Archive for February, 2010
Friday, February 26th, 2010
Wednesday, February 24th, 2010
This is a guest post by Bill Bachrach, Bachrach & Associates.
You may never see your name in lights or dazzle the crowd at Carnegie Hall. Yet there’s no doubt that a trusted advisor can achieve celebrity status among the people who matter most—your target market.
This kind of “stardom” means prospects recognize your name as soon as they hear or read it, you are looked upon as an expert, and your business is 100% referral-based. The benefits of this kind of usiness are obvious: extraordinary credibility that leads to countless introductions and natural, easy prospecting conversations—plus the bonus of knowing you are truly outstanding in your field.
Eight Roads to Stardom
1. Write a Book on Making Smart Financial Choices, Specifically for Your Target Market.
This is not as difficult as you may think. You don’t have to reinvent the principles of financial success. Your book should simply combine the fundamentals and your philosophy—all in your own words. The research must be factual, but your opinions are what will make the book unique.
Write about an area in which you have expertise, and address the issues that are currently relevant to your market. Then target the book narrowly and specifically so that the people you want to reach will immediately see that it is of interest to them.
Publishing a book gets your clients’ egos cooking: “My financial advisor wrote a book!” Its a great way to get referrals—sending an autographed book to potential clients is much better than sending promotional literature, and it’s a great enhancement to your value-added mail campaign for referrals.
2. Subscribe to the Publications Your Target Market Reads.
The professional association for your target market probably has at least one publication and possibly more, ranging from sophisticated magazines to desktop-published newsletters. Build a relationship
with the editors of these publications so they will invite you to participate as an author or as a member of the editorial board.
By reading these publications, you will become familiar with the leading figures and current issues in your target market. You send an article of interest to a client, or even write an article in response. This demonstrates your value to clients: you not only know your business, you also know their business.
3. Write Articles for Publications That Give Specific Financial Advice for Your Target Market.
To find out which publications are best for your articles, read each journal’s mission statement and author’s guidelines. Often the editors are happy to receive articles giving financial advice written specifically for their readers. (They might even pay for them.) Check the masthead in the front of the publication to see if it lists a finance editor. If it doesn’t, volunteer to be one!
4. Get Involved. If you become involved in professional associations relevant to your target market, you may be asked to speak at meetings or contribute articles. All these activities give you the name recognition that is the beginning of celebrity.
By all means, get involved in the association, but don’t try to sell anything to other members right away. First get to know the decision makers. Prove that you are a contributing member with a genuine interest in the organization. By resisting the temptation to sell anything, you are showing the members you are different. You are a contributor. Then you’re on the way to making great contacts who will help you understand the market.
5. Capitalize on the Information You Get From Professional Meetings and Society Publications.
Information about your target market is out there if you pay attention. Sometimes you can get association publications, a great source of information, without being qualified for membership in the organization. For example, I subscribe to the Million Dollar Round Table’s publication, Round the Table, which I had initially assumed was for members only. Don’t assume! Check it out. There are many publications non-members can subscribe to.
6. Become a Good Public Speaker. If you enjoy speaking and have worked on developing this skill, you can give seminars for professional organizations that represent your target markets. Volunteer for the planning committee and suggest a seminar such as “Managing Your Money” or “Creating an Effective Business Plan.” If they like the idea (and they usually will), volunteer to present the program.
How can you become an impressive speaker? Give a lot of speeches and get comfortable in front of an audience. This may include joining your local chapter of Toastmasters International. Get feedback so that you can constantly hone your skills. Hire a coach. Make a commitment to becoming a good speaker by establishing goals and milestones, and follow through on your commitment.
7. Research and Interview the Most Respected People in Your Target Market. Don’t you hate it when someone approaches you and tries to sell you something without knowing anything about you? Understanding your market and the people in it is crucial in building high-trust, long-term relationships. Making the extra effort to be informed about the hot issues and unique perspectives of those in your target market will not only help you build better relationships, but it will also help you to meet other potential clients.
