Warning: How Financial Planning Can Cost You Clients

Wednesday, March 14th, 2012

The last twenty years have seen many changes in the invest­ment indus­try. Among the most impor­tant being the adop­tion of finan­cial plans by many advi­sors as a cor­ner­stone of their client offering.

As a whole, this has been a huge pos­i­tive for both advi­sors and clients. But a plan is only as good as how it is imple­mented and my recent con­ver­sa­tions with some investors illus­trate the impor­tant steps advi­sors must take to fol­low through on their plan­ning efforts.

The pos­i­tives of finan­cial planning

Con­ver­sa­tions with investors quickly drive home the ben­e­fits of finan­cial planning.

Espe­cially in rocky mar­kets, finan­cial plans give clients con­fi­dence that they have a roadmap to their long term objec­tives. They answer the “how much do I need “ques­tion that is a top con­cern for investors; and iden­tify how much clients need to save to hit their goals. Finan­cial plans can also drive home the rea­son that investors need port­fo­lios that offer returns above the risk free rate; even if clients don’t like the volatil­ity that comes with those portfolios.

Price Pow­ell of research firm, Cor­po­rate Insights has worked with many lead­ing invest­ment firms mea­sur­ing client sat­is­fac­tion and share a wal­let among over 50,000 investors.

He’s iden­ti­fied eight attrib­utes that cor­re­late with higher lev­els of client assets. First among those is hav­ing a finan­cial plan in place. In Powell’s words, “He (or she) who owns the plan owns the client.”

Note that you don’t need a 30 page plan for clients to feel they have a path to suc­cess. Espe­cially for less com­plex sit­u­a­tions you can often do every­thing you need to in six or eight pages (and many clients pre­fer a more suc­cinct doc­u­ment in any event.)

The pit­falls of finan­cial plans

Last fall I spent some time talk­ing to investors and was struck by con­cerns about their finan­cial plans among some of the clients I spoke to. These con­cerns didn’t relate to the plans them­selves, but rather to what hap­pened after the ini­tial plans were developed.

Investor com­plaints (which, just to be clear, come from a small minor­ity of clients) fall into the three categories.

The first can be sum­ma­rized as “What­ever hap­pened to my plan?”

These are clients who worked with their advi­sor to pre­pare a plan but haven’t heard any men­tion of it since. Clients expect that their plan will serve as a roadmap against which their progress will be mea­sured. Even if the news is not good, advi­sors need to incor­po­rate a con­ver­sa­tion about how clients are doing again their plan into every client review.

The sec­ond set of com­plaints relates to plans that are out of date.

“My plan was pre­pared eight years ago and hasn’t been updated since” one investor told me. “My wife and I have both switched jobs and our cir­cum­stances have changed dra­mat­i­cally. I just don’t think that a plan based on where we were almost ten years ago is rel­e­vant today. We men­tioned this a year ago but nothing’s hap­pened. We’ve been talk­ing about whether we need to change advi­sors to ensure our plan is up to date.”

The final cat­e­gory of com­plaints is directed at advi­sors who are seen as being overly passive.

“Given what’s hap­pened to mar­kets, it was no sur­prise that we’re behind on our plan” was what still another investor told me. “When we met with our advi­sor, we expected that we’d have a con­ver­sa­tion about either mov­ing some of our goals back or mak­ing some changes to get back on track.

Nei­ther of those things hap­pened; instead she said that we should expect to fall behind at cer­tain points and that we shouldn’t be con­cerned. We walked away won­der­ing if we’re work­ing with the right advisor.”

Incor­po­rat­ing finan­cial plans into client conversations

Every expe­ri­enced advi­sor knows that the plan itself isn’t what dri­ves value to clients; it’s what hap­pens as a result of the plan.

Clients who go through the plan­ning process typ­i­cally expect that their finan­cial plan will be an ongo­ing topic of con­ver­sa­tion with their advi­sors. It may be that you haven’t fallen vic­tim to any of the traps investors com­plained about when it comes to finan­cial plans. Just in case, con­sider these questions:

1. Are dis­cus­sions of progress against their finan­cial plans incor­po­rated into every client review?

2. Have all of the finan­cial plans for your clients been updated to reflect their cur­rent situation?

3. Are you being proac­tive in sug­gest­ing amend­ments to client goals or strate­gies in light of what’s hap­pened to markets?

