Posts Tagged ‘Relationships’
Tuesday, July 3rd, 2012
by Stephen Wershing, The Client Driven Practice
Don’t make the mistake of saying what other advisors put on their websites.
At the Pershing INSITE 2012 conference, Michelle Gutierrez, a director at Pershing, referenced a Tower Group study that showed that 71% of a sample of investors get their first impression of you by visiting your website. Only then do they want to meet with you. (I cannot find a copy or summary of this study, so I can’t verify this statistic. If anyone has seen it, I would be grateful if you would put the link in the comments below.) So, if your message is not clearly on your homepage you are missing opportunities.
So many sites I see say the same thing: independent, objective, comprehensive, wealth management, financial planning. Does your website say that you build one-on-one relationships with clients, offering personalized attention and financial guidance? Then you are just like a national brokerage! Aren’t you?
If the client cannot quickly understand that you are really good at something in particular that the prospect needs, you may not get the chance to make her a client. You may have an amazing presentation that you make to prospects in an introductory meeting, but you have to get that appointment for it to work its magic. If your website looks pretty much like your competitors, and their in-person sales pitch is good, your prospect may sign on with them without ever talking to you.
Establishing your brand requires putting your value proposition, what makes you different, everywhere you have a marketing message. Whenever you have a chance to tell people what you do, verbally, in print, or on the web, you need to be reinforcing the description of your ideal client and that special solution or experience you deliver.
Copyright © The Client Driven Practice
Tags: Appointment, Brokerage, Driven Practice, Financial Guidance, Financial Planning, First Impression, Group Study, Insite, Investors, Magic, Mistake, Nbsp, Person Sales, Prospects, Relationships, Sales Pitch, Statistic, Tower Group, Value Proposition, Wealth Management
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Wednesday, May 16th, 2012
by Shauna Trainor, The Covenant Group
Yes, marketing is an essential part of running a business, but entrepreneurs should not view this activity as something separate from all other aspects of the company. Buying ad space or reaching out to prospects through newspaper articles and blogs will help establish your brand. Yet the efforts can also double as lead gathering and client relationship management opportunities.
In a piece for Entrepreneur magazine, Ann Handley outlines some newer technologies that could offer your firm more chances to spread awareness of your brand. Marketing can be as simple as updating your email signature. She suggests adding a link to your blog or a “relevant download” at the bottom of your messages — this can give contacts a better sense of what you do and represent, and may foster deeper relationships in the future.
Handley also notes that SlideShare.net is a valuable means of promoting your expertise on a specific subject while also gathering leads that could later become prospects and clients. That’s because in order to download a PDF or presentation, viewers have to fill out a form with their contact information. That feature comes with the Pro SlideShare membership, but the investment also allows you to prompt viewers at various points of the presentation to contact your business for more details.
Chiming in on LinkedIn discussion pages is another strong tactic for showing your command of a subject while also building a name for yourself. Handley recommends spending some time clicking through the questions on the network’s forum, providing helpful answers and, when relevant, pointing to how your services can help.
How do you integrate your marketing activities with other functions in your company? Do you see it as a means to not only build client capital, but solidify the relationships you already have with current clients? Are you regularly seeking ways to draw connections between your advertising and marketing initiatives and the day-to-day aspects of the business?
In The Business Builder, Norm Trainor talks about the importance of integrating your sales, marketing and client service efforts. He notes that there should be a smooth transition from the point where you are targeting prospects, to engaging them in the opening interview, to committing to future service when you finally close the sale.
Throughout this process, Norm notes that financial advisors should be working to make their clients feel special and appreciated while gently pushing them toward the next stage in the business cycle. This same concept applies to creating and distributing content online for marketing purposes. When you write an article, create a slideshow or share a link with contacts, it should be done with the audience’s interest in mind. Your ultimate goal in marketing is to create new clients, and offering them valuable information is the best method for doing so.
Shauna Trainor is The Covenant Group’s Marketing Manager. She focuses on The Covenant Group’s own marketing strategy and also helps entrepreneurs through financial advisor training to leverage social media and other technology to spread the word about their services and practices and build relationships.