Get to know those people who will provide you with introductions to other key people. The smaller and tighter your market, the easier it is to become well known. And once your credibility is established, your contacts will continue to provide you with referrals. Soon you will have a referral-based business with Great Clients.
8. Get Testimonials From People Who Think You’re Wonderful. Believe it or not, the first step in getting testimonials is to ask for them. Next, you can ask three specific questions, the answers to which become the basis for the testimonial letter:
• What did you expect to get when you first met with me?
• What did you actually get?
• What have been the results of our relationship?
The outcome of these pointed questions is often a glowing testimonial letter that you can use in your brochures or the foreword of your book.
Start on the road to celebrity by choosing the path on which you feel the most comfortable. As you probably noticed, some of the routes lead naturally to others in my list of suggestions. If you commit yourself, target your market, and stay focused you will attain stardom.
Don’t just be a salesperson; be a trusted advisor!
Tags: Bill Bachrach, Carnegie Hall, Celebrity Status, Conversations, Credibility, Egos, Enhancement, Financial Choices, Financial Success, Introductions, Mail Campaign, No Doubt, Professional Association, Prospects, Publishing A Book, Referrals, Sophisticated Magazines, Stardom, Target Market, Write A Book
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Wednesday, February 24th, 2010
When advisors think about ways to drive their business forward, they often look for dramatic initiatives that hit the ball out of the park.
Last week, I had a conversation with a twenty year veteran who’s a perennial qualifier for his firm’s Chairman’s Club. He described a change he made to his routine ten years ago that’s had a big impact on his business.
Every morning, his assistant prints out a “Conversation Diary” which has four columns.
The left hand column lists all the clients and prospects he’s meeting with or are on his schedule to call that day.
The next three columns are labeled Client Goal, My Goal and Information Gap.
Under Client Goal, he writes down the one thing he wants to achieve in his meeting or phone conversation that would serve the client’s interests. It might relate to rebalancing their portfolio, talking about using appreciated securities for charitable giving or discussing strategies around minimizing capital gains on a cottage property.
Under My Goal, he writes down the one thing he wants to achieve in the conversation that would advance his business …. for example, Inviting the client out to an upcoming dinner for key clients, getting to know their spouse or children or obtaining an introduction to their accountant.
Finally, under Information Gap, he writes down the one new piece of information about the client he wants to take away from the meeting.
After the meeting or phone call, he goes back to the Conversation Diary and writes down a score beside each of the three goals – 0 if he’s didn’t make any strides on this, 10 if he achieved it completely and 5 if he was partly successful.
He then writes down a total score for that meeting or phone call, out of 30 – that score represents the success of that conversation.
At the end of each day, his assistant takes the diary and calculates a composite average for all of that day’s conversations with clients and prospects.
The advisor tracks that score over time – each day, each week, each month and each quarter – and has all of the members of his team who make proactive calls to clients do the same.
This has become a central measure of how this advisor tracks the effectiveness of meetings and phone calls. At one level, this isn’t a big thing – many might say that this was in fact a trivial change in how he operates.
And yet as this advisor looks back, he attributes a large part of his success to the discipline that the Conversation Diary brought to his client conversations – and the greater productivity and effectiveness of these conversations as a result.
So when you look at ways to advance your business, by all means consider the big breakthroughs … but at the same time don’t ignore the small things that can have a dramatic impact over time.
Tags: Accountant, Capital Gains, Compendium, Diary, Gap, Information Gap, Initiatives, Left Hand Column, Phone Call, Phone Conversation, Prints, Prospects, Score, Strides, Target, Veteran
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Wednesday, February 24th, 2010
In the investment industry, few debates are waged more intensely than that between “active” and passive” investing. As investors read media coverage about the futility of trying to pick stocks and the advantages of investing via ETFs instead, more and more are questioning the fees they’re paying for investment advice.
That’s why an award winning research paper by two Yale academics, looking at active managers in a different light is so important. This research, which is the focus of my column in today’s Globe and Mail, identifies a new measure called “active share” – and demonstrates that managers with high active share can in fact beat their index over time.
