Female advisor meeting with male client at hotel lobby

In my many years as a litigation lawyer, I have seen so many distressed advisors spend countless hours fighting in court over client losses. Sometimes, the complaints were due to the advisor misunderstanding the client’s risk profile and sometimes it was because the client was misleading the advisor. But whatever the surface cause, the root cause is the same: the failure of both parties to properly understand and communicate.

Unpacking this widespread problem and learning solutions for better communication with clients is key to success in the financial services sector. But communication is a two-way street, so both advisors and clients need a guide to show them that they have everything to gain by understanding the importance of clear communication and transparency.

Both clients and advisors need the tools and resources to hold up their end in closing this dangerous communication gap. Although the responsibility is on both sides, client and advisor, it is you, the advisor who is responsible to steer the relationship, so clients appreciate and understand the risk of the communication gap and how they can help close it.

Advisors and clients need to think of themselves working together, sitting on the same side of the table, toward a common goal – to help the clients meet their financial goals. To bridge this communication gap will help advisors and clients understand each other better and to create a future with fewer unhappy clients, fewer complaints and even fewer lawsuits.

There are many real-world examples from my own experience as a litigator that portray common communication gaps between clients and advisors and represent the three main causes for the communication gap between the client and advisor. Two issues arise from the advisor’s side of the relationship: first, advisors’ failure to manage their clients’ expectations; and second, advisors not digging behind client assertions, thereby taking client statements at face value.

The third root cause arises from the clients as they can be evasive, or even secretive, about their personal financial situation not understanding the importance of being transparent with their advisors. There are clients who seem very knowledgeable, who are not. There are clients who appear to be high net worth, who are not.  There are clients who state they have high tolerance for risk, who do not. Clients need to understand the risk they face of not fulfilling their financial goals when they fail to be transparent with their advisors.

My goal, even though I have been accused of hurting my litigation practice, is that both advisors and clients gain a fresh outlook, new strategies, and a renewed commitment to fuller and clearer communication. How? That advisors, their superiors and their companies become equipped with the tools they need and use to reduce their risk. And that clients share a new perspective understanding the need for transparency with their advisors.

Communication is a two-way street and there needs to be an effort on both sides of the relationship to narrow the gap and avoid unnecessary and expensive litigation and regulatory matters. This will improve the industry, as a whole.

This is an excerpt from Communication Risk: How to Bridge the Client-Advisor gap to Protect and Grow Your Business by Ellen Bessner. Copyright 2018 Ellen Bessner, published by Babin Bessner Spry LLP.