Strategic Problem Solving or What’s The Cost of Losing a Client?

Wednesday, March 28th, 2012

by Bob Simp­son, Syn­chronic­ity Per­for­mance Consulting

Every sin­gle day, we are faced with problems:

• Per­sonal Problems
• Client Prob­lems
• Busi­ness Problems
• Rela­tion­ship Problems
• Finan­cial Problems

to name a few.

In fact, as a finan­cial advi­sor, you are in the busi­ness of solv­ing problems.

What is your process for solv­ing problems?

Strate­gic Prob­lem Solv­ing is a process that you can refine to pro­duce your sys­tem for solv­ing prob­lems for your­self and your clients.

Step 1 – Quan­tify the problem

One of my goals in work­ing with advi­sors is to “sim­plify every­thing” and focus on doing work that has the great­est impact on suc­cess, or focus on the 20% of activ­i­ties that pro­duce 80% of results.

Rather than fol­low­ing a tra­di­tional approach of “find a problem/fix a prob­lem”, you will achieve grater results by pri­or­i­tiz­ing the prob­lems and work­ing on the most impor­tant ones.  This is achieved by putting a finan­cial value on a problem.

Here’s an exam­ple.  You get a call from a client in which you are informed that this client is trans­fer­ring his account to another advi­sor or more likely, you get a transfer-out notice and no call.  In your dis­cus­sion, you try to iden­tify why your client made this deci­sion and find out that he is not sat­is­fied with fre­quency and qual­ity of contact.

Fol­low­ing the call, you sit at your desk and try to put a num­ber on how much rev­enue you lost as a result of this defec­tion.  This client had $750,000 in a 1% fee-based account.  So you have lost rev­enue of $7,500.  Not so fast.  If you had bet­ter sat­is­fied the client’s needs, this client who is in his early 50’s may have stayed with you for another ten years, for exam­ple.  So the num­ber is $75,000.  Think again.  This client plans to con­tribute $25,000 per year and will, in all like­li­hood, receive an inher­i­tance of $500,000 over the next ten years AND the account should grow, based on a con­ser­v­a­tive asset allo­ca­tion model of 6% per year.  Then, as you plan to retire and sell your busi­ness in ten years at 1.5 times rev­enue, you will lose this as well.

Based on this sce­nario, the loss of this one client will cost you approx­i­mately $86,000 with­out the inher­i­tance and over $113,000 in pre-tax income, if the inher­i­tance was received in the fifth year.

This num­ber gets crazy if you con­sider how many other clients you may lose if you don’t fix this prob­lem and poten­tial refer­rals, if you did a good job.

By quan­ti­fy­ing prob­lems, you are bet­ter able to pri­or­i­tize them and get them resolved before it costs you a small fortune.

How impor­tant do you think it is to solve a prob­lem like this?  How many clients have you lost in the last three years?  Sorry, it was not my inten­tion to make you feel nau­seous.  Maybe, you should get in touch with us?

Step 2 – Iden­tify the root of the problem

Some prob­lems are sim­ple and some are very com­plex.  Com­plex prob­lems can be very dif­fi­cult to solve and require a spe­cial­ized approach.

The first step, in work­ing on a com­plex prob­lem, is to break it down into smaller, more man­age­able prob­lems.  A com­plex prob­lem may be made up of ten or more sim­ple prob­lems.  Some may be sur­face issues that are easy to assess and some may be deeper and more dif­fi­cult to identify.

Your goal should be to drill down and find the root of the prob­lem.  The root may be com­plex but more often than not, it is rel­a­tively sim­ple to solve.  By fix­ing the root, many of the prob­lems you have iden­ti­fied may be resolved quite simply.

Step 3 – Plan to resolve the problem

Some prob­lems can be resolved sim­ply and it may make sense to knock them off quickly but it is impor­tant to give the high value prob­lems the proper pri­or­ity and atten­tion.  Any­thing that may result in the loss of a client is auto­mat­i­cally near the top of the list.

The best way to accom­plish this is to take a project man­age­ment approach to run­ning your busi­ness.  Our blog enti­tled The Project Man­age­ment Approach to Build­ing a Bet­ter Busi­ness will help you to wrap your mind around this concept.

Bob Simp­son is Pres­i­dent of Syn­chronic­ity Per­for­mance Con­sul­tants.  Bob can be reached on his direct line at 905−502−0100, toll free at 866−646−6002 or by e-mail at bob.simpson@synchronicity.ca.

About Bob Simpson

Syn­chronic­ity Per­for­mance Con­sult­ing has been coach­ing finan­cial advi­sors since 1998.

Bob Simp­son, pres­i­dent and founder of Syn­chronic­ity has been involved, directly or indi­rectly in the finan­cial ser­vices indus­try since 1981. He has been a very suc­cess­ful finan­cial advi­sor with Nes­bitt Thom­son Inc., a major Cana­dian finan­cial insti­tu­tion. Between 1981 and 1989, he built a busi­ness with more than $120 mil­lion in assets under man­age­ment, was branch man­ager and SVP National Sales for Mid­land Wal­wyn and has been coach­ing finan­cial advi­sors since 1998.

You can fol­low Bob Simp­son via:

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Tags: Asset Allocation Model, Busin, Business Problems, Defection, Desk, Financial Advisor, Focus, Frequency Contact, Goals, Inheritance, Likelihood, Personal Problems, Problem Solving, Relationship Problems, Single Day, Sit, Solving Problems, Step 1, Success, Traditional Approach
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The Art of Asking Questions (Beck)

Wednesday, March 28th, 2012

The Art of Ask­ing Questions

by Michael Beck

Mas­ter­ing the Art of Ask­ing Ques­tions is essen­tial if you want to suc­ceed.  It’s not sim­ply a mat­ter of get­ting in the habit of uti­liz­ing ques­tions in your inter­ac­tions with peo­ple.  It’s really about learn­ing how to ask the right ques­tions at the right time.

Whether you’re hav­ing sales con­ver­sa­tions, coach­ing con­ver­sa­tions, or work­ing to develop oth­ers, learn­ing how to ask good ques­tions can be the dif­fer­ence between suc­cess and fail­ure.  What does ask­ing the right ques­tions at the right time mean?  It means ask­ing ques­tions in such a way as to bet­ter under­stand the other per­son, their needs, and their motivations.

Since the ques­tions asked and the flow of an effec­tive con­ver­sa­tion varies from per­son to per­son and from sit­u­a­tion to sit­u­a­tion, the best way to illus­trate the Art of Ask­ing Ques­tions is by way of example.

Here is a sam­ple sales con­ver­sa­tion, con­ducted by some­one not skilled at the Art of Ask­ing Questions:

DIALOGUE

Hi Bob, I’m call­ing about the great wid­gets my com­pany sells.  Do you have a few min­utes to speak?
“Sure.“
Great!  Are you famil­iar with our brand?
“No, not really.“
We offer wid­gets that solve a num­ber of prob­lems and have some great fea­tures.  The new V210 — our mid-grade model — con­sumes 20% less energy than our com­pe­ti­tion and is 10% smaller.  It comes in three dif­fer­ent col­ors — red, black and white.  Can I sched­ule a time with you to come by and show it to you?
“What’s the price?“
It nor­mally sells for $199, but I can offer it to you at a 25% dis­count — only $149.
“Do you have some­thing you can send me?“
Sure… what address should I send it to?
“123 Main St.“
Great!  I’ll give you a follow-up call in about a week.  OK?
“Yes, that would be fine.”