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Tags: Ad Space, Advertising And Marketing, Advertising Marketing, Better Sense, Blogs, Brand Marketing, Client Relationship Management, Contacts, Covenant Group, Download Pdf, Dynasty, Email Signature, Entrepreneur Magazine, Friends, Lead Generation, Management Opportunities, Marketing Lead, Nbsp, Newer Technologies, Prospects, Relationships, Running A Business, Shauna, Slideshare, Tactic
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Wednesday, May 2nd, 2012
A couple of weeks back, I wrote about how making short term progress a priority can fuel long term growth.
In response, I heard from a financial advisor who starts each week by focusing on two specific measures and have seen substantial gains in his business as a result.
“Overwhelmed by putting out fires”
This advisor began by describing his conclusions from a review of his business at the end of 2010.
“Going into 2010, I set two key goals. First, I set out to broaden and deepen my relationships with my most important clients. And second, I wanted to significantly expand the number of prospects that I was communicating with.
As I went through the year-end analysis of my business, I realized that I’d made limited progress on the first goal and almost none on the second. When I thought about why that was, the difficulty wasn’t lack of desire or good intentions, it’s just that I found myself so overwhelmed by putting out fires and the sheer number of things I had on the go, I wasn’t able to put concerted effort against those two objectives.”
“What’s urgent vs. what’s important?”
This advisor’s difficulty is a universal one.
In “Seven Habits of Highly Effective People”, Stephen Covey describes the problem we all face of assigning enough energy and resources to the important things that will drive our future success. Quite simply, we’re all inundated with pressing demands on our time that need to be dealt with right now; these are critical but not necessarily important. And if we’re not careful, those things that are critical in the short term can crowd out the important activities that are essential to achieving long term success.
This advisor had another problem beyond this, however.
“I had set out really ambitious plans for 2010, with a bunch of different things that I wanted to move forward on, including broadening my knowledge on insurance, upgrading my team, developing closer relationships with the accountants for my key clients and raising my profile among a key target group that I see as having real promise.
As I looked back on the year I realized that I’d spread myself too thin. I’d set out to do too much, and as a result hadn’t been able to put enough real focus and effort against any of my goals.”
“A prescription for progress”
As he put together his 2011 business plan, this advisor resolved to learn from his failure the previous year.
Step one was to select two and only two key objectives on which to focus. As part of that, he sat down with his associate and assistant and discussed how they were going to achieve these goals. Next, he set quarterly objectives for each of these goals, against which he can track progress. At the start of each quarter he further sets activity goals by week.
All of this is on a spreadsheet that he and his team review each Monday morning. For each of his goals, there are four columns that they focus on.
The first column is an overview of target activity that was set out at beginning of year, with a running tally year to date tally showing where they should be. Column two shows where they actually are. The other two columns focus on the current quarter; column three lays out their goals for the current quarter, broken out by week, and column four shows actual progress for each week.
Using this spreadsheet as a guide they discuss what they did last week against each of those two priority activities, and the numbers that resulted from that activity. They then agree to the activity that will take place in the week ahead with those two goals in mind.
None of this is in any way revolutionary. But by maintaining steady and consistent focus on weekly progress, this advisor was able to achieve his goals on two important long term initiatives in 2011; and is on track again in 2012.
Given that this has worked so well for this advisor, consider whether a similar approach might help you move your business forward as well. In the meantime, here’s a link to the article describing the research on how focus on short term focus can advance your business.
Tags: Accountants, Ambitious Plans, Concerted Effort, Conclusions, Different Things, Good Intentions, Important Things, Key Goals, Lack Of Desire, Measures, Priority, Prospects, Putting Out Fires, Relationships, Seven Habits Of Highly Effective People, Sheer Number, Stephen Covey, Substantial Gains, Term Success, Year End
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Wednesday, April 4th, 2012
Most advisors recognize that clients are unhappy with returns in the last decade, but believe that their clients are satisfied with communication and the relationship as a whole.
That’s why three recent conversations with both investors and advisor should set off alarm bells.
Three causes of client defection:
In my 25 years working in the investment industry, I’ve had numerous conversations with advisors and investors about what makes clients leave. Sometimes it truly is beyond an advisors’ control; markets underperform, clients have unrealistic expectations, or feel they can save money investing on their own. And sometimes clients are won over by a sales pitch from another advisor who shot the lights out.
