Real Wealth Concepts

Practical Tips to Help Financial Advisors Persuade Clients

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Financial advisors must be able to persuade and influence the actions of their clients. Not only is persuasion key to prospecting, the effective advisor shapes client behaviors on an ongoing basis.

Client behavior management is critical to the success of the advisor-client relationship. According to research by Vanguard, about half of the value provided by an advisor comes from behavioral coaching:

This soft skill isn’t something they teach in school. While some advisors are naturally gifted in the art of persuasion, most of us must invest the time to develop this skill.

Below I have summarized the work of two masters in the field: Robert Cialdini and Dale Carnegie.

Who is Robert Cialdini?

Robert Cialdini is a well-known social psychologist who has researched and written extensively on the topic of influence and persuasion.

Cialdini received his bachelor’s degree in psychology from the University of Wisconsin-Milwaukee in 1967. He then went on to earn his Ph.D. in social psychology from the University of North Carolina at Chapel Hill in 1971.

After completing his education, Cialdini joined Arizona State University, where he taught for more than 35 years. During his tenure at ASU, Cialdini served as a visiting professor at Stanford University, the University of California, Santa Cruz, and the University of Colorado.

Cialdini is widely recognized for his groundbreaking research on the principles of persuasion and influence, which he outlines in his book “Influence: The Psychology of Persuasion” (1984). The book has sold over 3 million copies worldwide and has been translated into 30 languages.

What are the Six Key Principles of Influence?

In his book “Influence: The Psychology of Persuasion,” Cialdini outlines six key principles of influence that are commonly used by people to persuade others. These principles are:

  1. Reciprocity: The principle of reciprocity suggests that when someone does something for us, we feel obligated to return the favor. Financial advisors can use this principle by offering value to their clients before asking for anything in return. For example, a financial advisor might provide free financial planning advice to a potential client, knowing that the client will feel obligated to hire them for their services.
  2. Scarcity: The principle of scarcity suggests that people value things that are rare or hard to come by. Financial advisors can use this principle by emphasizing the limited availability of their services or the limited time to take advantage of an opportunity or protect from a negative outcome.
  3. Authority: The principle of authority suggests that people are more likely to follow the advice of someone who is seen as an expert in their field. Financial advisors can use this principle by establishing their credentials and expertise in the financial industry. For example, a financial advisor might highlight their certifications, degrees, or years of experience in their marketing materials to demonstrate their authority and expertise. Building authority isn’t done overnight, however. Advisors can build their authority by publicly (e.g. social media, blog, podcasts) sharing insights on a regular basis.
  4. Consistency: The principle of consistency suggests that people like to be consistent with their previous behavior and beliefs. Financial advisors can use this principle by asking clients to make small commitments that are consistent with their financial goals. For example, a financial advisor might ask a client to commit to saving a small amount each month, knowing that the client will be more likely to follow through with larger commitments in the future.
  5. Liking: The principle of liking suggests that people are more likely to be influenced by someone they like and respect. Financial advisors can use this principle by building rapport with their clients and demonstrating their likability. For example, a financial advisor might take the time to get to know their clients personally, share common interests, and show empathy for their financial concerns.
  6. Social proof: The principle of social proof suggests that people are more likely to follow the lead of others who are similar to them. Financial advisors can use this principle by providing social proof of their services, such as testimonials or case studies from clients who are similar to their target audience. For example, a financial advisor might highlight success stories from clients who are in a similar financial situation or have similar financial goals to potential clients.

Financial advisors can use these six principles of influence to build trust and rapport with their clients, demonstrate their expertise, and persuade clients to take action towards their financial goals. By understanding these principles and applying them ethically, financial advisors can enhance their ability to influence and persuade clients in a positive way.

How Else Can Financial Advisors Persuade Clients?