DIALOGUE

If you’ve been in sales, you already know the out­come of that con­ver­sa­tion.  The like­li­hood of clos­ing a sale is slim and the sales­per­son will no doubt con­tinue to try to reach the prospect again until they get dis­cour­aged and give up.

The next exam­ple is the same con­ver­sa­tion con­ducted by some­one who is bet­ter skilled at the Art of Ask­ing Ques­tions, but is not quite there yet:

DIALOGUE

Hi Bob, my com­pany helps com­pa­nies like yours solve their wid­get prob­lems.  Do you have a few min­utes to talk?
“Sure.“
Do you cur­rently use wid­gets in your busi­ness?
“Yes, we do.“
Have you been pleased with the ones you have?
“Well, for the most part we are, but nothing’s per­fect.“
The newer design of wid­gets have a num­ber of improve­ments over older mod­els.  Would you like to hear more about some of the improve­ments?
“Sure.“
Well, fea­ture 1… , fea­ture 2…, fea­ture 3…  We have a num­ber of dif­fer­ent mod­els avail­able.  Do you have a bud­get in mind?
“Well, we haven’t been actively look­ing up until now.  Can you send me some infor­ma­tion?“
I’d rather come by and show you first-hand so you can really see what I’m talk­ing about.  Which would be bet­ter for you, Tues­day morn­ing or Wednes­day after­noon?
“How about Tues­day morn­ing.“
Great!  I’ll see you Tues­day morn­ing then!

DIALOGUE

While it is pos­si­ble that this sales­per­son may make a sale, it’s far from a sure thing.  Even though the prospect set the appoint­ment, the sales­per­son really doesn’t know any­thing about the prospect or the prospect’s motivations.

The con­ver­sa­tion would unfold very dif­fer­ently if the sales­per­son was skilled in the Art of Ask­ing Questions:

DIALOGUE

Hi Bob, my name is Paul and I help com­pa­nies like yours solve any wid­get prob­lems they have.  Do you have a few min­utes to talk?
“Sure.“
Do you cur­rently use wid­gets in your busi­ness?
“Yes, we do.“
How often do you use your wid­gets?
“Pretty much every day.“
To what extent?  How much?
“About 3–4 hours every day.“
It sounds like you rely on them pretty heav­ily.
“Yes, absolutely.“
What aspects of your wid­gets work best for you?
“Well, for one thing they’ve been really reli­able.  We’ve had them for over 4 years.  Also, we need the auto­mated feed fea­ture and that’s been a life-saver.  And the sup­plies are easy to find and afford­able.“
Sounds like they’ve served you well.  Have you had any prob­lems with them?
“Well, the only prob­lem we’ve had is that they some­times mis­feed.“
When you say they some­times mis­feed, specif­i­cally how often does that hap­pen?
“Only once or twice a day.“
Are there any fea­tures or func­tions you wish they had?
“It would be nice if they had a big­ger bin so we didn’t have to re-stock them so often.“
Any­thing else?  Would it help if they could auto­mat­i­cally stack the fin­ished prod­uct?
“Can they do that?“
Ours can.  I think it would make sense for us to get together.  I can show you a wid­get I have that has a 99% reli­a­bil­ity record, high-speed auto­matic feed­ing with­out jam­ming, a large bin, and auto­mated stack­ing.  Do you have about 25 min­utes on Tues­day morn­ing or would some­thing like Wednes­day after­noon work bet­ter for you?
“Let’s do next Tues­day morning.”

DIALOGUE

As you can see, the last sales con­ver­sa­tion unfolded very dif­fer­ently than the prior two.  In the last con­ver­sa­tion, the sales­per­son asked good ques­tions — ques­tions which uncov­ered what mat­tered to the other per­son, along with some moti­va­tions for mak­ing a change.  (We didn’t have time in this arti­cle to uncover all the motivations.)

Hav­ing a con­ver­sa­tion like this helps the prospect to clar­ify what fea­tures he needed and high­lighted prob­lems and desires.  Both par­ties knew exactly why they were get­ting together and the like­li­hood of clos­ing a sale was extremely high.

When you mas­ter the Art of Ask­ing Ques­tions, you learn to ask ques­tions which uncover moti­va­tions and you’ll do a bet­ter job of sell­ing, coach­ing, and devel­op­ing others.

Writ­ten by Michael Beck, Busi­ness Strate­gist and Exec­u­tive Coach.  If you’d like help mas­ter­ing the Art of Ask­ing Ques­tions, please con­tact me through my web­site: www​.michaeljbeck​.com
Per­mis­sion to reprint with full attri­bu­tion.  © 2011 Michael Beck Inter­na­tional, Inc.

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Tags: Art Of Asking Questions, Asking The Right Questions, Beck, Black And White, Conversations, Dialogue, Different Colors, Few Minutes, Grade Model, Habit, Likelihood, Michael Beck, Motivations, No Doubt, Person To Person, Right Time, Salesperson, Success And Failure, Widgets
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Personal Financial Workspaces for Your Clients or Stop Being Average and Start Being Remarkable

Wednesday, March 28th, 2012

by Bob Simp­son, Syn­chronic­ity Per­for­mance Consulting

There is one unde­ni­able truth about build­ing a great finan­cial advi­sory practice:

The bet­ter you man­age client rela­tion­ships, the more suc­cess­ful your busi­ness will be.

Unfor­tu­nately, you work in an indus­try that teaches you how to be aver­age.  Man­age­ment and com­pli­ance don’t want you to be dif­fer­ent.  Sure, they would like you to pro­duce more rev­enue, as long as you don’t do any­thing different.

The prob­lem with this the­ory is that clients are demand­ing more.  Aver­age isn’t help­ing them to achieve their goals.  Baby boomers have taken over North America’s wealth and they are more demand­ing than pre­vi­ous generations.

When look­ing at indus­try stan­dards, rela­tion­ship man­age­ment has made the suc­cess­ful tran­si­tion from ran­dom acts of con­tact to MAYBE where most clients have a next con­tact sched­ule in a CRM.

If you are ready for some­thing rad­i­cally dif­fer­ent, I would like to intro­duce you to Client Roadmap:  a pro­gram that allows you to set up Per­sonal Finan­cial Work­spaces for your clients.

What is a Per­sonal Finan­cial Work­space?  It is a secure col­lab­o­ra­tive work­space that allows you, clients and their pro­fes­sional advi­sors to share doc­u­ments, con­ver­sa­tions and infor­ma­tion in the cloud.

What can you do in a Per­sonal Finan­cial Work­space?  You can keep every­thing orga­nized.  You can set up a vault for pri­vate doc­u­ments.  You can sched­ule meet­ings and calls for the next six to twelve months (or more) and have Client Roadmap send out e-mail reminders.  You can set up task lists and assign tasks to you, your team, your clients or their pro­fes­sional advi­sors.  You can set up pages in which they can view infor­ma­tion about their invest­ments so they know what their invest­ment man­agers are doing and why.