But often the issues that cost clients fall into three categories that are absolutely within advisors’ control:
The first of these relates to communication.
A recent article described a conversation with clients thinking about switching because they weren’t getting updates between annual meetings on market developments, leading them to wonder whether their advisor was actually on top of what was happening. Other clients complain that they never hear from their advisor, unless they initiate contact or that when they meet their advisor dominates the conversation.
Another set of issues within advisors’ control that damage relationships and can cost clients hinge on responsiveness; and clients feeling unimportant or unappreciated.
Last fall, I wrote about clients who left because their advisor hadn’t responded to requests for a comprehensive financial plan. Other clients have talked about advisors failing to respond to questions in a timely fashion, or things like change of address that drag on without resolution.
A third cause for clients leaving today is the sense that their advisor is too passive in recommendations to make changes to their portfolio. In markets like we’ve seen of late many clients want to feel that their advisor is actively looking for better opportunities. I recently talked to an advisor who lost a half a million dollar client and asked his branch manager to call the client to get feedback.
“I liked working with John,” was the response from clients, “but all we’ve heard for the last five years is to be patient and hang in there. Given everything that’s gone on, it’s hard to imagine that the portfolio that made sense five years ago still makes sense today.”
On this last issue, it’s not that you can’t recommend that clients stick with their portfolio, but understand that today many clients are looking for their portfolio to be actively managed; if you’re recommending a status quo approach you have to take time to demonstrate that you’ve looked at all the alternatives, and that this isn’t simply the path of least resistance for you.
“What we have here is a failure to communicate”
Let’s be clear here: The big problem isn’t client unhappiness with communication, responsiveness or proactive advice. The problem is that in many cases advisors are oblivious about these satisfaction gaps and only learn about them when clients leave.
In the words of the warden in the Oscar winning 1967 film Cool Hand Luke: “ What we have here is a failure to communicate.”
There are a number of ways to open the lines of communication with clients.
A recent article described the Net promoter methodology to measure client satisfaction and loyalty:
Last year, I wrote about questions that will get clients to open up about how they really feel. One of the best ways to get feedback is with the simple question: “What one thing could I do to improve your experience working with me and my team?”
You can hire one of the firms such as Advisor Impact that conduct audits of client satisfaction.
Or you can participate in a groundbreaking research study I’ll be conducting this spring in conjunction with Professor Tanjim Hossain of the Rotman School of Management at the University of Toronto.
How the study will work:
The study is designed to provide clear feedback on how to improve your client meetings and your client relationships generally. At the beginning of meetings, advisors will tell clients that they’re participating in a research study to maximize the value of meetings for clients, conducted with the Rotman School of Management at the University of Toronto.
At the end of the meeting, clients will complete a confidential written survey which they’ll put in a stamped envelope and mail. While clients are answering the written survey, advisors will be at their desks completing parallel questions. Notably, one client who completes the survey will win $5,000.
What you’ll get:
Participating advisors will receive:
- An analysis of what clients think of the value from your meetings and guidance on how meetings could be improved
- Feedback on your overall client satisfaction level
- Identification of gaps between your view of client satisfaction and what clients actually say
- An overview of the barriers to your clients providing referrals
- Where clients give us permission to share their names, specific feedback from individual clients
Plus one advisor will have the chance to call a client and tell him or her that they’ve won $5,000.
The study is being run over eight weeks, with the time commitment for the typical advisor about ten minutes per week.
1. More details on how the study will work: Client Meeting Study Summary–Click Here
2. A link to download a 15 minute conference call describing the study: Research Study Conference Call Recording–Click Here
3. A copy of the draft questionnaire for clients to complete: Sample Investor Questionnaire–Click Here
Here’s the link to sign up for the study: Register Here
Tags: Alarm Bells, Annual Meetings, Change Of Address, Control Markets, Conversations, Defection, Drag On, Gaps, Hadn, Investment Industry, Last Decade, Leaving Today, Market Developments, Recent Article, Relationships, Responsiveness, Sales Pitch, Satisfaction, Timely Fashion, Unrealistic Expectations
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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.