In addition to the six principles of influence outlined by Robert Cialdini, there are several other strategies that financial advisors can use to persuade their clients:

  1. Storytelling: People are often more engaged and persuaded by stories than by dry facts and figures. Financial advisors can use storytelling to illustrate the benefits of certain financial strategies or to help clients understand complex financial concepts.
  2. Education: Financial advisors can persuade clients by educating them on financial topics and providing them with the knowledge they need to make informed decisions. By empowering clients with knowledge and information, financial advisors can help them feel more confident in their financial decisions.
  3. Personalization: Financial advisors can persuade clients by tailoring their advice and recommendations to the client’s specific needs and goals. By understanding the client’s unique financial situation, preferences, and goals, financial advisors can offer personalized advice and recommendations that are more likely to be accepted and followed.
  4. Social media: Financial advisors can use social media to connect with potential clients, share valuable information, and build their credibility and authority in the financial industry. By using social media platforms like LinkedIn, Twitter, or Facebook, financial advisors can reach a wider audience and attract new clients.
  5. Collaboration: Financial advisors can persuade clients by collaborating with other professionals, such as lawyers, accountants, or insurance agents, to provide a comprehensive and integrated approach to financial planning. By working together with other professionals, financial advisors can offer clients a more complete and holistic view of their financial situation and provide them with a more effective and persuasive financial plan.

By using a combination of these strategies, financial advisors can build strong relationships with clients, and enhance their credibility and authority.

Who is Dale Carnegie?

Dale Carnegie (1888-1955) was an American author, lecturer, and self-improvement guru. He is best known for his self-help books, including “How to Win Friends and Influence People,” which has sold over 30 million copies worldwide and is considered a classic in the field of personal development.

Carnegie was born in Maryville, Missouri, and grew up on a farm. After attending college in Warrensburg, Missouri, he moved to New York City to pursue a career in sales. He eventually founded the Dale Carnegie Institute, which offers courses in public speaking, leadership, and personal development.

Carnegie’s books and courses are based on the idea that success in business and in life is largely determined by one’s ability to communicate effectively, build relationships, and influence others. His books and teachings emphasize the importance of empathy, kindness, and positive communication in achieving personal and professional success.

What Are the Key Principles from “How to Win Friends and Influence People”?

“How to Win Friends and Influence People” by Dale Carnegie is a classic self-help book that offers practical advice on how to build strong relationships, communicate effectively, and persuade others. Here are some of the key tips and tactics outlined in the book:

  1. Show genuine interest in others: One of the most important principles in the book is the idea that people are more likely to like and trust you if you show a genuine interest in them. Carnegie advises readers to ask questions, listen actively, and show empathy to others.
  2. Smile: According to Carnegie, a simple smile can go a long way in building relationships and making people feel at ease. Smiling is a nonverbal cue that signals friendliness and approachability.
  3. Remember people’s names: People feel important and valued when others remember their name. Carnegie advises readers to make a conscious effort to remember people’s names, and to use their names when addressing them.
  4. Avoid criticism and negative language: Carnegie advises readers to avoid criticizing, condemning, or complaining about others. Instead, he encourages readers to use positive language, focus on solutions rather than problems, and give constructive feedback.
  5. Acknowledge people’s achievements: People feel valued and appreciated when their achievements are recognized. Carnegie advises readers to praise others sincerely and specifically, and to avoid flattery or insincere compliments.
  6. Listen actively: Active listening is a key communication skill that involves paying close attention to what others are saying, asking questions, and responding appropriately. Carnegie advises readers to listen actively, show empathy, and avoid interrupting or talking over others.
  7. Appeal to people’s self-interest: People are more likely to be persuaded if they see how a particular action or decision will benefit them. Carnegie advises readers to appeal to people’s self-interest, and to frame their arguments in a way that emphasizes the benefits to the other person.
  8. Avoid arguments: Arguments and disagreements are rarely productive and can damage relationships. Carnegie advises readers to avoid arguments, to seek common ground, and to look for ways to compromise and collaborate.
  9. Be enthusiastic: Enthusiasm is contagious and can inspire others to take action. Carnegie advises readers to be enthusiastic about their goals and ideas, and to share their enthusiasm with others.
  10. Lead by example: Effective leadership involves setting a positive example, inspiring others, and providing guidance and support. Carnegie advises readers to lead by example, to be a role model for others, and to encourage and empower others to achieve their goals.

Overall, “How to Win Friends and Influence People” provides practical advice on how to build strong relationships, communicate effectively, and persuade others. By following the principles and techniques outlined in the book, readers can improve their interpersonal skills, enhance their influence and persuasion abilities, and ultimately achieve their goals.

These persuasion techniques are meant to help financial advisors strengthen their bond with clients by building trust and likeability. While some might consider these techniques manipulative, the objective is to ultimately convince the client to do what’s in their best interest. In the end, a strong bond between advisor and client will help the client achieve their financial goals and allow them to sleep better at night knowing a trusted advisor has their best interest at heart.