When to talk and when to zip it, how to avoid making premature proposals, how to engage clients versus selling them, how to persuade and influence. Indeed: How to succeed in the business of advice-giving by skillfully trying.
Largely, it's a matter of learning how to negotiate. And in light of the DOL's fiduciary standard rule calling for FAs advising on retirement accounts to act in the client's best interest, it's a critical process to understand.
Nearly every interaction between FA and client is a negotiation, argues Raphael Lapin, a Harvard-trained negotiation and mediation specialist, in an interview with ThinkAdvisor. His clients include Fortune 500 companies and governments around the world.
Financial advisors should regard clients as partners, not targets of sales pitches, insists Lapin, founder of Lapin Negotiation Services, based in Los Angeles.
The Johannesburg, South Africa-born communications expert, a former rabbi, is certified in Harvard Law School's famed Program on Negotiation. Among his clients are Microsoft, Yahoo, Northrop Grumman, UCLA Medical Center, the U.S. State Department and the governments of Qatar and the United Arab Emirates.
In the interview, he discusses skills FAs need to gain client trust and resolve advisor-client conflicts through powerful negotiation techniques.
Lapin, whose firm specializes in litigation avoidance too, is the author of "Working with Difficult People" (DK Penguin 2009). He writes: "Effective communication drives all successful human interaction. You can develop and refine your communication skills so that you can communicate with persuasion and influence at all times."
ThinkAdvisor recently interviewed Lapin on the phone from his Tower office on Wilshire Boulevard. An adjunct professor at Whittier School of Law and visiting professor at Southwestern Law School, he sometimes makes time to monitor courtroom television shows. So how's Judge Judy doing? Uh-oh, Lapin dings her for failing to zero in on litigants' emotions. That's an important aspect to address in the client-advisor relationship, as he discusses in our interview. Here are highlights:
THINKADVISOR: Clinton vs. Trump – doesn't seem like they're negotiating. But … are they?
RAPHAEL LAPIN: This is a great example of the negotiation approach known as "domination": One is trying to dominate and vanquish the other. It's a unilateral process. [Successful] negotiation is a joint and collaborative process.
Does that go for advisors and clients too?
Yes. In fact, it's something that has to be. This is when advisors become the most potent and powerful – when they're not trying to sell and pitch but engage the client as a partner in the process. A negotiation is being able to understand what your set of needs and concerns are and what mine are. Then let's talk about how we might meet them so that at best, [the solution] can be satisfying for both of us and at worst, we can live with it.
What are the three ways to negotiate?
Domination, which of course isn't good; compromise, which isn't ideal because it's two people with parallel [positions] trying to find common ground; and the integrated concept, which addresses understanding the differences in each other's needs and looks for ways to bridge them.
So the integrated process is best?
Yes, because you're both on the same journey. It's like two men in a lifeboat trying to get to safe waters: You're both on the same boat trying to resolve the issue. You've written of "The Premature Proposal Trap." Why is it counterproductive to present a proposal – such as recommending a particular investment – too soon in negotiating with the client?
If you propose before sufficient trust and rapport are built, the client will automatically have a "reactive devaluation." It's reactive because there's no rationale as to why they're [feeling] that way.
And why do they devalue it?
People make the mistake of putting their solutions out too early, before the other side can feel it's a proposal that meets their needs. Because it's presented prior to a relationship being established, they may feel the advisor is telling them something that's self-serving – and then they become suspicious. If the client feels their needs aren't being addressed, they're not going to go for it, and the premature proposal will be rejected out of hand.
What's the best way for an advisor to have their proposals accepted?
You can do a "responsive proposal" – that is, one the client will consider – only if you understand what needs you're responding to. It's not enough that you know those needs; the client also has to know what you know and understand their needs. They have to feel the advisor is walking alongside them demonstrating an understanding of their needs, concerns and risks.
How does the FA learn what those are?
A process has to take place in which you ask very probing questions. Then you need to demonstrate your understanding by explaining the client's needs and checking for accuracy. As this information-development stage takes place, you're learning more about the client, and the client is becoming more assured that you understand them.
So is that the right time to present a proposal?