Tags: Business Cards, Business Events, Charity Functions, Cornerstone, Correct Perspective, Guest Article, Lead, Personal Sphere, Premise, Referral Base, Referrals, Relationship, Relationships, Self Interest, Sphere Of Influence, Synagogue, Term Networking
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Wednesday, November 30th, 2011
People care less about what you do and more about what they get.
When I asked advisors what they do, or what value they represent, too many describe the process they utilize and not enough describe solution they deliver. People won’t send you a referral because you have a customized financial planning process and evaluate individual goals and generate recommendations tailored to client specific needs, and they won’t send you a referral because you carefully monitor relationships between markets and rebalance portfolios based on proprietary protocols. They will provide a referral beause you provide a solution to a problem their friend has. People care less about what you do and more about what they get.
I believe the most powerful descriptions of the value advisors offer encapsulate the benefit a target prospect realizes by working with them. This requires, first, that you have a practical and well defined target market, but that’s another post. Consider describing what you do worded as a solution from the client’s point of view. Complete this sentence “People like [describe target prospect] come to me for [solution that target market requires]. Consider these possibilities:
Corporate executives facing retirement in the next three years come to me because I show them the right choice on their retirement plan distributions.
Single professional mothers come to me to learn how to balance the demands of raising kids with the ability to afford college.
People who have saved enough to take care of themselves and want to use their savings to leave a mark on the world come to us to plan their legacy.
You can teach your clients statements of value like these, and they will repeat them to others when providing you a referral.
Don’t worry about answering the question “What do you do” with a sentence that starts out by describing your target client. You may think the person who asked you the question wants you to be the subject of the sentence, but you can much more effectively get their attention by describing the person you specialize in – especially if it is them.
When I ask advisors what they do, most often I hear versions of “I help people reach their financial goals” or “I manage people’s portfolios to help reduce risk.” Or “I give people peace of mind”. These are usually too general to be useful. And the bigger problem is that I don’t think of my problems in those terms. I have just started a new business with one child in college, and am newly married, working on consolidating two households and have a three-year-old in the house for the first time in 14 years. You are NOT going to give me peace of mind.
People will come to get a solution, not to get a process. And people will remember to refer you because a friend mentions a problem that your client can plug your solution into, not because they like your process or because you have provided them returns to keep up with the market (even if it’s with lower volatility).
If you stand for process you are a technician. If you represent a solution, you will attract clients and referrals who need a problem solved.
Tags: Answering The Question, Benefit, Corporate Executives, Financial Planning, Legacy, People, Point Of View, Portfolios, Possibilities, Proprietary Protocols, Raising Kids, Referral, Relationships, Retirement Plan Distributions, Right Choice, Target Client, Target Market, Worry
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Wednesday, November 2nd, 2011
Four communication imperatives for today’s clients
I recently had the opportunity to talk to a group of affluent investors about relationships with their advisors.
When it came to communication, I was struck by how the things that would have impressed clients ten years ago are absolutely ho-hum today … and how quickly the standards for effective communication are changing.
Not that long ago, investors would have been happy with an annual meeting and quarterly newsletters or market updates. While this model will still satisfy some, a growing number of investors are looking for something more when it comes to communication from their advisor.
Four new rules for effective communication
There are a number of themes that run through conversations with investors about what they look for in terms of communication.
1. More frequent contact
Given volatile markets and the sheer volume of available information, a growing number of investors want to hear from their advisors much more frequently than in the past — for many clients, the traditional model of an annual review as being the sole form of personal contact no longer cuts it.
2. Shorter conversations … on their terms
At the same time as investors want to hear from their advisors more frequently, they are reluctant to invest an hour on each conversation — they want shorter updates. Furthermore, more and more want at least some of these conversations in a time, place and fashion that is more convenient than trekking to their advisor’s office.
3. Relevant and customized
Some investors complain of generic, same-old content in meetings. A growing number are looking for conversations that reflect current issues and which are directly relevant to their situation, addressing the key question of “what does all this mean to me?”
4. From credible sources
We all recognize that today’s consumer is not only bombarded with much more information but also more sceptical. As a result, some investors are looking for direct access to expert views and for a sense that the perspectives they’re getting come from credible, objective sources.