Here’s a good exam­ple: A client phones look­ing for a doc­u­ment.  His doc­u­ment is filed some­where and you and your team go search­ing for it.  It takes hours and your client is frus­trated because he needed it yesterday.

With Client Roadmap, all of this client’s doc­u­ments are stored in his per­sonal finan­cial work­space.  He doesn’t need to call.  He just logs in and down­loads the document.

Another exam­ple: A client phones to ask about an invest­ment that she holds.  Sure you can do some research and send it to her.

With Client Roadmap, you set up a tab point­ing directly to pub­lic infor­ma­tion about the invest­ment:  A Morn­ingstar report or one that a fund com­pany updates reg­u­larly on their web­site.  If she wants to check out per­for­mance, infor­ma­tion about port­fo­lio hold­ings or about the invest­ment man­ager, it is all there in real time.

Another exam­ple:

A client is won­der­ing about the sta­tus of some­thing you have promised and calls you to get an update.  You aren’t sure so you ask your assis­tant, who looks it up and reports back to you and then you back to your client.

With Client Roadmap, your client logs into his work­space and right there on the home­page is a report of all out­stand­ing projects and their status.

Another exam­ple:

Your client’s accoun­tant needs infor­ma­tion to pre­pare her tax return.  You get writ­ten per­mis­sion to allow the accoun­tant to access her work­space and you pro­vide tem­po­rary access to allow him to find the infor­ma­tion he needs.  When that is com­plete, you click a but­ton and no more access.

Another exam­ple:

You are look­ing for a bet­ter way to get newslet­ters or quar­terly mar­ket com­ments to your clients.

With Client Roadmap, you can set up a feed directly in the client work­space and every time you update your newslet­ter it is updated and pre­vi­ous ver­sions stored in your pri­vate client workspace.

Final exam­ple:

You meet with a client and make notes about the meet­ing.  Your client asks you a ques­tion about some of the things you discussed.

In Client Roadmap, you put your client notes right on the front page of the work­space for your client to access at any time.  Plus, if he sees some­thing he does not agree with, he can make a com­ment right in the work­space and you get e-mail notification.

Sound com­pli­cated?  As with all tech­no­log­i­cal solu­tions, there is a learn­ing curve and set up time required.   We can help you to set up a tem­plate and then all you need to do is to clone the work­space.  New work­spaces can be set up with a new series of meet­ings and calls in approx­i­mately 20 min­utes.  You will eas­ily make this up through sit­u­a­tions like the exam­ples above.

Per­sonal Finan­cial Work­spaces allow you to work more col­lab­o­ra­tively and with full trans­parency.  These are two major pieces to more effec­tive client rela­tion­ship management.

Stop being aver­age and start being remark­able and your per­sonal and busi­ness per­for­mance will improve dramatically.

Bob Simp­son is Pres­i­dent of Syn­chronic­ity Per­for­mance Con­sul­tants.  Bob can be reached on his direct line at 905−502−0100, toll free at 866−646−6002 or by e-mail at bob.simpson@synchronicity.ca.

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Tags: Baby Boomers, Client Relationships, Collaborative Workspace, Compliance, Conversations, E Mail, Generations, Investment Managers, Investments, North America, Private Documents, Professional Advisors, Random Acts, Relationship Management, Reminders, Share Documents, Twelve Months, Undeniable Truth, Vault, Workspaces
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Two words to get in front of prospects

Wednesday, March 28th, 2012

Even advi­sors who are suc­cess­ful in every other aspect of their busi­ness often strug­gle when it comes to get­ting meet­ings with prospects.

That’s under­stand­able at one level; peo­ple are besieged with demands on their time and many prospects are deeply skep­ti­cal about any­one seen to be try­ing to sell them some­thing. At the same time if we can get past those bar­ri­ers, unhap­pi­ness with recent mar­kets and uncer­tainty about their finances has cre­ated an oppor­tu­nity to engage poten­tial new clients.

The key to cap­i­tal­iz­ing on this oppor­tu­nity is to under­stand how prospec­tive clients look at requests for action, and to frame any­thing we ask of prospects with two words in mind.

How prospec­tive clients look at things:

Let’s say you ask a prospec­tive client for a meet­ing or to attend a lun­cheon sem­i­nar. Imme­di­ately, he or she weighs two things.

First prospects look at the poten­tial upside, the ben­e­fit. And then against that they weigh the pos­si­ble down­side, the risk. Note that prospects don’t make this deci­sion con­sciously; it takes place at an instinc­tive, sub­con­scious level. In fact most of the time it hap­pens in a split second.

Some advi­sors who don’t get a pos­i­tive response con­clude that they haven’t done a suf­fi­cient job of demon­strat­ing the ben­e­fits of meet­ing, so they respond by show­ing more ben­e­fits. If that doesn’t work they pile on still more ben­e­fits. While that might work some­times, often the more you try to change a prospect’s mind by show­ing more ben­e­fits, the more it feels like a sales pitch and the more their guards go up.

When ask­ing your prospects for a com­mit­ment, by all means demon­strate the ben­e­fit of their say­ing yes. But don’t for­get the other side of the equa­tion, the down­side. In addi­tion to show­ing ben­e­fits, con­sider two words that can be crit­i­cal to suc­cess in get­ting prospects to agree: Reduce risk.

There are four ways to reduce the risk for prospects; bor­row cred­i­bil­ity, build your rep­u­ta­tion, reduce the time you’re ask­ing for, focus on a lower risk commitment.

Bor­row credibility:

Every advi­sor knows that refer­rals are the best way to get new clients. That’s because refer­rals involve a trans­fer of trust; when a sat­is­fied client refers you to some­one they know your client’s trust is trans­ferred to their friend.

But there are other ways to bor­row cred­i­bil­ity beyond referrals:

· Write in local newspapers

Seek out oppor­tu­ni­ties to have your views on finan­cial plan­ning issues or mar­kets pub­lished in your local news­pa­per. Hav­ing that arti­cle on your web­site or send­ing it to prospec­tive clients helps posi­tion you as an expert and reduces the risk of deal­ing with you.

An advi­sor who focuses on “sud­denly sin­gle” wid­ows and women get­ting divorced after long mar­riages has built her busi­ness by writ­ing about the issues these women face. In the process, she has become the go-to resource for local radio and news­pa­pers when­ever they are look­ing for an expert to talk about issues involv­ing wid­ows and divorcees.

· Seek out speak­ing opportunities

Another way to get expert posi­tion­ing is by seek­ing out speak­ing oppor­tu­ni­ties to mem­bers of your tar­get client community.

One advi­sor built his busi­ness by mak­ing a con­certed effort to get on as many plat­forms with qual­i­fied prospects as pos­si­ble. Early on, he had one of his talks video­taped, so he could send this to the pro­gram chair of local orga­ni­za­tions, in the process reduc­ing the risk of them invit­ing him to speak.

