Are You Ready for the Toughest Questions Every Financial Advisor Is Asked?

By Rosemary Smyth, MBA, ACC, Author on Thursday, June 27th, 2013

As your plane taxis down the runway, the person beside you strikes up a conversation. The what-do-you-do-for-a-living question will usually come up. When it does, you know that they will inevitably follow up with another question – perhaps something like: "My brother-in-law is really into gold stocks. Do you have any hot tips?"

Many professions have these dreaded questions. Even in social settings, doctors are frequently asked for an impromptu diagnosis of a rash, mechanics are frequently asked to identify engine trouble, and you as a financial advisor are probably asked for some kind of portfolio-related guidance.

These questions happen everywhere – in airplanes, at family get-togethers, at neighborhood barbecues, or while you're watching your kid's ballgame. People hear that you're an expert and they have questions and expect answers from you.

Rather than stumbling around an answer, savvy financial advisors prepare answers to the most common questions and have them ready to deliver when the questions inevitably come.

The 5 Types of Questions

Below, you'll find the 5 types of questions you'll be asked. Although some of these may seem similar when you first read them, it's helpful to have responses for each type so that a question doesn't catch you off-guard.

  1. Analysis/due diligence questions include questions like, "what do you think about XYZ Company?" or "what do you think about stocks in the ABC industry?" These are questions invite you to add to their knowledge about a particular company or industry.

  2. Forecasting questions include questions like, "where are interest rates headed?" or "what will the market do this week?" These are questions about what you think could happen in the future.

  3. Advice questions include questions like, "should I buy XYZ Company?" or "is the ABC industry going to turn around soon?" These questions ask you to provide portfolio-specific advice.

  4. Story questions include questions like, "what's the most money you ever made on a trade?" or "did you have any money in XYZ Company before it tanked?" These questions are looking for stories of big wins or losses in the marketplace and often precede a story that they'll share with you.

  5. Testing questions include questions like, "do you sell a lot of this new product?" or "have you ever heard of ABC Company?" These questions may seem innocent enough but they are actually testing you to see what you are like as an advisor and how you stack up to their perceptions of what an advisor should know. 

These questions are a mixed blessing. On the one hand, they show that the person may be a potential prospect (or may know someone who is) and their questions demonstrate their interest in learning more about us. On the other hand, they are all-too-common questions that could be asked with the hope of getting free financial advice.

You know you'll face these questions. So prepare now to respond to them advantageously.

How to Prepare Your Response

First, you'll want to make sure that you can readily identify the likelihood of that person's client potential. (This is done by knowing in advance who your perfect prospect is and what expertise you provide to your target market). This is key to ensuring that the rest of the conversation will provide value to both you and the person you are talking to.

Second, you'll want to speak generally to their question (so it doesn't look like you are avoiding their question) in a way that demonstrates your knowledge of the topic. For example: "XYZ Company has been volatile in recent months and there isn't a lot of consensus among analysts."

Third, provide a friendly disclaimer that explains how you can't provide a specific answer without analyzing their portfolio or determining if it's right for them. Do so in a professional way that shows how you care about providing the best advice possible. For example, "Whether or not I would recommend XYZ Company to you? Well, that's a harder question and it really depends on the asset mix in your portfolio and your risk tolerance."

Fourth, pivot to an action step for them. If they have the potential to become a client, invite them to your office for a further conversation with something like, "Why don’t I give you a call this week and set up an appointment…". Or, if you know that they won't become a client (i.e. because they live too far away or are not in your target market) then say something like, "your own advisor could give you far better advice than I could because he or she knows your portfolio and your financial goals."

Additional Tips to Formulate Your Responses

As you think about your responses to the 5 types of questions all financial advisors are asked, use the following list to help you craft your answers:

  • Know who you want to serve and how you help them. It's fine to say that you don't know the answer to a question you're asked, especially if it's not something your clients need you to pay attention to.
  • Avoid the temptation to expound knowledgeably on the topic, which will only lock you into the conversation and make it harder to pivot to an action step.
  • Craft answers that are neutral (so they don't give advice) while at the same time positioning the industry and the other person's advisor in a positive light. Don't disparage other advisors if they do things differently than you.
  • Always move the conversation toward an action step – one that draws the potential prospect closer to you (if appropriate) or one that steers them to a professional who can help them.
  • Be authentic. You'll build rapport with the other person and you'll enjoy your conversation more, and you'll position yourself in the right way in case they know someone they can refer to you.

Action step: Write each of the five types of questions and then craft a professional, authentic response with two potential action steps, depending on how likely they are to become clients.

Rosemary Smyth, MBA, CIM, FCSI, ACC, is an author, columnist and an international business coach for financial advisors. She spent her career working at leading investment firms before pursuing her passion for coaching. She lives in Victoria, BC. Visit her website at www.rosemarysmyth.com. You can email Rosemary at: rosemary@rosemarysmyth.com

Aaron Hoos, MBA, has worked in the financial industry since 1997. Formerly a stockbroker, insurance broker, and award-winning sales manager, today he writes for the financial and real estate industry as an educator and marketer. His first book, The Sales Funnel Bible, helps advisors master their sales funnel. Visit his website at www.AaronHoos.com and follow him on Twitter @AaronHoos.

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