I know advisors who feel it’s their job to educate clients and educate their prospects. I always know that these are poor advisors. I promise you, if you educate your prospects/clients, you’ll never earn more than a school teacher.
The fact is, we pay lip service to education in our society. We talk about how important education is, and then we pay our teachers measly salaries, on par with garbage collectors. We live in a culture that votes with their pocketbook, so it’s clear that the public does not value education. Therefore, client education is a commodity that prospects and clients don’t value. They are however interested in feeling good.
“But wait,” you protest, “I have to educate my clients because there is so much they don’t realize. They don’t understand how long they’ll be alive, and they don’t know how much a college education will cost. If I don’t educate them, how can I do any planning for them? They won’t implement anything until they understand.” True enough, clients need to understand their problems, but you can’t educate them by telling them about these issues.
Clients need to realize their problems and opportunities and realizing is different than learning. If you want your client to have a realization, they must do the realizing on their own. For example, if I tell you how painful it is to be punched in the stomach, this is different than being punched in the stomach and realizing the pain for yourself. So if you want your clients to truly understand, you must ask them the appropriate questions so that they realize the appropriate course of action for their financial affairs.
You may have noticed that Americans don’t like to be told anything. We are a culture of know-it-alls. Apparently, the ancient Greeks were the same, so Socrates had to invent another way to teach people. We now call it the Socratic Method. If you want your prospects and clients to truly learn anything, use the Socratic Method. I can personally attest that I have learned more in venues that use that mode of teaching than anywhere else.
Socratic method
The method of teaching in which the master imparts no information but asks a sequence of questions, through answering which the pupil eventually comes to the desired knowledge.
Here’s how to teach your prospect/client about college funding (or whatever it is they need to know in order to take action):
You: Bob, are you worried about the finances to send Johnny to college?
Bob: No, not really.
You: Do you know how much four years at a good private school costs?
Bob: I’m sure it’s plenty, so we’ll just have to borrow some money and qualify for aid.
You: Let me ask you. As the population ages and the government needs more resources to care for seniors, do you think the amount of money for college aid will go up or down?
Bob: It’s got to go down
You: So do you think it’s a sound plan to rely on college aid programs which have already been cut and will be reduced further?
Bob: No. So what should I do?
(at this point, the average advisor will blurt out the solution. Hold your tongue please and continue as Socrates would)
You: What do you think you should do?
Bob: I guess we could start some type of college fund, but I don’t think I have the cash flow for that.
You: If you did have the cash flow, is Johnny’s getting a good education important enough to you?
Bob: Of course
You: Let’s assume for a minute that you had $300 a month to put in a college fund. How do you think it should be invested?
Bob: In something safe so the money’s there at college time.
You: You know enough about investing by know—where should we invest this hypothetical money?
Bob: I guess in bonds that mature when Bob is ready for college.
You: That seems sensible. Do you see any downside to that choice?
Bob: Well, what do bonds pay now?
You: About 6%
Bob: Oh, then maybe they should be mixed with some growth. Didn’t you show me a chart that showed stocks growing at 10% annually?
You: Good memory. But what if the stocks don’t perform at 10% annually and actually lose money?
Bob: Well, you know what I really need? I need to see how much the $300 a month would grow to with the bonds. Maybe the 6% will be enough. And then I need to see a projection with different scenarios mixing in some stocks. And what is the projected rate of increase in college costs?
You: Would you like me to prepare those projections for you?
Bob: Yeah, that’s what I really need to see.
You: Based on your last salary increase, did you know that you can comfortably put $300 a month away for Johnny?
Bob: Really? Then let’s do that.
You: Okay. Let’s meet on Wednesday. I will have the projections, and then we can decide the best way to get the funds working. Bob, does this approach seem more sensible than just keeping your fingers crossed about John’s education?
Bob: Yeah, I actually feel better about it. I typically procrastinate thinking about things I don’t understand. Thanks.
There’s an old saying that you can lead a horse to water but you can’t make him drink. When you use this method of questioning to have your clients realize the appropriate solutions for themselves, you lead your prospect to water and they quench their own thirst. And by the way, with this method, you get your prospect committed to action before discussing any products. And since every answer they provided to your questions was their idea, you never get any objections.
