3 expert takes on the best behavioral onboarding for clients

One of the most important aspects of adding new clients to a financial planner's practice comes in the form of discussions that have little to do with investment "alpha" or fancy strategies.

Financial advisors who neglect the psychological side of money and investing during the onboarding process for incoming clients will be missing the opportunity to lay the foundation for success over a long-term customer relationship, according to three practice management experts who spoke with Financial Planning. Fortunately, the profession has amassed a wealth of resources and evidence behind developing behavioral onboarding tools for advisory practices.

"Advisors often do a great job outlining 'what' needs to be done — open this account, contribute more here, change that allocation," Meghaan Lurtz, the learning and development specialist for behavioral finance training and consulting firm Shaping Wealth, professor of practice at the Kansas State University Department of Personal Financial Planning and a lecturer at the Columbia University School of Professional Studies, said in an email.

READ MORE: 6 ways to implement psychology in advisory practices 

"The 'what' of a financial plan is essential, but equally important is the 'how,'" she continued. "More often, clients struggle with the 'how' rather than the 'what.' In change research, the top reason people don't make a change is that they don't know how, not because they don't know what to do. 

"For instance, a client may know they need to save more in a pretax account (the 'what'), but they may struggle with finding extra money or knowing how to open the account. They may also be unclear on how it all works together or who to turn to for help if they encounter difficulties — this is the 'how,'" Lurtz said. "It's extremely helpful for the advisor to focus on one key goal, perhaps the most motivating one, and not just explain what needs to change but also break down how it will happen — go through the tasks."

Such behavioral topics have in many cases become essential components of onboarding, much like the needs for technology to ease the transition of assets, tax-planning methods to avoid traps and find savings and a substantial stack of documents enabling planners' calculation of clients' financial status. They will also give advisors a better sense of whether the customer will be receptive to their advice and signal to the clients that their new planner understands the many nonfinancial reasons people are seeking quality advice.

Advisors can tap into ample reasons and resources to integrate psychological techniques. For instance, the "mistimed purchases and sales" of investments stemming from factors such as bias or rash decisions out of fear cost clients an average of 1.1% of returns per year, according to the latest annual "Mind the Gap" study by research firm Morningstar. And "focusing on behavioral coaching," especially the type keeping customers' actions consistent with their long-term plans, represents "the greatest potential value you can add" as an advisor, according to asset management giant Vanguard's "Advisor's Alpha" report.

Lurtz wrote an essay two years ago for the Kitces.com "Nerd's Eye View" blog with a primer on one of the most popular forms of behavioral onboarding in the profession, life planning originator George Kinder's three questions for clients. Other available tools include educational programs on communication, coaching or leadership from Shaping Wealth, various types of behavioral assessment quizzes from DataPoints or another firm, professional networking and training through the Financial Therapy Association or programs at other industry organizations and any number of practice management companies and consultants eager to assist advisors.

READ MORE: The non-financial reasons clients hire, keep or fire financial advisors

Planner Preston Cherry of Green Bay, Wisconsin-based Concurrent Financial Planning uses what his registered investment advisory firm calls a "signature money psychology meeting" to home in on key behavioral themes from the beginning of a client relationship. That comes after a meet-and-great session and a "discovery" meeting, as well as an exercise for the clients to do before the psychology meeting to help inform the conversation. Cherry's firm sends them materials such as his original "Life Money Balance" money psychology questions, Kinder's three questions or concepts created by financial therapy experts like Saundra Davis of Sage Financial Solutions and Rick Kahler of Rapid City, South Dakota-based Kahler Financial Group.

The meeting revolves around "asking the right questions and being able to interpret what's returned back to you from the client," Cherry said in an interview.

"That's going to lead you to the questions that you're going to ask the client. They're going to be different because each person is different," he said. "That's the connective glue to the whole thing. It's the Gorilla Glue, because that's going to help people discover themselves in their plan."

Another method — therapeutic "scaling" questions asking clients to grade their feelings on a range of zero to 10 — leads to conversations to "map out how they can increase their score," according to planner Rory Henry, a director of Marina Del Rey, California-based Arrowroot Family Office. Additionally, Henry has developed an approach he refers to as "Advis-ROR" that combines the technical parts of planning with the emotional ones to achieve the greatest "return-on-relationship" between advisors and their clients.

The simple query of, "How do you feel," may be the most important part of the conversation, he said in an interview.

"When you get that feeling involved, that's the moment when people say, 'Oh my gosh, I want to make that actual life come to fruition,'" Henry said. "I just have found it to be so much more effective and rewarding as a practitioner."

READ MORE: Planners often feel like therapists. When should they refer clients to one?

Long after the initial stages of the relationship, advisors may want to consider a "re-onboarding" meeting to get new ideas, tweak or recommit to the long-term goals or simply take part in the ongoing work of maintaining the vitality of their discussions with clients, Lurtz said. 

At the beginning, they ought to remember that "transitioning from not having an advisor to having one is significant, even if it's something the client wants," because, "people tend to resist change, even when they know it's good for them," she said. The situation resembles someone joining a gym, which doesn't mean that they'll necessarily choose to work out there often.  

"Advisors who address this natural ambivalence during the onboarding process often find that clients become more engaged and take action sooner," Lurtz said. "A simple and effective way to start is by asking the client, in each meeting, why they believe working with a planner is important, what benefits they see, what motivates them to take action and how they will feel once they've acted. Encouraging clients to vocalize the benefits of the relationship and the changes they want to make can foster internal motivation to implement those changes."