Every financial advisor understands the power of strong communication skills. From being able to pick up on non-verbal cues to ensuring clients feel "heard” in a conversation, effective communication skills are the bedrock of a strong client relationship.
Believe it or not, not everyone – including the advisor population - is a “natural communicator.” In fact, I have found that the strongest communicators in our space learned and developed specific skills over time through conscious practice.
So, where does one start on their journey to becoming an extraordinary communicator? The answer is by listening. While this may seem simple and obvious, most people are surprisingly poor listeners – which is why it is so important to develop a skill called “active listening”.
What is Active Listening?
Active listening is a way of intentionally engaging during conversation to build a deeper understanding of the person you are speaking to. The Harvard Review of Business cites three key components:
- Cognitive: Paying close attention to all information being conveyed, both explicit and implicit, and integrating that information into your understanding of the person.
- Emotional: Monitoring and regulating your emotions during the interaction to stay attuned to the person, rather than succumbing to emotional reactions such as irritation or boredom.
- Behavioral: Showing that you are engaged with the person through visual and verbal cues, such as nodding or mirroring their body language.
What Does Active Listening Achieve?
The combination of these three factors is extraordinarily powerful. Active listening can:
- Produce positive feelings: fMRI studies show that active listening activates the brain’s reward system and produces positive emotions. In other words, you can literally make someone feel good simply by showing them you are listening to them.
- Increase understanding: Concerted attention ensures you take note of important information other advisors might miss. It’s these tiny details that will shape and inform your responses and reactions, completely changing the trajectory of the conversation and relationship.
- Increase engagement: Active listening helps advisors “anchor” themselves in conversations with clients, helping them show curiosity and use that curiosity to propel the conversation forward.
Active listening is the lowest-hanging fruit as it relates to creating a rewarding client experience. When done right, it requires little effort but produces tremendous value. Here are four ways in which you can powerfully leverage active listening skills in your routine interactions with clients.
Four Ways Active Listening Can Help Advisors Improve the Client Experience
1. Identify Client’s Belief Systems
Roughly 90% of financial decisions are based on emotions, and those emotions are dictated by a set of underlying beliefs. In practice, that means advisors need to understand their clients’ belief systems and worldview – which is something active listening can help you achieve.
Let’s assume an exaggerated example. Imagine you are working with a couple, where the male spouse believes that he should be the sole financial-decision maker since he is the bread winner in the family. This could have a wide range of implications, influencing how your client interacts with you and how he engages in the financial planning process. Awareness of this fact can help you facilitate and steer conversations, so that you are “balancing” the power between the more and less dominant spouses, resulting in outcomes that benefit the entire family.
After a client meeting, it is important for advisors to create a space to reflect on what they have learned about the client.
The Cheat Sheet
After each meeting, ask yourself these three questions:
- What have I observed about this client that is worth remembering for the next conversion?
- What am I noticing about the dynamic between spouses? OR What am I noticing about specific language or phrases the client uses?
- What do I need to be mindful of when asking questions?
Be sure to store the answers in your CRM – they will help you recall these belief systems and factor them into future engagements.
2. Influence Behavior
Many advisors wish they could take on a more “powerful” role during client meetings but may fear creating a negative atmosphere. However, active listening skills help you attune to your clients’ emotions – which enables you to assert power when appropriate whilst remaining connected.
During the planning process, advisors have a chance to help clients recognize and shed belief systems hindering their progress and success. This is one of the most powerful roles an advisor can play.
There are so many examples that can be found when working with couples specifically. Perhaps one partner is extremely dismissive of the other, resulting in frequent arguing and a misalignment around goals and decisions. One way to handle this is to listen intently and then (only after you’ve built enough rapport with both parties) ask permission to share objective feedback about what you have witnessed. Be sure to not appear as if you are “taking sides” but rather provide objective feedback on what you’ve heard and then guidance on how both parties can meet in the middle.
3. Recognize and Support Clients
More than 50% of Americans are more trusting of advisors who show they care about their clients as people.1 While active listening has been shown to intrinsically make people feel valued, it also enables advisors to demonstrate their care through action.
One example would be addressing negative self-talk. Many clients exhibit patterns of behavior or speech that suggest they feel bad about themselves or their ability to manage money. However, advisors who pick up on these instances can uplift their clients and help them be less hard on themselves – ultimately building a stronger bond.
The best way to do this is to help the clients set goals, including small, short-term goals that are easily achievable. If you help the client stay accountable to those goals and then reinforce and celebrate their success when they achieve them, you will build their confidence and deepen their trust and loyalty.
4. Stay Engaged
Every advisor struggles to stay engaged 100% of the time during long client meetings. Oftentimes when we’re tired, bored or burnt out it can also be challenging to empathize with what the client is saying. But your client deserves your full attention and care – which is one reason active listening is so important.
Through active listening you can facilitate a technique I call “manufactured empathy”. When your mind begins to wander, lean into your curiosity. Recall a specific detail the client asked and ask an open-ended (“what” or “how”) question. Keep being curious, using what the client is saying to help formulate your next question. This can help anchor you into the conversation, re-engaging your mind and making the client feel heard and listened to.
The net result is the client feels good leaving the conversation. Think about how many times you’d have a conversation with someone, where they talked a lot and you talked very little, but they thanked you profusely for the “great” meeting. THAT is the power of active listening.
Take Your Communication to the Next Level
Financial advisors who develop their active listening skills see significant improvements in both client retention and referrals. But it is just one tool advisors can leverage to deliver a better client experience.
Our Communication Toolkit offers a range of powerful questions to communicate more effectively at each phase of the client journey. It condenses more than a decade’s experience into a practical guide you can refer to whenever you need to build stronger connections with your clients.
