On Using Assessments to Screen Prospects

While visiting Santa Cruz last year in August at the FPA Far West Roundup, I stepped into a surf shop on the wharf and saw a magic 8-ball for sale (I’m still not exactly certain what magic 8-balls and surfing have to do with each other). I hadn’t seen one of these things in quite some time, and it reminded me that, much like many of the other toys and games our children play with, the magic 8-ball is make-believe. In real life there is no device that can predict the future with perfect precision, especially when it comes to human behavior.

Fortunately, we can anticipate some of the things that people will do in the future by looking at what they have done or experienced in the past. Here at DataPoints we apply this science in our tools for identifying client financial behaviors and helping to anticipate investor behaviors. Our client-advisors and financial advisory firms use these tools to get to know their clients and to identify ways to coach and guide behaviors and decisions related to their money. These assessments can add efficiency and personalization to the onboarding process.

Certainly assessments can speed up the get-to-know-you process, but what about using them with prospects? One of the questions from the advisors who attended my session at the Far West Roundup was “can I use assessments to evaluate prospective clients? Can I ‘screen out’ certain prospects?” I’ve been asked that question before by other advisors, including on this podcast with Michael Kitces. As is often the case, the answer is–surprise!–it depends.

It depends on how you a) describe the use of any kind of assessment (or other screening tools) to your prospects, and b) present the outcome of that screening back to your prospects. It also depends on whether or not the assessment actually does what it says it will do–in other words, if the assessment is a valid predictor of behaviors you’re looking for (or in the case of screening, what you’re not looking for).

As an example, client scores on Building Wealth are related statistically to net worth and other types of client outcomes like likelihood of withdrawing savings from a 401(k) account and firing professional advisors. Since our assessments have been used by advisors over the past few years, some have shared with us that clients with extremely low scores on the test are often challenging to work with, while clients with high scores are often those who only need a “check up” to see how they’re doing as opposed to a long-term, hands-on relationship. Some financial coaches have indicated that they prefer to work with clients who score lower on Wealth Potential (the overall score from our Building Wealth assessment) because it provides greater opportunity for guidance and “personal financial training.” Part of our work on the research side of the house is to provide more empirical evidence of the ability of our assessments to predict these types of client-advisor related outcomes.

In the world of HR and hiring, many organizations use assessments as part of the hiring process but rarely tell applicants how they did, instead just giving them a thumbs up or down on the application without specifics. In that situation, using assessments as a hurdle without detailed feedback is common (but probably not desirable). However, in a business providing services directly to clients, personal relationships, building rapport, and demonstrating empathy are critical. It is essential to make sure you’re up front about a) your get-to-know-you process, and b) why you use assessments and what information your prospective client will receive and what it’s used for.

If you are considering screening prospective clients with any tool, including assessments like the Building Wealth test, here are a few recommendations.

  1. Be transparent. Have an open and transparent description of the types of clients you have success with, and how you make screening decisions. Providing this process to prospective clients helps them to evaluate “fit” for themselves and sets expectations about how you make these decisions.
  2. Have prospects screen you. Encourage prospective clients to understand more about your services so that they can also screen you (e.g., “do I want to work with an advisor that wants to discuss holistic financial planning?”). This approach can help to ensure a better two-way fit to the relationship. As another example, clients who want to consistently beat the market will have a hard time working with an advisor who has a more conservative approach to investing. Save time and effort by sharing your philosophy up front.
  3. Have a solid plan for communication. Have a plan for delivering feedback and your decision regarding fit. Share the client-facing report with them, and even provide specific recommendations on how they can improve their chances of financial success in the future. If you decide that the prospective client won’t be a good fit, work to deliver that message in a way that demonstrates your respect for them. The best outcome from delivering such a message would be for that prospective client to say “It didn’t work out for us, but I would recommend her to anyone.”
  4. Recommend others. Give those prospects who aren’t a good fit options for financial advice. Have a back-up plan if you decide the prospective client isn’t a good fit, including other advisors who may be able to provide that prospect with advice and guidance. This will serve to maintain goodwill even if you aren’t going to work together.

To reiterate one of the points above, be aware that all of your marketing and get-to-know-you processes serve as ways for prospective clients to screen you. This includes any calls to action on your website, the process you use to contact your prospective clients for the first time, or the way in which you communicate over email. Evaluating your customer journey is critical. Consider feedback from clients/non-financial services friends who can help you evaluate the content, look, and feel of the messages you’re sharing in your marketing efforts.

Fit is a two-way street. Adding assessments or tools to your client screening process can add efficiency, but must be tempered with respect and transparency to ensure that all prospects, even the ones that may not fit with your practice, have a favorable experience and have options for financial planning outside of your services.

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