The answer to all three ques­tions may be yes; but if you fall short with any of these with even a few clients now’s the time to rem­edy this. That way, clients will feel they’re get­ting the full ben­e­fit of the time they’ve invested to develop their finan­cial plan, and won’t be vul­ner­a­ble if approached by another advi­sor promis­ing that work­ing with him or her. Your clients will always have up to date plans in place.

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10 Questions That Begin the Referral Process

Wednesday, January 11th, 2012

This is a guest arti­cle by U.S. con­sul­tant Bob Burg, reprinted with his permission.

Net­work­ing isn’t a con­test to see who can hand out the most busi­ness cards. Great net­work­ers know that leav­ing self-interest at the door is the key to cul­ti­vat­ing rela­tion­ships — and referrals.

Oppor­tu­ni­ties to meet peo­ple arise con­stantly: at local busi­ness events, your church or syn­a­gogue, char­ity func­tions, and myr­iad other places. And, while cer­tainly not every­one you meet is a qual­i­fied — or even inter­ested — prospect, many of them know lots of oth­ers who just might be. After all, it’s been doc­u­mented that most peo­ple know about 250 other peo­ple. There­fore, every time you develop a strong rela­tion­ship with one new per­son, you’ve poten­tially increased your per­sonal sphere of influ­ence by 250 peo­ple. But how do you build those refer­ral rela­tion­ships in a way that is pro­fes­sional, non-intimidating (to you as well as oth­ers), and effective?

Where many advi­sors go awry

I want to share the fol­low­ing premise with you, and ask you to take it very seri­ously. This is the cor­ner­stone on which super­star advi­sors build their practices:

“All things being equal, peo­ple will do busi­ness with, and refer busi­ness to, those advi­sors they know, like, and trust.”

That’s it, plain and sim­ple. Suc­cess­ful net­work­ing, there­fore, pro­motes rela­tion­ships in which you are known, liked, and trusted, and which nat­u­rally lead to the devel­op­ment of a strong refer­ral base.

Unfor­tu­nately, many advi­sors mis­un­der­stand the term “net­work­ing.” Since the term is so mis­un­der­stood by so many peo­ple, allow me to pro­vide you with a def­i­n­i­tion that will put it in the cor­rect perspective.

Net­work­ing is sim­ply “the cul­ti­vat­ing of mutu­ally ben­e­fi­cial, give-and-take, win-win rela­tion­ships” — as opposed to the stereo­typ­i­cal slick-talker who aggres­sively shakes hands and dis­trib­utes busi­ness cards to every­one with whom he crosses paths. When prac­ticed con­sis­tently and cor­rectly, with the needs, wants, and desires of the other per­son in mind, net­work­ing can dra­mat­i­cally increase your refer­ral busi­ness in a way that will astound you.

In his book Net­work­ing for Life , Thomas Power writes, “The energy in net­works arises from a will­ing sus­pen­sion of self-interest.” I love that sen­tence because it absolutely encap­su­lates the one trait com­mon to those I call “super­star net­work­ers.” These peo­ple con­stantly ask them­selves how they can add to the life/business of the other per­son, as opposed to what they can get from them.

Of course, they still expect to pros­per — in fact, they know they’ll pros­per in a huge way. But they are not emo­tion­ally attached to hav­ing to reap the rewards then and there, or even directly from that per­son. Thus, they can fully focus on the “giv­ing” part of being a suc­cess­ful net­worker. They know that the more they give, the more they’ll even­tu­ally receive. Yes, it really does work that way.

The key to com­pelling conversations

So, what does this all mean in prac­ti­cal terms? Let’s say you are meet­ing some­one for the first time. Many advi­sors, like most peo­ple, feel they need to do most of the talk­ing when they’re “net­work­ing.” In other words, they have to pro­mote their prac­tice, which means show­ing how intel­li­gent and suc­cess­ful they are, and maybe even ask­ing pointed, per­sonal ques­tions about the person’s finan­cial sit­u­a­tion in order to dis­cover needs. But what this typ­i­cally accom­plishes, more than any­thing, is to make the other per­son ner­vous and defensive.

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10 Questions That Kick Start the Referral Process

Wednesday, September 7th, 2011

This is a guest arti­cle by U.S. con­sul­tant Bob Burg, reprinted with his permission.

Net­work­ing isn’t a con­test to see who can hand out the most busi­ness cards. Great net­work­ers know that leav­ing self-interest at the door is the key to cul­ti­vat­ing rela­tion­ships — and referrals.

