TGBA #22: The Hidden Competitive Advantage - Asking Better Questions

Welcome to the 22nd edition of?#theGoalsBasedAdvisor ?Newsletter!?

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Does being successful mean having the right answers? Or is it a matter of having better questions? To progress in any field, you have to have the technical skills and training to have the answers or be able to find the answers. But to succeed in any field, I would argue that you need to go from being the person with the right answers to being the person with the right questions.

I learned this first-hand building an ultra-high net worth business and meeting with a prospective client — let’s call him John.

Unlocking Wealth and Values: A Journey with John

It was Summer 2007, and the Canadian stock market was the darling of investors everywhere. People couldn’t get enough of Canadian resource stocks. In this environment, investors were naturally bullish and eager to jump in with both feet. John was the CEO of a successful public company. Within eight years, he had turned the company from one that was virtually bankrupt to a high-flyer that was taken over by another company. In the process, John personally pocketed almost $40 million. John came in very sure of himself and said that he was absolutely not interested in talking to me unless I could get him at least 15% annually in returns.

Now, John was in his mid-forties, so from an age perspective, he could afford to be aggressive in his investment strategy. But the investment strategy is the last piece of the puzzle. I remember saying to John, ‘Let’s assume that I have several investment solutions that could get you this 15% annual return — then what?’ John was confused.

‘John, let’s assume you invest your $40 million at your desired rate of 15% for the next seven years,’ I explained. ‘Leaving aside taxes, fees, and any incidental spending, you’ll have over $100 million in your portfolio at the end of this period. What do you want that money for? What will you spend it on? What’s important to you?’

John paused and pondered. ‘$100 million? I can’t even spend $40 million. You see, I grew up in a poor family, so I don’t have an extravagant lifestyle. I probably don’t need more than $300,000 before taxes each year.’

‘John,’ I replied, ‘If you invest $40 million at 1% — in other words, put it in the bank — then that’ll be more than enough to cover your lifestyle expenses. So, what do you want to do with your money? You just told me you couldn’t spend it all. What’s important to you?’

This got John thinking. A longer pause followed. When John finally spoke, the emotion was in his voice as he talked about his kids — in their teens — and how he wanted to make sure that they grew up with the same values he had, values to which he attributed his success: hard work, perseverance, and a willingness to take risks. He didn’t want his kids to become spoiled by his newfound wealth. What he wanted most, he realized, was to make sure that his kids and grandkids never had to let money concerns get in the way of getting a good education or taking risks. He also realized he’d like to set up a sort of ‘family bank’, so that any of his kids who wanted to start a new business could ‘apply’ to the family bank for financial support.

And just like that, a hard-charging man wanting 15% annual returns a year, just because that was what he was conditioned to expect, started defining what his values, goals, and objectives were. He became a happy client and even happier the following year when the market tanked and his investments didn’t!

John's journey began with a simple question: 'What's important to you?' Ask your clients the same. Explore the deeper meaning of wealth to them and use it to guide their financial decisions.

In the end, John's story taught me that wealth is not just about portfolio returns; it's a reflection of the clients’ values and their dreams for the future. It's a reminder that their financial choices should align with what truly matters.

Conversation — Learning vs. Liking

Questions are an integral part of a conversation. The art of conversation is to have both parties engaged in the discussion. In general, there are two purposes of a conversation : information exchange (learning) and impression management (liking). In an interesting research study , thousands of conversations — either in online chats or in-person speed dates — were analyzed.

The researchers instructed a group of participants to ask lots of questions (at least nine within 15 minutes); the second group were to ask a few questions (no more than four in the same timeframe). During online chats, those who were encouraged to ask many questions were better liked by their conversation partners and gained a deeper insight into their partners' interests. In the speed dating scenario, individuals who asked more questions on their first dates found a higher willingness from their partners to go on a second date.

Asking questions fosters a sense of liking due to its role in signaling responsiveness. This concept of responsiveness includes both verbal and non-verbal behaviors that meet the needs and desires of one's conversation partner. Here responsiveness is defined as reflecting three components: understanding (accurately comprehending the other person’s self-perceptions - needs, goals, beliefs, emotions, and life situation), validation (valuing and respecting the other person’s perspectives), and care for the partner (showing affection and concern for the person and their situation). Interestingly, the research found that follow-up questions were “an important behavioral indicator of responsiveness, and we find that asking a higher rate of follow-up questions reliably predicts partner liking”. This is because, as the researchers note:

Follow-up questions are only possible if an individual asks an original question, listens to the answer, and probes for more information (i.e., understands the answer, validates the partner, and cares to know more — the definition of responsiveness).

Determining what really matters

If asking better questions and more follow-up questions is critical to liking (and learning), how do we do it better? After all, as noted in the Harvard Business Review article , professionals such as litigators, journalists or physicians are taught how to ask questions as an essential part of their training. Advisors are not. Indeed, one of the findings and recommendations in my doctoral thesis was that this become a greater focus for training and continuing education in the industry.

There are a few places where advisors can start. In clinical settings, Motivational Interviewing (MI) is often recommended as an evidence-based approach to behavior change . In the clinical setting, “it is important to note that MI requires the clinician to engage with the client as an equal partner and refrain from unsolicited advice, confronting, instructing, directing, or warning. It is not a way to “get people to change” or a set of techniques to impose on the conversation. MI takes time, practice and requires self-awareness and discipline from the clinician.”

However, there are a few takeaways that may be easily incorporated into advisory practices. One of the techniques to effective MI is in more effective questioning by using the OARS technique:

Open Questions: to draw out and explore the client’s experiences, perspectives, and ideas.

e.g. Help me understand ___?; How would you like things to be different? What have you tried before to make a change?

Affirmations: of strengths, efforts, and past successes help to build the client’s hope and confidence in their ability to change.

e.g. You handled yourself really well in that situation; That’s a good suggestion.

Reflective Listening: by repeating or rephrasing what the other person said, the advisor demonstrates that they have carefully listened, incorporated and understood what the client said.

e.g. It sounds like you… ; You’re wondering if…

Summaries: by summarizing the conversation, the advisor shows understanding and reinforces the key points made by the client.

e.g. Let me see if I understand so far…; Here is what I’ve heard. Tell me if I’ve missed anything.

As Bruce Lee observed: “A wise man can learn more from a foolish question than a fool can learn from a wise answer".

To truly serve clients, advisors need to ask better questions. By doing so, not only are they building a deeper trusted relationship, but they are also learning the key hopes, fears and experiences that the client is dealing with. And in so doing, they can identify the problems and help to solve them. No AI can do that.

This is the key to becoming the Future-Ready Advisor.

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