He always fin­ished his talks with a draw and asked for per­mis­sion on the bal­lots to put peo­ple on the email list for his monthly com­men­tary. In short order he had hun­dreds of prospects that were get­ting his monthly mate­r­ial, with a steady stream of requests for appoint­ments as a result.

· Use tes­ti­mo­ni­als

If you’re invit­ing prospects to a lunch work­shop, con­sider includ­ing tes­ti­mo­ni­als from pre­vi­ous atten­dees as to the value that they received from attending.

Build your reputation

A sec­ond way to reduce risk is to build your word of mouth reputation.

Many advi­sors in mid-sized com­mu­ni­ties have found that high pro­file com­mu­nity activ­ity raises their vis­i­bil­ity and improves the response when talk­ing to prospec­tive clients. Tak­ing a lead­er­ship role in a respected char­ity can make you safer to deal with.

Another approach is to focus the clients you deal with, so that word of mouth kicks in and the “safety in num­bers” effect works for you. Let’s sup­pose you’re talk­ing to a retiree or busi­ness owner and can legit­i­mately say that you spe­cial­ize in work­ing with peo­ple in their sit­u­a­tion; if they’ve come across your name, the risk of doing busi­ness with you has just dropped.

Reduce the time involved:

Another way to reduce risk is to reduce the time com­mit­ment you’re ask­ing for.

Many advi­sors focus on get­ting prospects to come to the advisor’s office for an ini­tial meet­ing. Unless they hap­pen to be close by, this can present a has­sle in terms of travel time and parking.

In an arti­cle last sum­mer, I described one advi­sor who has suc­ceeded in get­ting in front of poten­tial clients by both demon­strat­ing a clear ben­e­fit and reduc­ing risk. He offers to take high net worth prospects through a check list of 20 ways that afflu­ent investors go wrong, based on research with mil­lion­aires con­ducted by US Trust. Hav­ing iden­ti­fied a tan­gi­ble ben­e­fit to sit­ting down, he then reduces risk by sug­gest­ing they meet for half an hour at a cof­fee shop close to the prospect’s office.

Ask­ing for a lower risk commitment:

The final strat­egy to reduce risk is ask­ing for a lower com­mit­ment. For many prospec­tive clients, meet­ing face to face rep­re­sents more of an oblig­a­tion than they’re com­fort­able with.

One advi­sor has had good suc­cess by invit­ing prospec­tive clients to 60 minute lun­cheon round­ta­bles for exist­ing clients. The key is in the wording:

“I keep these lunches to one hour. Over sand­wiches, I update my clients on what’s hap­pen­ing in mar­kets and answer ques­tions. While these lunches are pri­mar­ily for exist­ing clients, I do have a spot avail­able at the next lunch com­ing up two weeks from Fri­day, should you be inter­ested in sit­ting in.”

Other advi­sors use a two-step process to reduce risk. Stage One is to offer to add prospec­tive clients to monthly emails that go to exist­ing clients, fea­tur­ing rel­e­vant arti­cles from pub­li­ca­tions such as For­tune, Forbes or Bloomberg Busi­ness Week. This is as non-threatening a com­mit­ment that you can ask from poten­tial clients. Once prospects have received these for six months or so, you’ve built famil­iar­ity and cred­i­bil­ity and it becomes lower risk for prospects to agree to a meeting.

When talk­ing to prospec­tive clients, by all means main­tain your focus on the ben­e­fit of meet­ing. But to max­i­mize your chances of suc­cess, don’t for­get the other side of the equa­tion and to look for ways to reduce risk as well.

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Tags: Benefit, Credibility, Downside, Job Benefits, Luncheon Seminar, Opportunity, Prospective Client, Prospective Clients, Prospects, Reputation, Risk, Sales Pitch, Subconscious Level, Success, Uncertainty, Unhappiness
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How to make clients recognize your value

Wednesday, March 28th, 2012

Over the past decade, con­sul­tants and speak­ers at con­fer­ences have told advi­sors that they need a dis­tinc­tive branded process to dif­fer­en­ti­ate them­selves. As a result, a grow­ing num­ber have cre­ated a “unique process” to set them apart.

Despite this, most advi­sors strug­gle to get clients to see their value. A recent round­table lunch drove this home, as many suc­cess­ful advi­sors talked about their frus­tra­tion on this issue. Then a com­ment by one par­tic­i­pant shed some light on what advi­sors need to do to con­vey value.

Here’s what he said:

“A few years ago, I spent a ton of time on fine tun­ing the way I artic­u­late my process. I hired a designer and a brand­ing con­sul­tant; and the six step process we ended up with looks great on my web­site. For some rea­son, though, it really doesn’t seem to res­onate with clients.”

Same­ness rather than differentiation:

This advi­sor is very typ­i­cal; and his com­ment illus­trates two big prob­lems with what con­sul­tants have been say­ing on this issue.

First, if you take a look at the web­sites of many advi­sors, you’ll see a “unique process” gen­er­ally con­sist­ing of four, five or six steps. These processes have dif­fer­ent names and con­fig­u­ra­tions but ulti­mately look alike. As a result, what was intended to be a dif­fer­en­tia­tor has ended up con­vey­ing sameness.

That’s not the biggest prob­lem, though. The really sig­nif­i­cant prob­lem is that this focus on process has led many advi­sors down the entirely wrong path.

A fea­ture or a benefit:

The very first train­ing course that I attended after grad­u­at­ing from busi­ness school many years ago was a course on basic sell­ing skills. First on the agenda was a dis­cus­sion of fea­tures vs. benefits.

“If you’re sell­ing a cup of cof­fee” the instruc­tor said, “buy­ers don’t care that the beans were grown on a sunny hill­side in Colom­bia, and hand­picked at their peak, then roasted in small batches. Those are all features.

“What buy­ers care about is the ben­e­fit of a great tast­ing cup of cof­fee. You may need to talk about attrib­utes to make the ben­e­fit believ­able; but never for­get that peo­ple don’t buy fea­tures, they buy ben­e­fits. Start with ben­e­fits to get buyer’s atten­tion, then fol­low with fea­tures for credibility.”

In most web­sites fea­tur­ing an advisor’s “unique process,” you have to work hard to find the pay­off. In essence, the ben­e­fit had been obscured by the features.

Start­ing with the right benefit:

You need to start by clearly artic­u­lat­ing exactly the ben­e­fit that clients obtain by work­ing with you. Your ben­e­fit can be fairly broad or very nar­row and can be focused on invest­ments or on broader finan­cial out­comes. In some cases the ben­e­fit needs a bit of elab­o­ra­tion; in each exam­ple below, the ben­e­fit is in bold.

Here are three invest­ment focused approaches:

· We select man­agers with the demon­strated abil­ity to out­per­form over full mar­ket cycles:

o We focus on invest­ment man­agers with a proven process and estab­lished track record of find­ing under­val­ued com­pa­nies; employ­ing the same con­trar­ian invest­ment prin­ci­ples used by War­ren Buf­fett. Even though these man­agers may lag over short peri­ods, over time this approach has added con­sid­er­able value to client portfolios.