Oppor­tu­ni­ties to meet peo­ple arise con­stantly: at local busi­ness events, your church or syn­a­gogue, char­ity func­tions, and myr­iad other places. And, while cer­tainly not every­one you meet is a qual­i­fied — or even inter­ested — prospect, many of them know lots of oth­ers who just might be. After all, it’s been doc­u­mented that most peo­ple know about 250 other peo­ple. There­fore, every time you develop a strong rela­tion­ship with one new per­son, you’ve poten­tially increased your per­sonal sphere of influ­ence by 250 peo­ple. But how do you build those refer­ral rela­tion­ships in a way that is pro­fes­sional, non-intimidating (to you as well as oth­ers), and effective?

Where many advi­sors go awry

I want to share the fol­low­ing premise with you, and ask you to take it very seri­ously. This is the cor­ner­stone on which super­star advi­sors build their practices:

“All things being equal, peo­ple will do busi­ness with, and refer busi­ness to, those advi­sors they know, like, and trust.”

That’s it, plain and sim­ple. Suc­cess­ful net­work­ing, there­fore, pro­motes rela­tion­ships in which you are known, liked, and trusted, and which nat­u­rally lead to the devel­op­ment of a strong refer­ral base.

Unfor­tu­nately, many advi­sors mis­un­der­stand the term “net­work­ing.” Since the term is so mis­un­der­stood by so many peo­ple, allow me to pro­vide you with a def­i­n­i­tion that will put it in the cor­rect perspective.

Net­work­ing is sim­ply “the cul­ti­vat­ing of mutu­ally ben­e­fi­cial, give-and-take, win-win rela­tion­ships” — as opposed to the stereo­typ­i­cal slick-talker who aggres­sively shakes hands and dis­trib­utes busi­ness cards to every­one with whom he crosses paths. When prac­ticed con­sis­tently and cor­rectly, with the needs, wants, and desires of the other per­son in mind, net­work­ing can dra­mat­i­cally increase your refer­ral busi­ness in a way that will astound you.

In his book Net­work­ing for Life , Thomas Power writes, “The energy in net­works arises from a will­ing sus­pen­sion of self-interest.” I love that sen­tence because it absolutely encap­su­lates the one trait com­mon to those I call “super­star net­work­ers.” These peo­ple con­stantly ask them­selves how they can add to the life/business of the other per­son, as opposed to what they can get from them.

Of course, they still expect to pros­per — in fact, they know they’ll pros­per in a huge way. But they are not emo­tion­ally attached to hav­ing to reap the rewards then and there, or even directly from that per­son. Thus, they can fully focus on the “giv­ing” part of being a suc­cess­ful net­worker. They know that the more they give, the more they’ll even­tu­ally receive. Yes, it really does work that way.

The key to com­pelling conversations

So, what does this all mean in prac­ti­cal terms? Let’s say you are meet­ing some­one for the first time. Many advi­sors, like most peo­ple, feel they need to do most of the talk­ing when they’re “net­work­ing.” In other words, they have to pro­mote their prac­tice, which means show­ing how intel­li­gent and suc­cess­ful they are, and maybe even ask­ing pointed, per­sonal ques­tions about the person’s finan­cial sit­u­a­tion in order to dis­cover needs. But what this typ­i­cally accom­plishes, more than any­thing, is to make the other per­son ner­vous and defensive.

Instead, let the con­ver­sa­tion hap­pen nat­u­rally, and in such a way that the prospect (or, most likely, new refer­ral source, since not every­one you meet is a direct prospect) enjoys the con­ver­sa­tion as much as, if not more than, you do.

How? Ask ques­tions. But not just any ques­tions. And def­i­nitely not prospect­ing questions.

Instead, use “Feel-Good” ques­tions. Feel-good ques­tions are designed to put the per­son with whom you are speak­ing at ease and begin the rapport-building process. These ques­tions will make the other per­son feel warm and fuzzy about them­selves, about the con­ver­sa­tion, and about you.

That is key, because remem­ber, “All things being equal, peo­ple will do busi­ness with, and refer busi­ness to, those advi­sors they know, like, and trust.” Feel-good ques­tions are the first step toward accom­plish­ing that goal. And they don’t come off as inva­sive or intrusive.

What to ask

I have 10 feel-good ques­tions in my arse­nal, plus one key “must-ask” ques­tion. Before I share these, please know that you’ll never ask all 10 in any one con­ver­sa­tion — typ­i­cally, you should ask no more than two or three. Which ones you choose depends upon the con­text and the per­son to whom you are speaking.