The roots of the active passive debate
The passive argument really began with Princeton professor Burton Malkiel’s classic 1973 text “A random walk down Wall Street.” The book argues that the stock market is fundamentally efficient, reflecting everything that is known at a given point in time. As a result, it is futile to try to outperform the stock market – and the best way to invest in stocks is through low-cost index funds that essentially match the market’s overall performance.
In the United States, the growth of index investing was spurred by Vanguard Funds and its founder and Chairman, John Bogle – today Vanguard manages over $1 trillion dollars (almost twice the size of the entire Canadian fund industry) and is among the top three U.S. fund complexes.
Over the past decade, the launch of exchange traded funds has given passive investing a boost, as these offer investors the opportunity to participate in an ever more focused group of indexes.
The majority of academics subscribe to the efficient market theory and support passive investing – but the events of the past couple of years have called into question just how efficient the stock market actually is.
A different definition of active management
In 2006, Martijn Cremers and Antti Petajisto of Yale University published a paper titled “How active is your fund manager? A new measure that predicts performance.” Winner of best paper at the Finanical Research Association 2006 annual meeting, the authors examined over 2500 U.S. mutual funds from 1980 to 2003, looking in particular at what the authors called their “active share”.
The active share of a fund is the extent to which its holdings don’t overlap with the benchmark index that the fund tracks – a fund with active share of 100% would have no overlap with the index, while an active share of 0% would exactly track the index. You’d expect index funds to have a 0% active share, but what about so-called actively managed funds?
Some of the key conclusions from the authors:
- In 2003, only half of self-described active funds were truly active, with an active share of 80% or higher. This compares to eight out of ten funds with a similar active share in 1980, at the beginning of the study.
- And larger funds tended to have lower active share. When looked at by assets under management, the percentage of assets with active share under 60% grew from under 2% in 1980 to over 40% in 2003. By contrast, the percentage of assets with active share over 80% fell from 58% in 1980 to under 30% in 2003.
- Part of the decline in active share is due to the rise of index funds. Beyond this, however, the authors identified significant growth in what the industry calls “closet indexers” – funds that charge management fees for active management but that closely track their index.
- There is a direct correlation between true active management and performance. Funds with the highest active share outperformed their index after expenses by 1.5%; the least active funds underperformed by 1.5% — so there is a gap between high active and low active share funds of almost 3% annually.
- Size matters – smaller actively managed funds outperformed large actively managed funds by about 2% per year.
- Fees were not an indication of active share – closet indexers charged just as much as funds that were truly actively managed.
- High active share doesn’t mean greater volatility – the study showed that funds run by strong stock pickers had similar volatility to their benchmarks, even though their portfolios were quite different and their returns tended to be higher.
While attending the annual meeting of the American Economics Association in Atlanta at the beginning of January, I had a chance to chat with Martijn Cremers, one of the study’s co-authors.
Cremers discussed a key finding on the persistence of above average performance – as long as they have a high active share, managers who have done well in the past three years tend to do well in the next three.
He also talked about the dramatic growth in closet index funds, supposedly active funds that didn’t appear to be active funds at all.
He attributed this to three factors: First, as funds became successful and grew in size, some managers became more risk averse and cautious about making big bets. Second, the greater difficulty of deviating from the index as a fund grows in size. And finally, he suggested that in the U.S. some managers with demonstrated skill had left the mutual fund industry for the greater financial rewards in hedge funds.
Finally, he differentiated between two types of funds with high active share. The first were run by traditional stock pickers, whose focus was on taking concentrated positions in a relatively small number of stocks, making decisions on the merits of each individual stock.
The second category were run by fund managers who made what the industry calls “factor bets” – essentially making macro judgements to rotate from one industry sector to another or in some cases go to cash entirely.
Cremers said their research showed that as a general rule, funds focused on stock selection had better returns than those that made market timing calls, although as long as they were truly active, both tended to outperform their index after expenses.