· We deliver supe­rior risk adjusted returns over time:

o To do that, we use a proven cash-flow focused approach to eval­u­ate stocks and bonds and to con­struct truly diver­si­fied port­fo­lios; reg­u­larly rebal­anc­ing those port­fo­lios to con­tain risk.

· We help afflu­ent Cana­di­ans con­trol port­fo­lio volatil­ity while still achiev­ing cap­i­tal growth:

o Using the same risk man­age­ment prin­ci­ples employed by uni­ver­sity endow­ments and pen­sion plans. As part of this, we tap into alter­na­tive invest­ment vehi­cles and solu­tions that are typ­i­cally only avail­able to sophis­ti­cated investors.

Here are three ben­e­fit state­ments that focus on broad finan­cial outcomes:

· Work­ing with clients plan­ning for retire­ment, we instill con­fi­dence that they’ll achieve their finan­cial goals:

o We start by cus­tomiz­ing a finan­cial and invest­ment plan to each client’s unique needs and objec­tives. Hav­ing devel­oped that plan, we help clients adhere to it through both good and bad mar­kets; we see our­selves as an emo­tional anchor for our clients, keep­ing the highs from being too high and the lows from being too low.

· We cre­ate peace of mind for retirees:

o By ensur­ing that they won’t have to worry about fund­ing their retire­ment years, devel­op­ing detailed invest­ment and cash flow plans and stress test­ing those plans to ensure that they’ll deliver pos­i­tive cash flow under a broad range of scenarios.

· We min­i­mize the tax bur­den for our clients:

o Using advanced tax plan­ning strate­gies and employ­ing tax advan­taged insur­ance and invest­ment solu­tions to deliver effi­cient after tax income.

Finally, here are four nar­row ben­e­fit statements:

· We advise suc­cess­ful exec­u­tives, pro­fes­sion­als and busi­ness own­ers on max­i­miz­ing tax effi­cient income and trans­fer­ring wealth to suc­ces­sive generations.

· We spe­cial­ize in work­ing with suc­cess­ful entre­pre­neurs to real­ize max­i­mum value from their busi­nesses, col­lab­o­rat­ing with exist­ing pro­fes­sional advi­sors to imple­ment inte­grated tax, estate and invest­ment plan­ning strategies.

· We help med­ical pro­fes­sion­als plan for today and tomor­row, man­ag­ing cur­rent busi­ness and per­sonal finances in the most tax effec­tive fash­ion pos­si­ble while imple­ment­ing plans to ensure that long term goals are attained.

· We work with entre­pre­neurs mov­ing to Canada to launch busi­nesses, help­ing clients nav­i­gate the com­plex­ity of work­ing in a dif­fer­ent cul­tural and finan­cial landscape.

Bring­ing your ben­e­fit to life:

While a strong ben­e­fit state­ment is a good start­ing point, that’s typ­i­cally all it is. The chal­lenge is to make that ben­e­fit real; for it to be more than just words.

That’s where the process that allows you to deliver that ben­e­fit comes in. With exist­ing clients, use every meet­ing to remind clients of your key ben­e­fit and where they stand in the process that you use to deliver that ben­e­fit. It may not be the very first thing you talk about, but it should fea­ture prominently.

And find a way to rein­force your key ben­e­fit in writ­ten com­mu­ni­ca­tion to clients. If you send fre­quent mar­ket let­ters, you may not want to make your ben­e­fit the cen­ter­piece of every let­ter (rep­e­ti­tion that’s too fre­quent can cause clients to lose inter­est and stop read­ing), but your ben­e­fit should always be there, and from time to time should be promi­nently featured.

With prospec­tive clients, you’ve got a dif­fer­ent chal­lenge. Because the typ­i­cal process can look generic and abstract, look for ways to make your ben­e­fit more tangible.

If your com­pli­ance depart­ment and reg­u­la­tory envi­ron­ment allow them, tes­ti­mo­ni­als can be an effec­tive way to do this.

Another way to bring your ben­e­fit to life is with case stud­ies. If your focus is on invest­ment out­comes, use past peri­ods to demon­strate how your approach pro­duced results. And if your ben­e­fit is more broadly focused on finan­cial issues, you can use the clas­sic case study frame­work (Prob­lem, Solu­tion, Results) to make your story compelling.

This arti­cle pro­vides more details on how case stud­ies can work:

http://​www​.cli​entin​sights​.ca/​a​r​t​i​c​l​e​/​u​s​i​n​g​-​c​a​s​e​-​s​t​u​d​i​e​s​-​t​o​-​m​a​k​e​-​y​o​u​r​-​c​ase

None of this dimin­ishes the impor­tance of hav­ing a well-articulated process. Just remem­ber that your process alone isn’t suf­fi­cient to con­vey value to exist­ing and prospec­tive clients. Never for­get that your process is there to sup­port your ben­e­fit, and never for­get the les­son from that old sales trainer; lead with ben­e­fit, and fol­low with fea­tures.

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Tags: Batches, Benefit, Business School, Colombia, Conferences, Cup Of Coffee, Decade, Differentiation, Differentiator, Frustration, Lunch, Participant, Roundtable, Sameness, Six Steps, Speakers, Sunny Hillside
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To Blog, or Not to Blog, That is the Question

Tuesday, March 27th, 2012

by Bob Simp­son, Syn­chronic­ity Per­for­mance Consulting

For most advi­sors, main­tain­ing a web­site and writ­ing a blog is a major waste of time.  It takes a ton of work to set up a web­site and devel­op­ing con­tent is a major task.  Advi­sor web­sites tend to be glo­ri­fied brochures that don’t attract much traf­fic, drive lit­tle busi­ness and do a poor job of differentiation.

Web­sites and blogs are part of your brand­ing and can play a major role in help­ing you achieve your busi­ness goals but they need to be done prop­erly.  If you are will­ing to allo­cate resources to build an above aver­age web­site, it will pay div­i­dends.  If you sim­ply need an online brochure, you can set some­thing up inex­pen­sively but don’t expect an ROI.

A big prob­lem you will face in devel­op­ing your web­site is:  “How do I make my web­site inter­est­ing?”  “How do I develop a site that peo­ple will visit reg­u­larly and rec­om­mend to their friends and colleagues?”

That’s where blog­ging comes in.  If you build a web­site that has the basics:

• About Us
• Con­tact Us
• How We are Different
• Descrip­tion of Services

you will have the foun­da­tion for your online brochure.  This is fairly easy to write.

By adding a Blog tab and con­tribut­ing reg­u­larly, you can build inter­est­ing con­tent that will attract read­ers and increase the chances of your web­site being found by poten­tial clients.

If you have been writ­ing a newslet­ter for a num­ber of years, you have a stock­pile of compliance-approved arti­cles from which you can draw.   Start by pulling your best arti­cles and add one or two to your blog each week.  If you are will­ing to com­mit the time to writ­ing new arti­cles on a weekly basis, post all your old arti­cles up front but make sure you are com­mit­ted to posted weekly or bi-weekly.  Try to have a min­i­mum of four compliance-approved arti­cles writ­ten in advance in case you get busy to min­i­mize dead­line pressure.