Here are my 10 feel-good questions:

1. How did you get your start in the “wid­get” business?

2. What do you enjoy most about what you do?

3. What sep­a­rates your com­pany from your competition?

4. What advice would you give some­one just start­ing in the wid­get (his or her) business?

5. What one thing would you do with your busi­ness if you knew you couldn’t fail?

6. What sig­nif­i­cant changes have you seen take place in your pro­fes­sion through the years?

7. What do you see as the com­ing trends in the wid­get business?

8. Describe the strangest (or fun­ni­est) inci­dent you’ve ever expe­ri­enced in your business.

9. What strate­gies have you found to be the most effec­tive for pro­mot­ing your business?

10. What one sen­tence would you like peo­ple to use in describ­ing the way you do business?

How the process works in practice

Now that you’ve got the whole list, let’s look at just two of the ques­tions. If you ask only these, you’ll find a remark­able dif­fer­ence in the response you get, as opposed to in other con­ver­sa­tions where you spoke mostly about your­self and your business.

The first ques­tion is, “How did you get started in the ‘wid­get’ busi­ness?” I call this the “Movie-of-the-Week” ques­tion, because most peo­ple love the oppor­tu­nity to tell their story to some­one. Be sure to lis­ten actively, and be gen­uinely inter­ested in what the other per­son is saying.

A good sec­ond ques­tion is, “What do you enjoy most about what you do?”

Again, you are giv­ing the other per­son some­thing very pos­i­tive to asso­ciate with you and your conversation.

The One Key Question

At this point, you’ve begun to estab­lish a nice rap­port with your new prospect and/or refer­ral source. You are focus­ing on him or her, as opposed to on your­self and your awe­some finan­cial abil­i­ties. The per­son is start­ing to feel good about you and has enjoyed answer­ing your first two “feel-good” ques­tions. Now it’s time for the one key question:

“Gary, how can I know if some­one I speak­ing with would be a good prospect for you?”

What have you accom­plished by ask­ing that ques­tion? Two things. First, you’ve con­tin­ued to estab­lish your­self as being dif­fer­ent from any other finan­cial advi­sor they’ve ever met, because all the oth­ers only seem to want to know, “Would you like to invest with me?” Instead, you are let­ting the other party know that your inter­est is in help­ing them. And that is always accept­able to peo­ple (as long as you are, and are per­ceived as, sincere).

Sec­ond, since you are ask­ing for help in iden­ti­fy­ing the other person’s ideal prospects, he or she will gladly sup­ply you with an answer. And the fact is, noth­ing builds trust and cred­i­bil­ity with a prospect or poten­tial refer­ral source than actu­ally refer­ring busi­ness to them when­ever possible.

By the way, if you are speak­ing with some­one who is not in man­u­fac­tur­ing or sales (as in the above exam­ple), sim­ply gear your ques­tions to that individual’s unique sit­u­a­tion. You can always ask about hob­bies, fam­i­lies, or orga­ni­za­tions and causes in which the prospect is involved. And you can tweak the key ques­tion into some­thing like, “How can I know if some­one I’m speak­ing to is some­one you’d like to meet?”

Think­ing ahead

So, your con­ver­sa­tion has ended and you never even brought up your prac­tice. Good! Your rela­tion­ship with this new prospect may not be far enough along for him or her to be recep­tive to that dis­cus­sion (although there are times when it’s very advis­able to bring it up — we’ll cover that in a future article).

Hope­fully, you’ve obtained the person’s busi­ness card. Notice that I did not say, “Hope­fully, you’ve given them your busi­ness card.” Why not give her yours? Because she doesn’t need it or want it right now (unless she directly asks for it) — and since you have hers, you are in a posi­tion to fol­low up cor­rectly and systematically.

Good job. You’ve accom­plished the first step in cul­ti­vat­ing a refer­ral rela­tion­ship. Whether meet­ing new peo­ple in a one-on-one sit­u­a­tion or at for­mal gath­er­ings, fol­low­ing the process out­lined above means you’ll never again have to feel that ner­vous dis­com­fort in the pit of your stom­ach, know­ing that you have to approach some­one you don’t want to approach and whom you can sense does not want to be approached. Instead, this process will help you build a high-quality prospect and refer­ral base quickly and in a man­ner that’s fun for you and your prospects.

