A Conversation that Tripled Referrals

Wednesday, June 27th, 2012

Last Sep­tem­ber, a vet­eran advi­sor con­tacted his retired clients with the sug­ges­tion that they meet. The meet­ing had one sim­ple goal; to lay out detailed monthly cash flow fore­casts for the period ahead match­ing funds com­ing in with cash going out.

The response was way beyond this advisor’s expec­ta­tions. Clients who he’d had dif­fi­culty get­ting into his office sud­denly made meet­ing him a pri­or­ity. The response after­wards was gen­er­ally relief. Even clients who had absolutely no con­cerns about cash flow expressed appre­ci­a­tion for his time and the peace of mind they felt as a result.

The good news was that most clients were fine although there were a few cases where income didn’t cover expenses. In those instances, he talked about the two alter­na­tives; to cur­tail spend­ing or real­lo­cate some of their port­fo­lio into invest­ments which threw off more income. In one case, he agreed with a client that they would tem­porar­ily eat into cap­i­tal with the pro­viso that they would revisit this in a year’s times.

At the end of each meet­ing he asked clients whether they’d felt it was time well spent. With­out excep­tion they said it was; retired cou­ples were espe­cially effu­sive. A num­ber said they’d each been wor­ry­ing about this but hadn’t known how to bring it up. Another client with assets of $5 mil­lion said that he’d been uncer­tain as to whether he could afford to offer to cover uni­ver­sity tuition for his three grandchildren.

After hear­ing clients out this advi­sor men­tioned that should they have fam­ily or friends in cir­cum­stances sim­i­lar to theirs who might be inter­ested in going through a sim­i­lar process, he would be happy to meet with them also. He sug­gested that either their friends could call his assis­tant to book a meet­ing or if his clients called her with their friends’ name and phone num­ber, she would con­tact them directly.

He started get­ting calls right away as clients talked to friends about the expe­ri­ence. He saw a par­tic­u­lar bump in calls in early Jan­u­ary as his clients got together with friends and fam­ily dur­ing the hol­i­day season.

Tap­ping into hot buttons

Why was the response to these meet­ings so positive?

I’ve writ­ten in the past about the need to focus on client hot but­tons. Many peo­ple in retire­ment have always wor­ried about their finances. His­tor­i­cally, under spend­ing has been a big­ger prob­lem than over­spend­ing (although it remains to be seen if this con­tin­ues to be the case as boomers enter retire­ment, with their “I want it all and I want it now” mind­set.)

With all the uncer­tainty about the econ­omy and stock mar­kets it’s under­stand­able that clients worry; and par­tic­u­larly retired clients. The rea­son that this worked was quite sim­ply that it addressed a pre­oc­cu­pa­tion and con­cern for many retired clients, whether war­ranted or not. Quite sim­ply, it gave them cer­tainty, and clients love cer­tainty, espe­cially those get­ting on in years.

The exer­cise achieved two other things as well.

First, it pro­vided con­text for dis­cre­tionary deci­sions. In prepar­ing cash flow fore­casts, it pro­vided a frame­work within which to make deci­sions on large items; buy­ing a new car, the kind of hol­i­day to take, giv­ing gifts to char­ity or to chil­dren and grandchildren.

And sec­ond, it con­sol­i­dated every­thing into one place, both income as well as expenses. The advi­sor asked clients to bring in their last year’s tax return as well as state­ments for any invest­ment accounts out­side of his firm. By putting every­thing onto one piece of paper, it clar­i­fied exactly where they stood, and in some cases opened this advisor’s eyes to accounts that clients held elsewhere.

As this advi­sor put it, ”There were two lessons for me from this experience.”

“First, see­ing how much clients with­out a clear cash flow fore­cast were wor­ry­ing; even those who had noth­ing to worry about.”

“And sec­ond, dis­cov­er­ing how much some clients where I was pos­i­tive I had all their money held else­where. There were a few Holy S… moments that emerged from this exercise.”

Mak­ing this happen

Like many advi­sors, this advi­sor had his­tor­i­cally shied away from focus­ing on client spend­ing. While he had pro­vided cash flow fore­casts to clients in the past show­ing income from div­i­dends and inter­est pay­ments, get­ting into con­ver­sa­tions about expenses was a new expe­ri­ence for him.

He started by pulling down one of the many bud­get­ing forms avail­able online. As a point of ref­er­ence for some clients who weren’t sure where to start, he used the 2009 Sta­tis­tics Canada sur­vey of house­hold spend­ing of Cana­dian house­holds available.

http://​www40​.stat​can​.ca/​l​0​1​/​c​s​t​0​1​/​f​a​m​i​l​1​6​a​-​e​n​g​.​htm

Where clients asked for the bud­get doc­u­ments before­hand, he sent them out in advance of the meet­ing. More often, he asked clients to bring their bank and credit card state­ments along to refer to if needed, and he worked through the bud­get along with his clients. Once he’d done about ten of these, he began com­pil­ing aver­ages of his own that he used to give retired clients some per­spec­tive about their spend­ing habits com­pared to other retired clients.

Some­thing else that this advi­sor learned was to book longer ses­sions for those meet­ings. Ini­tially, he sched­uled nor­mal one hour meet­ings, but after a cou­ple of ses­sions in which cou­ples had lengthy con­ver­sa­tions about some line items, he moved to a two hour time block. Towards the end, for his smaller clients he had his assis­tant do the ini­tial work to for­mu­late their spend­ing, join­ing in for the lat­ter part of the meeting.

I fully rec­og­nize that get­ting into the details of client spend­ing is not every advisor’s cup of tea. That said, I would point out that this truly does rep­re­sent an oppor­tu­nity to cre­ate peace of mind and to add value for your retired clients; and fur­ther, that if you don’t make this offer, there is always the risk that another advi­sor will.

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Tags: 5 Million, Assets, Bump, Cash Flow Forecasts, Circumstances, Couples, Friends Name, Grandchildren, Instances, Investments, Last September, Matching Funds, Peace Of Mind, Phone Number, Priority, Proviso, Referrals, Suggestion, University Tuition, Veteran
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