If you have a Word­Press web­site, post­ing blogs is as sim­ple as writ­ing the arti­cle in Microsoft Word, log­ging into the back­end of your web­site, click­ing “add new post”, past­ing the arti­cle and hit­ting “submit”.

My goal is to write three arti­cles per week for my blog.  This takes a great deal of time but has pro­vided a good ROI, largely because Advi­sor Ana­lyst dis­trib­utes my arti­cles to over 28,000 advi­sors.  If you can find a sim­i­lar arrange­ment, you will be much more moti­vated to write your articles.

We take two addi­tional steps to attract read­ers.  We dis­trib­ute a newslet­ter twice a month to peo­ple on our mail­ing list.  Our newslet­ter is very sim­ple to pro­duce as we pro­vide intro­duc­tions to arti­cles and links to recent blogs.  We added a “Top 10 Blogs” tab on our web­site and are con­vert­ing these blogs into an eBook.

Another advan­tage of hav­ing a blog on your web­site is that it improves your con­tent and search engine rank­ings.  Work hard to make sure that search terms that peo­ple who meet your ideal client pro­file might use to find an advi­sor are in both titles and the body of the blog.  Remem­ber, peo­ple do not search for “finan­cial advi­sor” as fre­quently as they do to find a solu­tion to a prob­lem.  To prove this point, I am writ­ing this arti­cle because I know a lot of advi­sors are won­der­ing whether they should be writ­ing a blog.

One of the chal­lenges you will face is to find top­ics to write about.  The approach I find most effec­tive is to keep your eyes and ears open to opportunities:

• You have a meet­ing with a client and help her solve a prob­lem.  Write up a case study.
• You attend a port­fo­lio man­ager pre­sen­ta­tion.  Write up the highlights.
• You read an arti­cle.  Dis­cuss the arti­cle and link your blog to the article.
• You meet with an accoun­tant or attor­ney. Dis­cuss some new meth­ods to min­i­mize taxes.
• You read a book.  Do a book review.
• You watched a video.  Embed the video into your blog and then write about it.  See Let’s Get Positive!

You may want to down­load the Dragon Nat­u­rally Speak­ing iPhone appli­ca­tion and after attend­ing a port­fo­lio man­ager pre­sen­ta­tion, just start talk­ing about what you just learned.  Blogs should be well-written but don’t have to be per­fect.  Try to keep your blog arti­cles under 500 words.  This is just under 800 words.

The process of writ­ing a blog will make you a bet­ter advi­sor.  It forces you to think about and be cur­rent on a broad range of wealth man­age­ment topics.

If social media is part of your busi­ness devel­op­ment plan, a blog should be at the top of your list.   Before you look at alter­na­tive strate­gies, like Face­book and Twit­ter, get your blog done prop­erly and then branch out.

Bob Simp­son is Pres­i­dent of Syn­chronic­ity Per­for­mance Con­sul­tants.  Bob can be reached on his direct line at 905−502−0100, toll free at 866−646−6002 or by e-mail at bob.simpson@synchronicity.ca.

About Bob Simpson

Syn­chronic­ity Per­for­mance Con­sult­ing has been coach­ing finan­cial advi­sors since 1998.

Bob Simp­son, pres­i­dent and founder of Syn­chronic­ity has been involved, directly or indi­rectly in the finan­cial ser­vices indus­try since 1981. He has been a very suc­cess­ful finan­cial advi­sor with Nes­bitt Thom­son Inc., a major Cana­dian finan­cial insti­tu­tion. Between 1981 and 1989, he built a busi­ness with more than $120 mil­lion in assets under man­age­ment, was branch man­ager and SVP National Sales for Mid­land Wal­wyn and has been coach­ing finan­cial advi­sors since 1998.

You can fol­low Bob Simp­son via:

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Tags: Backend, Blogs, Brochure, Brochures, Business Goals, Colleagues, Compliance, Deadline Pressure, Differentiation, Dividends, Friends, Microsoft, Microsoft Word, New Articles, People, Poor Job, Stockpile, Traffic, Waste Of Time, Wordpress
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Emerging a Winner from a Period of Turmoil

Tuesday, March 27th, 2012

Today’s arti­cle focuses on what it will take for advi­sors to emerge as win­ners from the tur­moil in which the indus­try cur­rently finds itself.

My Decem­ber col­umn in Invest­ment Exec­u­tive starts with the premise that a new breed of empow­ered cus­tomers and aggres­sive com­peti­tors have changed the rules of the game for most man­u­fac­tur­ers and retail­ers — and are in the process of doing the same for the invest­ment industry.

The only way to ensure that you’ll emerge a win­ner from this process is through an intense, sin­gle minded focus on pro­vid­ing com­pelling, out­stand­ing value — today, pro­vid­ing tepid value means you’re toast.

Many finan­cial advi­sors rec­og­nize that the tra­di­tional busi­ness model is seri­ously chal­lenged. What is less clear is what will replace it going forward.

In my view, there will not be one suc­cess­ful model going for­ward — rather there will be a vari­ety of approaches.

The one thing they’ll have in com­mon is a clearer and higher stan­dard of value than existed in the past.

As you think about where you’re going to take your busi­ness in 2010and beyond, you need to answer two key questions.

Defin­ing your value

First and fore­most, what’s your response if a prospec­tive client says to you: “What’s the unique value that you pro­vide your clients?”

It’s a cliché to say that not long ago investors paid for trans­ac­tions and access to infor­ma­tion and got advice for free. Today, more and more investors see trans­ac­tions and infor­ma­tion as com­modi­ties– the only thing left for advi­sors to charge for is supe­rior advice that makes sense of the over­whelm­ing vol­ume of infor­ma­tion and assim­i­lates it into a sen­si­ble plan, as well as effec­tive ongo­ing com­mu­ni­ca­tion around that plan.

In some cases that plan focuses on invest­ment or insur­ance advice alone, in other instances advi­sors also pro­vide a broad range of advice on wealth issues such as tax and estate plan­ning and char­i­ta­ble giving.

And in some cases, advi­sors focus on a sub­set of investors such as busi­ness own­ers, retirees or investors plan­ning for retire­ment with a view to pro­vid­ing spe­cial­ized exper­tise that “gen­er­al­ist” advi­sors can’t match, other advi­sors take a more broadly based “all-comers” approach to the clients they serve.

It’s impor­tant to note that the value doesn’t nor­mally reside in the plan itself — the value resides in what the plan and the com­mu­ni­ca­tion around that plan achieve.

In some cases, that might be con­crete tax savings.

In oth­ers, it will be value for money, with investors feel­ing their port­fo­lio is in bet­ter shape by work­ing with their advi­sor than it would be if they were else­where or doing this on their own.

In other instances, the value might be clients’ peace of mind or the abil­ity to avoid hav­ing to spend a great deal of time think­ing about their invest­ments, con­fi­dent that their advi­sor is on top of things and is watch­ing out for their interests.

And in still oth­ers, the value might be feel­ing good about the level of atten­tion they are get­ting from their advi­sor and his or her team en route to achiev­ing their goals.