——–

Bob Burg speaks to Finan­cial Advi­sors on how to cul­ti­vate ongo­ing refer­ral busi­ness. He is author of End­less Refer­rals and co-author (with John David Mann) of the National Best­seller, The Go-Giver and the soon-to-be-released, Go-Givers Sell More . To down­load Chap­ter one of either/both of The Go-Giver books, visit www​.Burg​.com and click the book graphic.

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Five essential lessons from top advisors

Wednesday, July 27th, 2011

This month, my col­umn in Invest­ment Exec­u­tive high­lights impor­tant take­aways  from ten suc­cess­ful advi­sor who spoke at the recent Top Advi­sor Summit.What was espe­cially strik­ing was how con­sis­tently these themes were repeated by advi­sors with dis­parate back­grounds and a broad range of firms.

Advi­sors look­ing to move through the cur­rent tough times could do far worse than focus on the five com­mon mes­sages that came out of the Summit

Les­son One: Deal with all of your clients’ finan­cial issues

Many clients want and need more than invest­ment advice alone and ben­e­fit from advi­sors who take a whole wealth approach.

By tak­ing a whole wealth approach, advi­sors can add sub­stan­tial value to the rela­tion­ship. You’ll build deeper rela­tion­ships and increase the chances you are the pri­mary advi­sor, so insu­late your­self from com­pe­ti­tion and pos­si­ble pric­ing pres­sure. And since clients are hap­pier, you’ll feel bet­ter about the work you do and increase the chances of referrals.

Les­son Two: Make a finan­cial plan the cor­ner­stone of your client relationships

A num­ber of the speak­ers talked about the pos­i­tive impact of hav­ing a writ­ten plan in place in main­tain­ing peace of mind for clients dur­ing peri­ods of mar­ket tur­moil such as we’ve seen of late — being able to show them that things are not as dire as they fear and that they’re still okay can be a huge relief.

In the words of one speaker,” never for­get that he who owns the plan owns the relationship.”

Les­son Three: Put strate­gies in place to ensure clients feel listened

Another recur­rent theme was how impor­tant it is to get anx­ious clients to open up about their mood and to ensure that they feel lis­tened to.

One speaker talked about a con­ver­sa­tion with his brother, a psy­chi­a­trist, who coun­seled him not to reas­sure clients that they shouldn’t be wor­ry­ing. When clients are bom­barded by neg­a­tive head­lines, it’s nat­ural that they be con­cerned. To build a bond of trust, advi­sors need to hear those con­cerns out, to tell clients that they’re not alone and that their con­cerns are under­stand­able …. and then to go on to bring con­text and per­spec­tive to the situation.

A num­ber of advi­sors also talked about using client advi­sory boards to obtain struc­tured  feed­back on an ongo­ing basis.

Les­son 4: Bring focus to your business

All the speak­ers had achieved con­sid­er­able suc­cess — and lis­ten­ing to them rein­forced the impor­tance of bring­ing focus to your busi­ness. One talked about the impact of bring­ing a full-time Vice Pres­i­dent Oper­a­tions on board so that he and his part­ner could con­cen­trate on build­ing out their retire­ment plan­ning prac­tice. Another team described the many hours invested in cre­at­ing a com­pre­hen­sive “owner’s man­ual” that every client receives — and that is also a pow­er­ful tool in talk­ing to prospec­tive clients.

And  two oth­ers described their exclu­sive focus on busi­ness own­ers and some of the pos­i­tive impli­ca­tions of this deci­sion on their abil­ity to serve those clients extra­or­di­nar­ily well.

Les­son 5. Remem­ber that lit­tle things truly matter

In mar­kets like these, it’s easy to over­look some of the small touches when deal­ing with clients — these can range from remem­ber­ing birth­days to inquir­ing about a client’s grand­chil­dren. And yet, remark­ably often, it’s not the big things that clients notice and remem­ber, it’s the lit­tle things.

One speaker talked about buy­ing $5 Star­bucks cards with her name on them — and look­ing for oppor­tu­ni­ties to send these out to clients with a thank you note. Whether it’s thank­ing them for send­ing in an RESP con­tri­bu­tion for their chil­dren or for tak­ing the time to come into her office for a meet­ing, she has the goal of send­ing these out when­ever she can. In her talk she dis­cussed the very pos­i­tive response she’s received to these cards, well beyond what would seem mer­ited by a $5 investment.

To read the entire col­umn and see detailed cov­er­age of all of the pre­sen­ta­tions, click: Top advi­sors share com­mon themes from Invest​mentEx​ec​u​tive​.com

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