December Reading List for Financial Advisors

Dec 6, 2022 | Blog Posts

It’s hard to believe that we’re sprinting towards the finish line of yet another year. Time keeps moving forward, and one of the most strategic decisions that advisors can make during this time is to prioritize technology infrastructure enhancements for 2023. 

Throughout 2022, the CircleBlack team has seen a trend of investors understandably needing more communication to manage expectations and respond to trends in the market. That’s why, for this month’s December Reading List, we’re focused on the theme of trust. 

Clients and advisors work best together when operating around a shared basis of mutual understanding. Along the lines of this theme, we’ve curated a few reads that bring an interesting perspective to the discussion.

  1. You Don’t Know What You Don’t Know About Your Financial Advisor
    Source: Wall Street Journal

Heading into 2023, it’s understandable that investors may be feeling a bit skeptical about their decisions, especially those who they are trusting with their finances. As an advisor, you may not have second thoughts about your level of trustworthiness.

But this recent article in the Wall Street Journal sheds insight into the concerns that some investors may be feeling. What’s the story about client disputes that you may have had? Financial journalist Jason Zweig shares his thoughts, referencing a few case studies, about the importance of trust and transparency in the profession.

  1. Learning Clients’ Biographics
    Source: Financial Advisor Magazine

Every investor is different, with varying communication expectations. One valuable step that advisors can take to improve discussion transparency is to understand where clients are coming from.

Who are they? What are their values? What details will they appreciate hearing about?

In this article, Mitch Anthony, speaker and author of books for financial service professionals, provides an astute reminder that every client has a story. He shares some key details about how advisors can have a more biographical mindset:

  • Sharing their history and where they’ve been
  • Understanding their transitions — where they are now and where they are going
  • Knowing their goals and where they would like to go

“When I speak with financial services firms and ask about their qualitative inquiries into clients’ lives, I’ve found most professionals focus on the clients’ goals,” Anthony writes. “But turning to goals first is premature and problematic. These should actually be the last thing you delve into. Before that, you need to ask clients about their history, the transitions they’ve made and the ones they anticipate. Why? Because the past matters.”

Knowing who your clients are will help you figure out exactly what you need to say.

  1. The Science of Building Trust and Commitment in Financial Planning
    Source: Financial Planning Association

A team of academics, led by Megan McCoy, Ph.D., LMFT, AFC, CFT-I, an assistant professor in the personal financial planning program at Kansas State University, explains that technical skills alone aren’t sufficient for advisors to build trust with their clients.

The team of 5 researchers conducted a replication and extension of a 2007 study that found strong empirical support for financial life planning in fostering trust and commitment in the planner–client relationship.

“Specifically, that trust and commitment are built by the following antecedents: (1) communication abilities, (2) an absence of opportunistic behavior, (3) perceived relationship benefits, (4) the costs of terminating the relationship, and (5) shared values,” explains the study.

It’s about integrity and reliability. 

  1. Behavioral Economics Expert Herman Brodie Reveals the Two Crucial Components to a Trust-Driven Client Relationship
    Source: Wealth Professional, Investments and Wealth Institute

This research provides validation to the research conducted by the Financial Planning Association, that investor clients are seeking empathy from and a shared basis of understanding with their financial advisors.

“By the time a client is sitting in front of a financial professional, they’ve probably already decided that person is competent,” explains Brodie. “What a lot of people are bad at is conveying to the client their benevolent intentions so as to cultivate warmth in the relationship.”

This warmth is especially important during turbulent or unpredictable times, especially when a client may not be in the best mood.

“It’s these reserves of trust that you draw from when clients are feeling uncertain and vulnerable, and you need to be building those reserves up all the time,” Brodie elaborates.

  1. The Seven Deadly Sins of the Wealth Management Industry
    Source: Forbes

All people, even financial advisors, are fallible to mistakes. After all, we are human, and these days, everyone is moving through the world at lightning speeds. Sometimes, it’s helpful to get a refresher on ways that we can hold ourselves to higher standards of behavior. 

Here are few behaviors to watch out for, according to John Jennings, chief strategist and president at the St. Louis Trust Company and adjunct professor at Washington University’s Olin School of Business. Here are the behaviors that Jennings recommends steering clear of adopting:

  • Incentives to provide the least amount of service possible
  • Constant pursuit of finding the next client and neglecting investors who are already on board
  • Viewing clients as profit centers
  • Introducing needless incentives to justify their existence
  • Inability to acknowledge personal boundaries
  • Lack of transparency around fees
  • Ignoring tax reporting requirements

“Most advisors aren’t sitting around the office thinking of new ways to underserve and overcharge clients,” explains Jennings. “Rather, the seven deadly sins are subtle; advisors serve multiple masters, and clients aren’t usually at the top due to misaligned incentives.”

Advisors will benefit from holding themselves accountable to higher standards. This accountability ultimately improves the profession overall.

Learn more about CircleBlack

CircleBlack is an all in one management platform for the wealth management industry. You can think of it as an operational dashboard to better connect financial advisors and their clients around a shared perspective. The outcome is better collaboration and communication for relationship-focused advisors.

To learn how our software can help you build, manage, and grow your wealth management practice, get in touch.

This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal, or tax advice.

Financial Advisor Reading List: June 2023

There’s a popular saying that it’s hard to tell we’re in a moment in history when you’re in it. But we’re certainly in one. What will be our memory of summer 2023 when we reflect upon the decisions we’ve made, the guidance we’ve provided to our clients, and the...

Financial Advisor Reading List: May 2023

Another tax season has come and gone. That means RIAs (and other financial professionals) have a bit more headspace to decompress. With the summer around the corner, now is a good time to focus on business fundamentals that matter. Here are some important topics to...

5 Questions Your RIA Clients May Not Know They Should Be Asking

Are your clients happy with your services as an RIA? What’s making them nervous? Are you in alignment regarding the goals you’re setting or the progress you’re making? Or is there something missing? As a financial advisor, it’s critical to be astute to the answers to...

Ready to try CircleBlack?

See how we can help you simplify your daily tasks, delight your customers, and grow your practice.