Speaking to clients about the risk posed by hackers and security breaches is never an easy conversation. When trying to reassure clients that their money is safe, it seems counterintuitive to focus on all the things that could go wrong.
However, strengthening the client relationship means being as transparent as possible with the benefits and risks inherent to the financial industry. Knowing how to broach the sensitive subject of risk management is an important skill, particularly if you want to compete in an increasingly digital (and, therefore, digitally dangerous) industry. Here are three strategies to use when explaining the importance of risk management to clients.
Don’t Downplay Risks To Clients
Mitigating financial risk is a complex subject many spend years learning about. When having conversations with clients, though, address the real concerns most clients have when entrusting their money to a third party. Approaching discussions about risk management through an empathetic lens can reassure clients that you care enough about their financial well-being and understand where they’re coming from. It also sets the foundation for an honest working relationship that can help you make the most beneficial decisions for your clients.
Avoid jargon and invite clients to be active partners in investment decisions. Using clear and concise terminology to describe your firm’s approach to risk management also helps clients recognize its importance. It can also empower clients to understand — at least, on a high level — how their information is protected and any general procedures in place for minimizing risk.
Technical, real-world examples can help showcase your firm’s risk management policies. Relying on Docupace to exemplify how data remains secure and investments remain legally and ethically compliant is one strategy for educating clients on the topic. Overall, the most important thing is to start with the basics: if you were in your clients’ shoes, what would you want to know about how your information will be kept safe?
Focus On Your Clients’ Needs
Another way to organically include risk management in client conversations is by infusing it into the portfolio planning process. Before recommending investment options, understand clients’ preferences and long-term goals.
Some common questions to ask clients include:
- How would you like your financial situation to look within the next 5 years? 20 years?
- What kinds of companies/organizations would you like to buy shares in? Do you value environmental sustainability? Consistent stability in the market?
- How comfortable are you with taking investment risks?
- What are your plans for retirement? What kind of monthly income do you want available after you retire?
As part of the same discussion, advisors can tie in risk management with their investment recommendations. Based on client answers, tailor risk management discussions toward topics and threats pertinent to each person. Being transparent with this strategy will build client/advisor rapport and mutual trust.
Establish Processes And Platforms For Addressing Security Risks
Discussing risk management with your clients isn’t effective if you don’t have the time or resources to properly secure their information. Investing in technological solutions that identify, remediate, and document risk gives advisors more time to provide personalized investment advice.
Involving clients in building out a comprehensive risk management plan can help them see how the right platforms and processes mitigate risk. Knowing who is accountable can reassure hesitant clients that you have an actionable plan for addressing any threats that may arise.
No risk management plan is perfect. However, informing clients about the dangers that can get through even the most robust security system provides them some agency in the level of risk they feel comfortable with. Tools like Docupace can serve as a further barrier against threats and reassure clients that automated risk assessment is happening behind the scenes at all times. When it comes to risk management, transparency with clients is far better than downplaying the dangerous truth.
For more information on how Docupace can support your risk management strategy, please contact us for a discovery call here.