Building a foundation of personal contact
Effective communication starts with a foundation of personal contact.
Let’s begin with the reality that while many things have changed, there’s still no substitute for face to face contact. An annual face to face meeting is still essential — and for important clients, you need to do whatever it takes within reason to make that meeting happen, in my opinion up to and including meeting at their home or office.
Provided that you make it clear you’re making an exception to accommodate their schedules, if that’s what it takes to make it happen, for significant clients I’d be open to occasional meetings on their premises.
Having the meeting is only the first step, though. Once face to face with clients, you need to ensure that you accomplish a number of key things:
1. Clients have to walk away reassured about your competence and ability.
2. They need to feel listened to and be confident that the meeting revolves around their needs and agenda rather than yours.
3. Clients need to emerge feeling more positive that they’re on target to hit their long term goals, even if that entails making some modifications to their plan.
If you missed last week’s article, here’s how one advisor achieves this:
Supplementing face to face meetings
For many clients, even if you accomplish all these goals in your annual review, that once a year meeting isn’t enough … they want more frequent, shorter updates.
That’s where regular telephone meetings come in. Increasingly, advisors will need to schedule 15 or 20 minute telephone appointments to answer questions and update progress.
The key is to making these telephone reviews feel as much as possible like face to face meetings. The article below from late last year goes into detail on using technology to make those phone meetings work.
For some clients, this level of personal contact is sufficient — an annual face to face meeting and short quarterly phone meeting would be absolutely sufficient.
Others, however, are looking for more — on Thursday, I’ll cover the other two ingredients to effective communication — relevant content from credible sources.
Tags: Annual Meeting, Conversations, Credible Sources, Current Issues, Effective Communication, Fashion, Imperatives, Investors, Market Updates, Personal Contact, Quarterly Newsletters, Relationships, Sheer Volume, Time Place, Traditional Model, Trekking, Volatile Markets
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Wednesday, October 26th, 2011
Talk to successful advisors about their business objectives and for most increasing assets is towards the top of their list.
Some advisors believe that winning a greater share of assets from existing clients is driven by performance.
And while that may be true in some cases, research with 50,000 Canadian investors pinpoints eight advisor activities that lead to increased client assets — none of which relate directly to performance.
A starting point on increasing client assets
I’ve written in the past about research showing that the majority of clients with
multiple advisors had never been approached about consolidating assets.
In some cases, clients have made a conscious decision to work with more than one advisor.
They may have developed strong relationships with multiple advisors, like to get multiple perspectives, work with more than one advisor to diversif risk or seek out different advisors for different skill sets.
And in a few cases clients are reluctant to consolidate assets with one advisor because they’re concerned they may lose some control over their money as a result.
All of that said, clients making a conscious decision to work with multiple advisors were a distinct minority. Most often this was a historical accident which just evolved over time.
In those cases, the first advisor who approaches a client about consolidating assets has an advantage. Note, however that just approaching clients about consolidating assets isn’t enough — you have to demonstrate the benefit of doing this, whether it be reducing overlapping positions, improving the overall risk return profile of a portfolio, improving the client’s tax situation or simplifying reporting.
New research on share of wallet drivers
Among the speakers at a conference I chaired this spring was Price Powell of Corporate Insights, a Vancouver based research firm that has collected information from over 50,000 investors on behalf of some of Canada’s largest investment dealers, financial planning firms and private banking operations.
For the typical advisor, his or her largest clients make up 25% of households and 65% of existing clients — but those largest clients make up almost 80% of the assets with clients that existing advisors don’t currently hold.
The good news is that there are specific things that advisor can do to increase their assets among their largest clients.
Corporate insights has identified eight share of wallet drivers. If those share of wallet drivers are in place, the percentage of client assets goes up, if they aren’t the share of assets goes down.
It is. If none of those eight drivers is in place, share of wallet is under 20%. If four drivers are in place, share of assets is about 50%. And if seven of those drivers are in place, percentage of assets is over 80%.
Client communication drivers
The first four share of wallet drivers all relate to client communcation — contact level, having a service agreement in place, portfolio reviews and holding conversations about fees and charges.
