and disciplined approach to managing their nest egg and work with them to make changes when necessary to reflect their personal situation.”

That is the above the waterline explanation for how the advisor manages money. Most clients will be satisfied with this outline because they feel confident that the advisor has a system and builds something specifically for them.

Other clients will want to go to the second layer of the iceberg and get more details about how the advisor’s money management system works. They may be interested in investment management themselves or just want further details to satisfy themselves that the advisor knows what he or she is doing.

The advisors second level explanation might be:

“I believe in the benefits of asset allocation and I make sure that I rebalance my clients portfolios based either on changes in their personal situation or to reflect changes in the market if they would like me to take more of a tactical approach. I also favor investing in smaller growth companies and focus on North American equities rather than global stocks.”

The eight-step process is found on the third level of the iceberg. If the client wants to go there, you are quite willing to explain it to them. However, it makes little sense to start by doing a deep dive before you are comfortable that the client cares.

Generally, when you use industry buzzwords or talk in “advisor-speak”, you are going below the waterline; you do so at your own peril. It is an important goal for advisors to communicate effectively with the client in a way that ensures that the client is paying attention and can internalize your information to assess “what’s in it for me?”

For that reason, keep your explanations of what you do geared to why the client should care. If you are talking about the benefits of your advice, don’t confuse what you do (the above the waterline information), with how you do it (the below the waterline detail)!

Barry LaValley is President, The LifeFirst Approach. He works with advisors and their companies to help them communicate more effectively with their marketplace. His programs can be accessed through his web site www.lifefirstapproach.com or through the Canadian Securities Institute’s CH. P Chartered Wealth program.