Behavioral science is becoming more and more integral to the financial business. I’ve heard advisors tell me that managing client expectations and predicting their behavior is a huge part of their daily work. Within the field of behavioral science, risk communication is an interesting and emerging area.
Marketing consultant Michael Carpenter in Boston, recently sent me an article he’d written about improving client trust, in which he linked to and quoted The Center for Risk Communication. I’d never heard of them before, but this organization apparently counsels some of the largest corporations and government entities in how to more effectively communicate with customers and business stakeholders in before and after a crisis or high-stress situation. (We’ve certainly had a few of those in the last decade).
In general, stressful situations might include a major change in the organization, an environmental disaster or accident. All of these events require managing public and internal perceptions, especially when there is a palpable threat in people’s minds. These instances require consistent communication from the company or organization that is reassuring while at the same time, factually accurate. The goal is to be perceived as trustworthy and credible.
And what did the Center discover in its research? People want to know you care – and they want to know you’re smart. But “caring and empathy” are more than twice as important in establishing trust.
See this … the four elements of establishing trust, according to the CRC:
I thought that was an interesting visual that gives you a vivid reminder of what people are looking for from you in stressful situations, which may involve a market drop, a back office error, or other problem in their financial lives. It reminds me a little of a doctor’s so-called “bedside manner” – definitely an underrated part of any physician’s success.
In fact, Carpenter goes on (in his article: Improve Client Trust and Communications in Volatile Markets ) to point out some excellent advice, that was originally developed for doctors:
Understanding and applying what risk communications experts have learned about effective communications during periods of elevated stress and uncertainty can be extremely valuable. …
“Compassion and Caring Determines Risk Acceptability,” or “CCDRA” is a simple, mnemonic risk communications model that can help accomplish an adviser’s risk communications goals. Experts on the subject recommend using its steps when communicating with clients affected by anxiety, uncertainty and fear associated with negative investment surprises and volatile markets. Guidelines put forth by the Department of Defense’s Deployment Health Clinical Center designed to help military doctors achieve effective risk communications with patients can easily be applied to the adviser-client relationship.
Here are steps to achieving effective CCDRA risk communications based on those suggested in a 1999 Deployment Health Clinical Center paper by Charles C. Engel Jr.:
Begin your message with a statement of compassion and understanding.
Offer a brief, simply stated, “sound bite” conclusion statement.
State no more than two succinct pieces of data that support your conclusion.
Repeat your brief conclusion (in a slightly different way), and ask if you have made yourself clear; don’t assume.
Agree on an action step, such as a follow-up phone appointment in a couple of days or weeks. Investors are less worried when their concerns are not being ignored or rejected and an action step is in place, even if that action step is as simple as a phone appointment to re-evaluate developments.
You can read the whole article here: Improve Client Trust and Communications in Volatile Markets
Carpenter authored the book, The Risk-Wise Investor: How to Better Understand and Manage Risk.
What have you learned about risk communication with clients?
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