Driver one: Client contact
There were two measures on contact level — whether investors thought advisors spend enough time managing their account and whether they got sufficient contact.
On the first question, about half of clients think their advisors spend enough time managing their account — which leaves half who don’t
And just under 30% complain of lack of sufficient contact.
Driver two: Service agreements
Service agreements were also measured two ways.
And second, is there a written service agreement in place spelling out exactly what clients can look for. And there only about 20% of advisors have a written service agreement in place.
Just by putting your commitments to service in writing, the share of client assets goes up.
Driver Three: Portfolio reviews:
Regular portfolio reviews increase satisfaction and they increase share of assets. And yet only 40% of clients said they receive regular portfolio reviews.
Some advisors might say, well I offer those to clients but clients simply aren’t interested. But in fact research shows that almost half of clients want more regular portfolio reviews.
Again, regular portfolio reviews drive satisfaction and share of assets.
Driver Four: Communication on fees and charges
Again, communication on fees and charges was measured two ways.
First, do clients understand how they’re charged — just under 60% said they do, which leaves four out of ten who say no.
And second, do clients want an update and clarification of fees and charged — a full two thirds of clients said yes to this.
Wealth management drivers
The other four drivers all related to wealth management advice — things like financial planning, advisory services and insurance.
Driver five: Wealth management advice
A third of clients said they’re currently getting wealth management advice.
And among those not getting it, a quarter expressed interest in receiving broad wealth management advice.
Driver six: Advisory services
Advisors who provided advice on tax issues, estate planning, education savings and charitable giving experienced a higher share of assets.
Just over half of clients said they’re currently receiving advice on these issues.
And just under 40% of those not receiving this kind of advice expressed interest in getting it.
Driver seven: Insurance services
Just over half of clients use insurance services.
33% buying insurance use their main investment advisor — and just under one in five clents expressed interest in insurance advice.
Again, another driver of share of assets with a client.
Driver eight: Financial planning
Having a financial plan was the single factor that drove share of wallet the most — it truly does seem that the advisor who owns the play owns the client.
Half of clients surveyed said they had a financial plan — but only 28% had a written plan, so about half that number.
And what research shows is that if the plan isn’t written down, it doesn’t really count in terms of impact on asset level.
Even more interesting, over 40% of clients expressed interest in financial planning, a very big number.
On financial planning, failing to have a written plan in place doesn’t just cost advisors potential assets. It also represents a point of vulnerability — if another advisor offers to prepare a financial plan for that client, he or she will be at risk of leaving.
Making this happen
The good news is that the Corporate Insights research provides a roadmap on how to increase client assets.
For advisors interested in acting on this, consider this five step process.
1. On a piece of paper list your top ten clients — chances are that a good number of these have assets elsewhere.
2. Across the top of the page write the eight share of wallet activities:
- what clients see as sufficient contact
- a written service agreement
- regular portfolio reviews
- a conversation about fees and charges
- general wealth management advice
- advice on tax, estate planning, charitable giving or education savings
- advice on insurance
- a written financial plan
3. For each of your top ten clients, check off any of those eight activities that haven’t happened.
4. Schedule time to call your each of you top ten clients to talk about any of those gaps.
5. Finally, once you’ve done this for your top ten clients, repeat the process for your next ten — and then the next ten after that and another ten, until you’ve done this for all your meaningful clients.
By going through this process, you not only lock in your relationship with top clients, but chances are you’ll see additional assets coming in along the way.
Tags: Benefit, Business Objectives, Canadian Investors, Client Assets, Conscious Decision, Corporate Insights, Distinct Minority, Investment Dealers, Money, Note However That, Perspectives, Portfolio, Profile, Relationships, Risk Return, Share Of Wallet, Skill Sets, Speakers, Tax Situation, Vancouver
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Wednesday, October 26th, 2011
Stop leaving fee-based dollars on the floor
One of the important trends among successful advisors over the past decade has been the shift from a business whose revenue model depended on commissions to one based on annual fees.
A recent research report provides important insights on getting the level of fee pricing right, one of the keys to making a fee-based approach work.