Or it could be an intan­gi­ble — some­thing I’ve learned in my time in the indus­try is to never under­es­ti­mate the impor­tance of investors sim­ply lik­ing the advi­sor they deal with (bear­ing in mind that “like­abil­ity” was the hall­mark of fraud­sters like Bernie Mad­off and Earl Jones.)

What­ever it is that dri­ves value for you, the key first step is to be crys­tal clear about that — just remem­ber that the value bar has gone up. What was per­ceived as excep­tional value by clients yes­ter­day won’t nec­es­sar­ily be per­ceived as excep­tional value tomorrow.

Deliv­er­ing value

The sec­ond ques­tion relates to how you deliver that value — many of today’s skep­ti­cal cus­tomers say “talk is cheap” and demand con­crete evi­dence to back up your claims.
Begin by sum­ma­riz­ing all the time and money you spent on your busi­ness this past year — and divide that time and money into three categories.

The first cat­e­gory are those expen­di­tures that are the cost of doing busi­ness; cus­tomers aren’t pre­pared to pay the cost of keep­ing the lights on, so you need to keep these to a minimum.

Every­thing else falls into two cat­e­gories — “good expen­di­tures” of time and money that trans­late into clear per­ceived value for clients and “bad expen­di­tures” that don’t. Your goal is to max­i­mize the dis­cre­tionary expen­di­tures that drive value and to min­i­mize those that don’t.

Here’s a sim­ple exam­ple. One advi­sor I recently talked to laboured for many hours over his monthly newslet­ter, deter­mined to get the words exactly right — this was a major invest­ment of time on his part.

Ear­lier this year, he ini­ti­ated a Client Advi­sory Board, invit­ing eight of his best clients to serve as an advi­sory group that he could con­sult with. When he brought up his newslet­ter, the uni­ver­sal response around the table was “Who cares?” Few of the clients around the table paid much atten­tion to it and none would miss it.

In fact, rather than his own newslet­ter, almost all of his clients said they’d pre­fer to receive care­fully cho­sen arti­cles from cred­i­ble, third party sources.

This is a clas­sic exam­ple of a “bad cost” — he was spend­ing a sig­nif­i­cant amount of time on some­thing that rep­re­sented mar­ginal value to clients.

Divid­ing every­thing you do into those three cat­e­gories can be an ardu­ous process — but it can also be an illu­mi­nat­ing one that will clar­ify how you can max­i­mize the value you deliver clients.

For the full arti­cle in Invest­ment Exec­u­tive, includ­ing talk­ing about tim­ing to imple­ment change, click below:
http://​www​.invest​mentex​ec​u​tive​.com/​c​l​i​e​n​t​/​e​n​/​N​e​w​s​/​D​e​t​a​i​l​N​e​w​s​.​a​s​p​?​I​d​=​5​1​6​3​9​&​a​m​p​;​c​a​t​=​3​0​&​a​m​p​;​I​d​S​e​c​t​i​o​n​=​3​0​&​a​m​p​;​P​a​g​e​M​e​m​=​&​a​m​p​;​n​b​N​e​w​s​=​&​a​m​p​;​I​d​P​u​b​=​188

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Numbers Confuse, Information Empowers

Tuesday, March 27th, 2012

by Bob Simp­son, Syn­chronic­ity Per­for­mance Consulting

Have you ever been in a meet­ing with another pro­fes­sional, like an accoun­tant or lawyer, where num­bers are fly­ing through the air like debris in a tornado?

How did you react? I’ll bet, at some point, you politely tuned out.

Invest­ment and wealth man­age­ment are very num­bers focused. Clients receive monthly state­ments that present NUMBERS. When you do a quar­terly review, more NUMBERS. What is finan­cial plan­ning all about?: NUMBERS. Retire­ment pro­jec­tions are NUMBERS. When a client phones you, they need to look up your phone NUMBER. OK, maybe the last one is a stretch.

The prob­lem is that almost the entire indus­try is based on NUMBERS: price earn­ings ratios, alphas, betas, MERs, fee rates, etc. and NUMBERS confuse.

How many of your clients can answer the fol­low­ing ques­tions about invest­ments they hold?:

What is the pur­pose of this invest­ment?
What is the time­frame for hold­ing this invest­ment?
Why did we pur­chase this invest­ment?
Who is man­ag­ing this invest­ment?
How is this per­son or team qual­i­fied to man­age this invest­ment?
What is the over­all invest­ment cli­mate today and how will that affect the value of this invest­ment?
What is the expected return for this invest­ment over this time­frame?
What is the worst-case sce­nario for this invest­ment over this time­frame?
Is this a rel­a­tive return or an absolute return invest­ment?
How will fac­tors, like eco­nomic growth, inter­est rate or cur­rency changes affect this invest­ment?
What role does this invest­ment play when com­bined with other invest­ments in this port­fo­lio?
What is the best way to track this manager’s strategy?

OK, I must admit that some of the ques­tions above are NUMBERS questions.

I think it is a good idea to spend one day per quar­ter com­pletely ded­i­cated to research­ing and man­ag­ing invest­ments. I like the idea of form­ing an invest­ment com­mit­tee with peo­ple whose exper­tise and knowl­edge you respect. This may include your favorite whole­salers. By the end of the day, you should have all the infor­ma­tion and doc­u­men­ta­tion you need for your quar­terly client meet­ings and meet­ing packages.

By devel­op­ing a list of ques­tions, like the list above, you have a process for approv­ing invest­ments and invest­ment man­agers but more impor­tantly you have infor­ma­tion to share with your clients. This infor­ma­tion and a pur­pose or goals-based approach, like the one we wrote about in a pre­vi­ous blog A Sim­ple Method to Improve Your Clients’ Invest­ment Per­for­mance, will help your clients feel empow­ered, rather than con­fused, when mak­ing deci­sions about their invest­ments. This con­fi­dence will help them to bet­ter process the infor­ma­tion they access over the Inter­net or in the press and make more con­fi­dent decisions.

Empow­ered clients appre­ci­ate all the hard work you do in research­ing invest­ment rec­om­men­da­tions and are more likely to refer friends and colleagues.

Dur­ing the week of March 19th, we will be ask­ing mem­bers of our LinkedIn group Advi­sor Col­lab­o­ra­tion to sug­gest other ques­tions to include in a due dili­gence process.

We have devel­oped a unique new approach to directly link­ing your clients to infor­ma­tion about their invest­ments that auto­mates shar­ing of infor­ma­tion. If you have not yet watched our 2-minute video on Client Roadmap, visit www​.clien​troadmap​.com.

Bob Simp­son is Pres­i­dent of Syn­chronic­ity Per­for­mance Con­sul­tants. Bob can be reached on his direct line at 905−502−0100, toll free at 866−646−6002 or by e-mail at bob.simpson@synchronicity.ca.

About Bob Simpson

Syn­chronic­ity Per­for­mance Con­sult­ing has been coach­ing finan­cial advi­sors since 1998.

Bob Simp­son, pres­i­dent and founder of Syn­chronic­ity has been involved, directly or indi­rectly in the finan­cial ser­vices indus­try since 1981. He has been a very suc­cess­ful finan­cial advi­sor with Nes­bitt Thom­son Inc., a major Cana­dian finan­cial insti­tu­tion. Between 1981 and 1989, he built a busi­ness with more than $120 mil­lion in assets under man­age­ment, was branch man­ager and SVP National Sales for Mid­land Wal­wyn and has been coach­ing finan­cial advi­sors since 1998.

