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When most people think of mediation and negotiation, it typically refers to lawyers or third parties who facilitate dialogue between two or more parties to help them reach an agreement. In practice, financial advisors sometimes find themselves in the same position, having to resolve conflicts between a client’s family members or within their advisory team, where it’s essential to find win-win solutions.
Disagreements about money are common among married couples. Money conflicts are often rooted more deeply in people’s attitudes and beliefs about money, or, in some cases, money is not even the primary issue. However, in almost all cases, it involves two or more people who don’t know how to engage in productive financial conversations.
Resolving conflicts is a critical role for Advisors
Granted, financial advisors are not marriage counselors, nor should they try to be. However, you are a financial coach with the responsibility for keeping your clients focused on their goals, holding them accountable for their decisions, and keeping them from making costly mistakes. So, engaging your clients on how to work through their financial differences and have productive money conversations is definitely within your purview.
Most advisors don’t sign on to be family mediators initially. It’s not what they trained for, which is why many are not prepared when faced with a family conflict. But rather than avoid it and hope they resolve it on their own, advisors should run toward it because successful mediation that brings people back together on something as important as their financial future benefits everyone.
For advisors, stepping up to apply mediation skills, consisting primarily of the soft skills we frequently discuss here, is an unparalleled opportunity to strengthen their client relationships. It’s these situations that define the type of advisor you are to your clients and how they’ll talk about you to their friends and colleagues.
Steps to mediating family conflicts
We’ve discussed the preparation and approach advisors must take when dealing with emotionally distraught clients, and it’s really no different here because family conflicts are typically fueled by emotions. As their advisor, you must recognize when it’s time to put your coaching hat on and guide your clients to a win-win solution.
Your goal in this process is to help de-escalate the situation, giving your clients a chance to cool off, catch their breath, and help them remain objective. When the time is right, get them to refocus on their financial goals and priorities and find common-ground solutions they can agree on.
Here’s a three-step process to get them there:
1. Actively listen
Mediation involves first gaining a deep understanding of where your clients are coming from, requiring active listening. Encourage your clients to share their concerns—one at a time—and talk openly about what is bothering them. Your goal is to understand, learn, and obtain new information about your clients.
Active listening means giving your full attention to the person talking, taking note of non-verbal cues (facial expressions, tone, gestures), and playing back what you hear to communicate your understanding or clear up a misunderstanding. An effective way to do that is by asking clarifying questions to let them know you heard them and then getting their feedback on your understanding of what you heard.
2. Demonstrate empathy
Active listening is essential for building trust but showing genuine empathy is your most powerful tool for making a personal connection. Mastering both these skills is vital to drawing your clients closer so they will feel more comfortable opening up to you.
Of course, when dealing with multiple family members, it’s important not to appear as if you’re taking sides. It’s essential to validate each person’s experience and make them feel understood without passing judgment.
3. Get them to refocus on what’s important
When you first took on your clients, you spent a lot of time in discovery—learning about their goals and priorities and why they’re important to them. After having them air out their grievances, it’s time to get your clients to refocus on what’s important to them and determine what, if anything, has changed. If their goals are unchanged, you can suggest that the three of you brainstorm ideas and actions related to achieving them. The idea is to separate each person from their individual concerns, which may or may not be solvable, and focus on their shared interests.
As you can imagine, resolving conflicts can be frustrating and challenging. The most difficult situations may require professional mediation, which you should be prepared to recommend. However, advisors who master communication and mediation skills to help their clients through difficult conflicts are often rewarded with deeper, more trusting relationships and loyal clients who learn how to have productive conversations about money.
Related: Your Best Practices Checklist for Resolving Client Complaints