Strategies for More Financially Literate Clients

When you work with financially literate clients, you can enjoy a stronger sense of collaboration. You can also reduce risk since clients who participate in building their financial strategy are less likely to be upset if something doesn’t turn out as expected.

November is Financial Literacy Month, and everyone from government agencies to media and financial institutions are doing their part to promote the initiative. The reason is simple, there are many financial steps Canadians must take after earning their first pay cheque to the time they retire with a healthy nest egg. We are all better off when we know how to earn, borrow, budget, save and invest our money.

As a financial advisor, you play an important role not only in facilitating some of the most important steps around saving and investing but also in helping your clients gain knowledge and confidence that will help them when they are making decisions. It’s good for their well-being, it’s good for your business, and it’s good for society, too.

Assume nothing and explain everything

Here’s a reality for many people when they first sit down with a financial advisor: they’re nervous. They may not have a great deal of financial knowledge and might not know what to expect from the conversation. Their financial affairs may not be in good order, which could be embarrassing. Most importantly, it can be difficult to make big financial decisions without adequate knowledge, and this can cause them to feel guarded.

But, to avoid revealing negative emotions, many people will simply smile and nod along – even when they’re confused. On the surface, it may seem that the meeting is going very well. In reality, the client may have a lot of information going in one ear and out the other.

For many personality types, the best antidote is to assume nothing and explain everything. Go ahead and answer the questions someone might be too shy to ask, beginning with:

  • “What does a financial advisor do?”
  • “What are your qualifications to be a financial advisor?”
  • “What are stocks?” or “What is a mutual fund?”
  • “What is an interest rate?” or “How does a GIC work?”

Do not assume that clients understand even the most basic things. If they understand, they will let you know and you can move on – no harm done. But if they don’t understand, patiently helping them grasp these basics is necessary for them to feel safe, develop trust and start absorbing more of the conversation.

Jargon bad, questions good

Jargon, lingo, slang – call it what you want, it can be alienating to clients. Be on the lookout for any language that assumes the client has pre-existing knowledge. This isn’t always easy because the language probably comes naturally to you. Consider saying “fee” instead of “MER” and “Tax-Free Savings Account” instead of “TFSA” and “mix of investments” instead of “asset allocation.”

Questions are another powerful tool for building financial literacy – both those that you ask and those that you encourage your clients to ask.

Asking questions helps you understand what’s important to your clients so you can place the financial aspects of the conversation within the context of their lives. Contrast, for example, how much more interesting it is to say, “I will recommend a strategy to help you avoid selling your home in retirement,” versus something generic like, “I will recommend a strategy to help you meet your goals.” Which one do you think will put the client in a better mindset to pay attention and learn?

Encouraging clients to ask questions helps them clarify concepts and feel more committed to their decisions. Rather than assuming they can see why, for example, a tax deduction might be a beneficial aspect of an RRSP, put them at ease by opening the door for questions: “I know tax deductions can be a tricky topic – do you have any questions about how they work? Would it be helpful if I showed you an example?”

Some useful resources

It’s great to be your clients’ go-to person for financial education. There are a few online resources that you might also find useful to recommend – here are three that we like:

  • Financial literacy programs from the Government of Canada are quite extensive. The “Your Financial Toolkit” modules take a deep dive into several topics, and the e-Learning videos make the content highly digestible.
  • Get smarter about money is a website created in association with the Ontario Securities Commission to teach Canadians about investing – the basics of how to do it successfully, as well as some of the pitfalls to avoid.
  • Practical Money Skills is a rich resource of articles, calculators and downloadable materials aimed at the whole family. You’ll find resources on everything from spending management to buying a home.

As a financial advisor, supporting a client’s understanding of their finances is a real value-add that can provide personal and professional satisfaction. Do it by demonstrating that you are willing to patiently explain even the most basic things without jargon, asking questions that help you make your lessons more relevant, and encouraging questions that will help your clients move forward with confidence.

Share Article