The big picture on fee-based business
At the end of December, the average advisor at US and Canadian full-service securities firms had 25% of assets and 37% of revenue in fee-based accounts; 80% of advisors had at least 5% of assets in fee-based programs.
Over the last four years, the typical advisor’s fee-based assets are up 24%, at a time when non fee-based assets were down slightly. The average advisor opened just under 15 new fee-based accounts in 2010, up from 12 accounts in 2008 — over 80% of these accounts were with new relationships.
These are some of the findings from the most recent Insights whitepaper by investment industry software firm PriceMetrix. This report features data from 15,000 advisor books at a broad range of Canadian and US firms; these advisors worked with over 2 million investors representing assets of $850 billion (so an average account size of $400,000.)
Note that the firms PriceMetrix works with tend to be full-service securities firms, so the actual numbers may differ from advisors with other business models, although the overall trends should be.
What’s driven the move to fee-based
There are a number of reasons for the growth in fee-based accounts.
Start with the fact that a fee-based approach leads to better alignment of interests. For investors it can reduce concerns about potential conflicts and whether a recommendation to buy or sell is motivated by the advisor’s desire to generate a commission. Further it eliminates client anxiety about not getting a fair price if they don’t haggle about commission levels.
For advisors, fee based-business escapes the commoditization trap on commissions and matches revenue and effort — good advisors provide ongoing, regular communication and advice to clients and a fee-based approach reflects that.
Finally, fee-based business provides predictable revenue. One of the key things that drives long term value in a business is “recurring revenue”, the fact that once an initial sale is made, provided that you do a good job, additional revenue can be relied on. This is nothing new — Gillette built a great business based on giving away razors and then making money off razor blades.
For advisors looking to enhance the long term value of their business, recurring revenue is key — that’s why some advisors who were historically transaction oriented have sat down with clients, shown them how much they’ve paid in commissions over the past few years and suggested a fee below the commission level clients paid in the past, foregoing some revenue for stability and predictability.
Getting fee-based pricing right
Perhaps the most critical element to a profitable fee based business is getting pricing right.
Three observations on pricing from the PriceMetrix research:
1. Underpricing of small and mid-sized accounts
Average revenue from client households with assets of $500K to $1 million is two to three times that for clients with $100K to $250K.
Even accounting for higher communication and service levels for larger clients, it appears that advisors are either undercharging smaller clients or overcharging larger ones.
Here’s the average pricing for accounts at different levels of household assets:
Advisors need to scale pricing so that it’s fair to clients of all sizes and to set minimum levels of revenue per household.
2. Wide disparities in pricing for similar clients
Fees for similar accounts varied widely across advisors.
Here’s the distribution of pricing to clients with assets of $250K to $500k in balanced accounts — note that the overall average price for this group 1.39%.
Of note, PriceMetrix didn’t find any correlation between pricing level on the one hand and geographic location, other revenue from clients or success in winning new accounts on the other. The only apparent variable is the advisor’s business model and going in thinking on pricing.
Advisors need to be clear and consistent on their approach to fee-based pricing; as part of that, more attention needs to be paid to market pricing and what other advisors are charging for similar accounts.
3. Getting initial pricing right
Once a pricing level is set, it is incredibly difficult to raise it — only 5% of advisors saw a meaningful increase in pricing levels with existing accounts. That means it’s of paramount importance to get the initial pricing level on a fee based account right. To do that, you have to be crystal clear about your pricing going into client conversations — and be committed to maintain pricing levels across your book that are consistent and fair both to you and to clients.
You need to get initial pricing on new fee-based accounts right. As part of that, you have to be crystal clear on the value you’re providing.
Two ingredients to building a fee-based business
There are at least two keys to making fee-based business the foundation of your business going forward.
First is to focus — the advisors who are seeing the most success are those who are adopting the fee-based model as the foundation of their approach. To make fee-based business a central part of your business, you have to assign this top priority.
The second is to effectively articulate what clients get for the fee they pay. A fee-based approach makes investors’ annual costs absolutely transparent and requires clients to explicitly agree to pay that cost — in light of that, communicating your value is job one.
Here’s a recent article and video that talk specifically to this point:
Watch Video Run Time — 3m 31s
And click here for the PriceMetrix report on fee and managed asset pricing:
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