The Advisor Institute: Coach's Corner
Listen, learn and teach

Practical messages intended to help you elevate the success of your practice.

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      By David GordonDirector, Eaton Vance Advisor Institute

      In "Chasing Positivity®: The Charismatic Advisor® in Conversation," David Richman and Dr. Robert Brooks introduce a new paradigm called the 3 Dynamics to help advisors have conversations with clients that are positive and productive — communicate empathically, collaborate consciously and inspire action.

      The 3 Dynamics are especially valuable in conversations with clients who are emotionally attached to concentrated positions of stock — particularly when those shares are employer stock. The primary risk associated with concentration is loss of value, yet the emotions and biases that attend that concentrated position can make it very difficult for clients to "let go" of shares. In a sense, their feelings for the stock are tangled up in their feelings about themselves, as though the company's fortunes and their egos are one.

      How can an advisor begin the process of helping a client diversify a concentrated position of employer stock?

      1. Listen by communicating empathically. Take time to listen to the client's stories so you can understand the attachment to the stock.  Ask questions like:

      • "What do you see as your proudest accomplishment at [company]?"
      • "What legacy do you hope to leave behind at the company?"
      • "What does it mean to you to be a shareholder of your employer?"

      2. Learn from collaborating consciously. Next, ask about other concentrations of employer stock that may not be immediately visible to you, such as shares held in a qualified retirement plan or employee stock purchase plan. Ask questions like:

      • "How much of your retirement security is dependent upon the performance of your employer's stock?"
      • "Have you thought about the relative attractiveness, from a tax standpoint, of your various exposures to employer stock?"
      • "Should we include those assets administered elsewhere in our planning work together?"

      3. Teach by inspiring action. Finally, build on the first two steps by helping the client understand that the tax code makes some shares of employer stock more attractive than others (even if they look the same). Help the client take action by asking questions like:

      • "Would you be interested in keeping more of the employer shares the tax code rewards you for keeping, and diversifying away from the less attractive employer shares?"
      • "Can we include future exposure (of unvested awards, for example) in your calculation of how much employer stock exposure you would like?"
      • "Should we make a plan for selling, gifting or transferring shares of employer stock as part of your broader financial plan?"

      Bottom Line: Applying the 3 Dynamics can help clients understand how and why they should diversify employer stock — and can inspire them to take action.