You can fol­low Bob Simp­son via:

    Lat­est Advi­so­r­An­a­lyst Prac­tice Growth Sto­ries

Tags: Absolute Return, Accountant, Betas, Currency Changes, Economic Growth, Interest Rate, Investment Climate, Investment Committee, Managing Investments, Monthly Statements, Price Earnings Ratios, Relative Return, Retirement Projections, Return Investment, Timeframe, Tornado, Wealth Management, What Is Financial Planning, Wholesalers, Worst Case Scenario
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A Simple Method to Improve Your Clients’ Investment Performance

Thursday, March 22nd, 2012

There is a great arti­cle by Louis S. Har­vey of Dal­bar enti­tled Purpose-Based Asset Man­age­ment.

When I read this arti­cle, my ini­tial reac­tion was that this sim­pli­fied method would result in peo­ple walk­ing out of an advisor’s office, climb­ing into the car and say­ing to his or her spouse:

“Dear.  For the first time in my entire life, I think I finally under­stand how to invest our money.”

You should spend a cou­ple of min­utes read­ing the arti­cle before read­ing the rest of this arti­cle.  It is only six pages and has graphs.

OK.  Back with me now?  Here is how I would describe this process to a client:

“When I started in the indus­try, I used to sit through pre­sen­ta­tions by our Chief Econ­o­mist and walk out won­der­ing what lan­guage he was speak­ing.  Invest­ing and wealth man­age­ment can be very con­fus­ing and over­whelm­ing.  It is our job to take com­plex finan­cial prod­ucts and ser­vices, fil­ter them and trans­late them into a lan­guage that most peo­ple can understand.

To be hon­est, most peo­ple don’t under­stand how to invest their money.  Most advi­sors take them through a fact-finding process to help iden­tify finan­cial prob­lems and then rec­om­mend a port­fo­lio of stocks, bonds and mutual funds.  The port­fo­lio is devel­oped to gen­er­ate returns to help grow invest­ments over time.

Port­fo­lios are gen­er­ally devel­oped based on the level of risk you are able to with­stand.  Most advi­sors gen­er­ate a sin­gle risk tol­er­ance and develop a port­fo­lio based on that.

We do things quite dif­fer­ently.  One of the first things that we try to iden­tify is the pur­poses for your money.   Let me give you a cou­ple of examples.

Most peo­ple have mul­ti­ple ways in which they plan to use money.  Most peo­ple like to have an emer­gency fund or need to save money for retire­ment.  Oth­ers have chil­dren who plan to attend col­leges or uni­ver­si­ties, and some plan to pur­chase a recre­ational prop­erty or help their chil­dren to pur­chase homes.

I have placed sev­eral buck­ets on my desk to help you under­stand this process.  Some buck­ets are large, some are medium sized and some are small.  Each bucket rep­re­sents a pur­pose for your money.

Your retire­ment bucket may be one of the large ones.  A large bucket requires more money to fill.  One bucket may be edu­cat­ing your chil­dren.  This may be a medium bucket.  Another may be for the pur­chase of a new car.  That bucket is rel­a­tively small.

Some buck­ets need to be filled within a short time span.  In the exam­ples above, your new car bucket may need to be filled within the next two years.  Your retire­ment bucket, on the other hand, may not need to be filled for twenty years or more.

When you invest money, one of the major fac­tors for iden­ti­fy­ing risk is the length of time before the money is required.  If you have a short time­frame, you can­not assume much risk because there are a lot of things that can and will go wrong in a short period of time.  If some­thing goes wrong, you don’t have time to recover and there­fore, you need to be very con­ser­v­a­tive in the way you invest that money.

If you will not be using money in one of the buck­ets for over twenty years, you can take more risk.  If you lose 20% of your cap­i­tal in one year, you have lots of time to recover.  This becomes really impor­tant when you review invest­ment per­for­mance of the major stock indexes.  Approx­i­mately 50% of the time over the past 111 years, the stock mar­ket has gained more than 16% or lost more than 16% in a sin­gle year.

Let’s use 2008 as an exam­ple.  If you invested a one-year bucket in stocks at the begin­ning of the year, you lost 34% of your money that year.  Let’s say, your new car bucket had $40,000 in it at the begin­ning of 2008 and you planned to buy a new car at the end of the year.  You invested in the Dow Jones Indus­trial Aver­age at the begin­ning of the year and at the end of the year, your invest­ment was only worth $26,400 and you are nowhere close to buy­ing your new car.

If you invested a 25 year bucket in the Dow Jones Indus­trial Aver­age, you have time to recover from your loss and although it was uncom­fort­able, your bucket has more money in it today, espe­cially con­sid­er­ing that you have added per­sonal funds to this bucket as per your plan, than you did at the begin­ning of 2008.

So the task ahead of us today is to put some labels on each of these buck­ets, deter­mine how much you need to fill each bucket and put a time­frame on when they need to be filled.  Some buck­ets, like your retire­ment bucket, will be more dif­fi­cult to esti­mate how much money will be required to fill it but we have lots of time to make these calculations.

Then we need to put labels on each bucket sym­bol­iz­ing the tar­get date for fill­ing the buckets.

Are you ready to get started?”

The Bucket Strat­egy will help your clients to bet­ter under­stand the risks and will help them stay com­posed dur­ing dif­fi­cult mar­ket con­di­tions.  This will improve invest­ment per­for­mance and will reduce strains to your client rela­tion­ships caused by high lev­els of stress caused by uncertainty.

Bob Simp­son is Pres­i­dent of Syn­chronic­ity Per­for­mance Con­sul­tants.  Bob can be reached on his direct line at 905−502−0100, toll free at 866−646−6002 or by e-mail at bob.simpson@synchronicity.ca.

About Bob Simpson

Syn­chronic­ity Per­for­mance Con­sult­ing has been coach­ing finan­cial advi­sors since 1998.

Bob Simp­son, pres­i­dent and founder of Syn­chronic­ity has been involved, directly or indi­rectly in the finan­cial ser­vices indus­try since 1981. He has been a very suc­cess­ful finan­cial advi­sor with Nes­bitt Thom­son Inc., a major Cana­dian finan­cial insti­tu­tion. Between 1981 and 1989, he built a busi­ness with more than $120 mil­lion in assets under man­age­ment, was branch man­ager and SVP National Sales for Mid­land Wal­wyn and has been coach­ing finan­cial advi­sors since 1998.

You can fol­low Bob Simp­son via:

    Lat­est Advi­so­r­An­a­lyst Prac­tice Growth Sto­ries

Tags: Asset Management, Chief Economist, Colleges, Couple Of Minutes, Dalbar, Emergency Fund, Graphs, Initial Reaction, Invest Money, Investment Performance, Investments, Mutual Funds, Need Money, People, Portfolios, Retirement, Risk Tolerance, Stocks Bonds, Universities, Wealth Management
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