June 1, 2021

Objection Handling of Clients

Kalpesh Ashar

Founder, Full Circle Financial Planners & Advisors

“Tujhse naaraz nahi zindagi, hairaan hoon main…
…Tere masoom sawaalon se pareshan hoon main”…

These relevant lines from the evergreen song always resonate with personal finance professionals whenever there is an investor grievance/complaint, don’t they?

Investment advisory is about a lot more than merely telling people what to do with their money. In fact, that is just a small part of the overall job of being an effective guide and advisor to your clients. A critical part of the job is to also handle their investment behaviour, their insecurities, and above all, their objections. These objections could be against something you said, or against something that is part of your advisory belief, or against a particular financial product, an asset class, a company, a mutual fund company, an insurance company, some other professional they dealt with in the past, or just the situation that they may currently be in.

Regardless of the source, nature, reason and propeller of these objections, when you take on board a new client, it becomes part of your job to handle these objections effectively, make them comfortable and yet the strike the balance with what is right for them.

These objections and apprehensions may present themselves in the forms of questions, complaints, strong opinions, etc. We should try to understand where they stem from, what is it that the client is really worried about.

Just like  salt and pepper form an integral part of your palate, the below mentioned acronyms of PEPPER(representing major objections) and SALT (representing some ways to deal with said objections) can be very useful for the various cuisines(read: client interactions) that take place across your work table.

The PEPPER effect briefs about some major objections raised by the clients.

Prevailing economy and market conditions- The amount of information and news circulating through media is enough to confuse one about where they stand and where they should be headed. The prevailing economic and market conditions either cause fear and panic or fill up someone with overconfidence regarding their understanding. There are so many layers of sensationalism that often surround the actual information/ situation. Ultimately, the investor ends up deciding what is good/bad for them based on the candy wrapper and not what is actually inside. They may even object to your ideas based on this perception only. There is need to understand where this investor behaviour comes from so as to able to address them  appropriately.

External financial forces- Several other financial factors, both internal ( family, friends and so-called experts ) and external ( Media ) forces   which are connected to the finance world, may bother the clients. The client may also find it difficult to figure out two different sets of information are even correlated- sometimes there may be too much emphasis given to this and sometimes, not enough.

Past financial experiences- The most impactful are the past financial experiences. Whether pleasant or unpleasant, a lot of questions and doubts are created in their mind from these experiences. These experiences do not even have to be personal for the investor to get affected and thinking. Often, it’s seen that the bad experiences travel way faster than the good ones. They also pass through a round of “Chinese whispers” with some spices added every time the experience is narrated.

Perceptions v/s reality- For clients, the perceptions are in contrast with the reality. What they are unable to understand may keep them further away. Hence, it’s necessary to first resolve these with proper understanding. There is no other alternative to information and knowledge. It is of paramount importance to impart the same to the clients to make sure their perceptions align with reality.

Efficiency and trust fluctuations- The other reasonable objections that arise are of the confidentiality and the efficiency of the process keeping them a step away from giving it a shot. While you can try to create a good initial impression, this struggle to win the client’s complete trust is a continuous struggle, one lined with thorns. We have to be very careful with our interactions, actions and dealings with our clients. Just advising what is best for them is often not enough. We need to make them understand why this is suitable for them, too.

Rewarding experiences- Many are known to have had rewarding past experiences and hence do not find any need for the advice of any professional and trust their own intuition instead which could have an equal chance of them ending up in loss from their investments. Our job is to not make the client feel that they do not  know enough. Our job is to make them understand that we know our job well and that we can really make a difference to them. This becomes difficult to prove after a series of favourable past experiences of the client based on their own decisions. Holistic advice, including on matters that may not result in remuneration for you, can go a long way here.

The SALT factors assist in tackling the same objections raised effectively.

Speak with clarity and candidness- There are a few ways to manage these objections effectively for the benefit of both the sides. Clarifying any doubts and questions with complete honesty in a candid conversation is the best way to tackle any objections. Be clear, true and honest, even if it results in a difficult  conversation. This will be appreciated way more than having sweet talks that are distanced from what is for the benefit of  the client. .

Action your words- Stating how a way can be found through different steps shows that these are not mere words of assurances. As it is rightly said, ‘Actions speak louder than words’, it is really important to implement it in the financial process as well. Actions that are easy to implement and understand in fact enhance  your abilities . Make ‘ Simplicity ‘ your forte.

Listening to the entire story of the client from every perspective gives a holistic idea of the present scenario. We are used to talking a lot while explaining things to clients. It is a fair requirement of our job. But, we should not forget the “listening” part of the conversation. It also makes the client feel lighter that he satisfyingly vented out his thoughts.

Trust building- The primary  goal should be the trust and vote of confidence between the client and the financial planner to carry forward this journey of financial well-being of the client.

However, there are some major grey areas often stumbled upon by significant number of clients.

Insurance could be one of the most misunderstood and confusing concepts. The way it is portrayed and marketed as an investment tool has complicated its actual goals of insurance. Being perceived as a promising investment besides the benefit in case of any exigency, it has wrongly occupied the mind and financial portfolio of numerous individuals… Many have chosen these policies on the insistence of relatives as their insurance agent who claims to be giving financial advice best suited for them. With the emerging new plans with maturity benefits and added benefits, the basic and efficient term plans look lacklustre with only death benefits. . The idea of discontinuing the unnecessary insurance is a major road ( mind ) block for most individuals es.

Another such grey area is mutual funds.

The areas of ambiguity in minds of Investors here are : Based  on  a glance through the previous five-ten years performance, either a lump sum or a sip is started. A gaping point is many individuals  consider Mutual Funds risky as they presumably invest only in equity markets ! ( No awareness of other categories seems to be present in many cases ! ) . Among the tax relief funds or the sectoral funds one can easily make mistakes if there is a lack of understanding and no alignment between these investments and goals. Later any bad experiences are held against other future suggestion for investment in mutual funds. There is also high uncertainty regarding the period of holding and the implications of the movements of the NAV and the dividend pay-out.

Finally, there is the question of the paying of Fees for Advisory Services. The financial planning services are moving steadily towards the fee-based structure. The letter of engagement clearly states the terms of remuneration to be received by the planner for the services rendered along with the other terms of the relation.

At the end of the day, the fees are charged for the value addition the planner gives his client as per his expertise .

Some key points the planner should stand by are:

1. To have a proper business model.
2. Be transparent from the very first meeting about all the terms and conditions.
3. There must be an explicit mention regarding the offering either being advisory or implementation.
4. His honest conviction where he is a fiduciary and is a win – win for himself and the client We often get worked up with the number of client objections we are forced to handle in our work-life, especially those that stem from factors that have got nothing to do with us or our advice. I hope this article will help all of you readers where these objectives find their roots and the kind of experiences that drive them. Only if we understand this back-story, can we help to write the rest of the story of our clients’ financial lives in a better manner ! …