Empathizing with Your Prospects to Secure the Next Meeting

A cookie-cutter approach to prospective client meetings won’t cut it. Advisors, learn to pay attention to your prospect’s mindset with these meeting tips.

What are today’s investors looking for from their financial advisors? Guidance, certainly, but the nature of that guidance has changed over the years; more importantly, it’s very different depending on the investor’s lifecycle stage.

Whether your prospects are in the accumulation phase, the preservation phase, or the distribution phase, they all seek the practical guidance of experts who can help them make decisions that will lead them to their investment goals. By better understanding who your prospects are and what needs, goals, fears, and perspectives they have, you can engage more productively and build mutually beneficial relationships with them.

propect meeting interaction

Accumulation Phase

People in this phase are often relatively new to the workforce and beginning to consider positioning themselves appropriately for the future. A 2018 Forbes article reveals that millennials are saving at an impressive rate:

  • 71% are saving for retirement – with 39% being defined as “super savers” who save more than 10% of their salaries.
  • They’re are on track to replace 78% of their estimated retirement expenses, according to a 2018 Fidelity survey.
  • About one in six have already saved $100,000 or more, according to Bank of America’s Better Money Habits survey.

But while a growing number of people in this phase are saving, they seem reluctant to invest:

  • 66% of people aged 18 to 29 (and 65% of those 30 to 39) say investing in the stock market is scary or intimidating, compared with 58% of those aged 40 to 54 and 57% of those 55 and older, according to an Ally Financial survey.
  • Millennials held 25% of their investments in cash, compared to 19% of investors overall, according to a Charles Schwab & Co. study of client data.
  • 20% of millennials say their retirement money is invested mostly in bonds, money market funds, cash or other stable investments, compared with 15% each for older generations, according to Transamerica.

This contrast isn’t entirely unexpected. Those in the accumulation stage understand the need to save but, having witnessed the Great Recession of 2008-2009, are confused where to start.

Framing the conversation

A Deloitte study found that while 72% of millennials describe themselves as self-directed with control over their wealth, they don’t have the level of financial knowledge older generations do – yet they know when they need help and will reach out to get it. In fact, 84% seek financial advice to help them make financial decisions and reach their goals.

  • Knowing there’s a knowledge gap, begin conversations not by talking about investments, but by covering the basics: Does the prospect understand the value of being enrolled in his or her employer’s 401(k) and setting up an IRA? Has he or she established a budget, considered an emergency fund or taken steps to reduce debt? Discussing some of this “low hanging fruit” gives you the opportunity to demonstrate your financial coaching value and provide the most appropriate solutions.
  • Because Millennials have likely not experienced meaningful returns from standard checking or savings accounts, they may underestimate the potential of moving assets to online savings accounts, which are typically more responsive to rising interest rates than traditional bank checking/savings accounts. The value of these accounts have the potential to rise with interest rates, unlike checking/savings accounts that don't automatically increase and, as a result, lose money to inflation.
  • In general, millennials are looking for experiences and connections – in their home lives, work lives, social media...everything. When meeting with a prospect, ditch the canned Powerpoint presentation. Instead, make it a two-sided conversation in which you ask questions and listen closely to their answers – then use those answers to formulate the most appropriate guidance.
  • Remember these are “digital natives” and early adopters of technology who grew up with, rely on and expect technology to simplify their lives. Promote interactive online capabilities that allow them to manage their investments.

Preservation Phase

During the preservation phase – the period during the middle of investors’ lives – people are focused on both growing and protecting their investments. Their kids, if they have any, may be in college, retirement is a ways away (but in sight), and most large purchases (second home, college for kids, etc.) have been made.

  • Their comfortable financial situations may lead such clients to take a hands-off approach to their finances, or they may consider taking money out of their retirement savings to make additional purchases.
  • They were likely impacted financially by the recession and, while the economy today is healthy, they fear the loss they’d experience should markets turn down again.
  • Having gone through the high interest rates of the 1980s and the downturn that began in 2008, this age group fears inflation, loss, and outliving their money (6 in 10 fear outliving their money more than they fear death itself). Their knee-jerk reaction to even slight upticks in interest rates could cause them to pull their investments.

Framing the conversation

  • According to Insured Retirement Institute, 42% of Baby Boomers have no retirement savings and among those who have some retirement savings, 38% have saved less than $100,000. Thus, approximately half of Baby Boomer retirees are, or will be, living off of their Social Security benefits. It’s critical advisors help educate these prospects about the importance of increasing contributions to their portfolios to improve retirement funding for the remainder of their lives.
  • One reason Baby Boomers lack retirement funds could be attributed to the recession of 2008-2009. This scared many right out of the markets – some of whom missed the subsequent rebound. That fear remains and could present a roadblock to advisors.
  • Technology that’s simple to use and straightforward will likely be welcomed by this group, as it gives them some amount of control over their finances. Balance its usefulness with person-to-person exchanges in which you as an advisor provide insights and guidance.

Distribution Phase

Investors nearing retirement generally become more averse to risk, and those actually in retirement are most concerned with depleting their nest eggs too soon. Expected life spans are increasing (today, U.S. 65-year-old men can expect to live to age 83 and women to almost age 86, according to the National Center for Health Statistics, whereas in 1970, those numbers were 78 years old and 82 years old respectively), and if they’ve not planned appropriately, retirees’ investments might not cover their living and care expenses – many in this group may need to rely on investment withdrawals for 30 years or more.

Framing the conversation

  • As clients enter this phase, managing risk is as important as ever. While some clients may be focused on preservation and generating income, others may have different needs and objectives.
  • This phase of the investor lifecycle can be filled with joy and excitement for the adventure ahead, but at the same time can be a difficult transition. Many of your clients have spent the past several decades saving for this moment. You’ve both planned for this moment, and you can encourage spending with safe withdrawal rates.
  • Technology that allows this group to monitor their investments must be easy to use, and should be complemented and supported by face-to-face discussions. These interactions allow the client to get answers to their questions, help build trust, and foster a sense of security.

Listen to Learn

No matter which type of investor you’re talking with, your first goal should be to listen and learn.

  • Listen to their fears and understand their goals – and only then talk about solutions. You’ll enhance your credibility when you show that you’re most interested in providing guidance that’s in their best interests.
  • If they do have fears, validate those fears – don’t dismiss them. Often, the best way to mitigate fears is with information. Provide resources and insights that help explain issues and pave a practical way forward.
  • Reach out on a regular basis (the cadence of which will depend on the client). In both good times and not-so-good, be there to offer guidance. The value of interaction cannot be overstated.