Wealth Expectations
Managing other people’s money is an article of faith.
While speaking to a group of wealth management executives, during the week, on how to explain the rewards and risks of investing, to potential clients, without dampening enthusiasm, a question came up — how does one manage the expectation of clients?
That was a tricky one.
A philosophical answer would not do here. They were asking about a here-and-now problem; I could not sound otherworldly.
The problem with expectation, I told them, from my experience, is that it cannot be managed. When expectations come from a place of comparison, beware, I told them.
In most cases, when dealing with money, expectations stem from comparison.
There is a difference between the desire to have a slice of heaven and doing what is necessary to get there.
Ask Novak Djokovic, the current world number 1 in tennis for the 378th week in a row.
When asked about his will to win, he reportedly said, “It’s not the will to win that makes a winner. It’s the will to prepare. That’s what I do well”.
The preparation, which starts with the mandatory KYC documentation and risk profiling, should not end there.
Know Your Customer, an international financial compliance requirement, is designed to protect financial institutions against fraud, corruption, money laundering and terrorist financing and to verify the authenticity of a customer.
Make the effort to Know Your Customer; what does s/he want?
Wider digitalization has increased awareness of brands and products.
I said do not interpret awareness as familiarity, which is a higher standard of awareness, referencing Dean Adams, principal at advertising company Merton Adams.
Map Your Beat
I am no genius, but I’m smart in spots, and I stay around those spots. — Thomas Watson Senior.
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The key to managing expectations is to be aware of the factors that give rise to them. When clients are familiar with the evolving ecosystem, they are better equipped to handle when returns fall short of expectations.
Make a “beat map” and follow it to stay familiar with the changing contours of the financial landscape.
Build a cheat sheet for your clients to stay familiar with the evolving situation. This will increase your engagement with them and make them come back to you to know more.
Presenting choices is one thing; making clients feel confident in their choices is the hook.
This is what I have gleaned from years of conversations with successful investors and satisfied individuals.
Know your clients’ purpose for investing. When the objective is achieved, get them to enjoy it. Resist the sales pitch of making them reinvest the funds. The experience of using the funds will make clients come back.
Over the years, I have often heard a refrain that brokers and wealth managers advise on “what to invest in but often do not tell me when to sell”.
Also, remember that whenever you sell a financial product to a client, don’t forget the unsaid expectation of all clients.
And that is — don’t lose my money.
More importantly, understand Murphy’s law contextually.
Anything that can go wrong will go wrong, especially in financial markets.
Investors remember losses that occur at a bad time more than the returns that financed their good times.
It’s more of a psychological thing.
How do you know that it is time for Murphy’s law to kick in?
When you hear the words “This time it is different”,.
No words have been more prophetical than these when it comes to the financial markets.