Today, Canadians go to great lengths to ensure they get good value on major purchases. This research suggests that when it comes to recommending actively managed mutual funds, advisors need to go beyond just performance numbers to dig deeper into how a manager delivered those numbers – and in particular the extent to which they deviated from their underlying index and had a high “active share” as a result.
To read today’s column in the Globe and Mail on active share, click here: http://www.theglobeandmail.com/globe-investor/investment-ideas/only-the-truly-active-fund-managers-lead-the-pack/article1476655/
To watch the interview with Yale University’s Martijn Cremers, click here: http://clientinsights.ca/video/martijn-cremers-new-research-on-outperformance/type:investor
And to read the award winning study by Cremers and Petajisto, click here: http://rfs.oxfordjournals.org/cgi/reprint/hhp057?ijkey=M0noS3O1M6QvzdG&keytype=ref
Tags: Active Share, Award Winning Research, Book Argues That, Burton Malkiel, Chairman John, Cost Index, Different Light, Efficient Market Theory, Exchange Traded Funds, Globe And Mail, Investment Advice, Investment Industry, John Bogle, Launch, Low Cost Index Funds, Princeton Professor, Professor Burton, Random Walk Down Wall Street, Target, Vanguard Funds
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Wednesday, February 24th, 2010
Monday, February 22nd, 2010
Monday, February 22nd, 2010
Wednesday, February 17th, 2010
Wednesday, February 17th, 2010
A recent post contained a warning from a top producer about the risks of being seen by clients as dismissive of their losses – I got lots of positive comments on this article.
Last week, I talked to a thirty year veteran of the business who’s consistently ranked among his firm’s top ten producers.
I asked him about the single most important thing he’d learned over the course of his career – he answered with four words.
Those words: “ Focus on big problems.”
He went on to say:
“When I meet with prospects, I concentrate all my time on understanding the biggest issues that they’re concerned about, the things that are really bothering them. In my experience, there’s no better use a meeting with a prospect than digging deep to understand their hot buttons … the more you can get a prospect to talk about what’s really bugging them, the better the chances of a positive outcome.
“And the same applies to clients.
“When I’m meeting with clients” he said, “I make it my number one priority to ask what’s causing them the most concern, the thing that’s keeping them up at night.
“And you don’t always get the obvious answers” he continued on.
“These days you’d expect people to talk about losing money on investments, market volatility and outliving their, money …. and you certainly do hear that.
“But earlier this year I met with my biggest client and asked that question. This is someone with over $10 million dollars …. and they talked about how disappointed they are about the lack of ambition among their kids and concerned about whether this will be passed on to their grandkids.
“ My clients said they couldn’t do anything about their kids at this point … but still had hope for their grandchildren.
“We talked about what they could do about this … and ended up deciding to set aside some money to fund activities for their grandkids to open their eyes to more possibilities, things like taking them to Europe or Asia on holidays, maybe funding summer school at Harvard or Oxford when they were in their teens, perhaps encouraging their parents to look at something like Pearson College on Vancouver Island when the kids hit 15 and offering to pay for this.
“We also talked about the clients setting up a trust fund for their grandkids’ education – so that they could go anywhere in the world to study without worrying about paying for this …. but structuring it in a way that that they couldn’t use it for any other purpose. While we were in the meeting, I actually called a lawyer I work with and booked a meeting for them to meet with me and these clients to talk about this.”
The advisor finished by saying: “Even though I’ve been working with these clients for many years, this is the first time this came up in conversation. And it wouldn’t have happened if I hadn’t asked about what was causing them the most concern these days.”
There are lots of things you can talk about in conversations with existing and prospective clients. As you think about how you use the time during meetings, consider adding a focus on the really big problems they’re grappling with to the list.
And to read the tip from the top producer a few weeks ago, discussing the risk of having clients feel you are dismissing their losses, click here:
Tags: 10 Million, Ambition, Asia, Europe, Grandchildren, Grandkids, Hol, Hot Buttons, Losses, Market Volatility, Million Dollars, Money Investments, Money Market, Possibilities, Priority, Producers, Prospects, Single Most Important Thing, Top Producer, Veteran
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