Overcoming a key barrier to moving accounts

Tuesday, July 19th, 2011

Recent posts have focused on approaches to over­come the skep­ti­cism of today’s investors and ways to get in front of prospec­tive clients.

In talk­ing to advi­sors who have reached out to prospects, a com­mon objec­tion they hear to mov­ing accounts is “I don’t want to lock in losses by sell­ing my invest­ments now.” Some­times this comes up when they first talk to a prospect on the phone, on other occa­sions it arises dur­ing the ini­tial meet­ing or when the advi­sor is pre­sent­ing recommendations.

Here’s a step by step response if you hear “I don’t want to lock in losses” when talk­ing to a prospec­tive client.

Start by val­i­dat­ing the objection

When­ever a prospect raises an objec­tion, they put their guard up because they expect that objec­tion to be attacked. 

Instead, respond by val­i­dat­ing the objec­tion, say­ing some­thing like “I can absolutely relate to your con­cern. None of us likes the idea of lock­ing in losses by sell­ing when invest­ments are beaten down.”

Respond­ing in this way reduces ten­sion and demon­strates that you share the investor’s concerns.

Get the prospec­tive client talking

Your pri­mary objec­tive in any con­ver­sa­tion with a prospect is to get them talk­ing, learn­ing as much about them in the process as you can.

It’s espe­cially impor­tant that you unearth as much as you can about the con­cerns that investors have about mov­ing. It may be that sell­ing invest­ments at depressed lev­els is only one of the bar­ri­ers to mak­ing a change — and maybe not even the largest obstacle.

Try to learn more by say­ing some­thing like: “What other con­cerns do you have about the pos­si­bil­ity of mak­ing a move?”

If you can’t get a response, you could try some­thing along the lines of: “In talk­ing to other investors, one con­cern about mov­ing advi­sors relates to the paper­work entailed and the pos­si­bil­ity of tax records being mis­placed. To what extent is this some­thing that wor­ries you?”

Or if you want to be a bit more aggres­sive, you could say some­thing like: “Some investors I’ve talked to tell me that they’re not sure they’ll really be bet­ter off work­ing with some­one new. Is this some­thing that con­cerns you?”

Let prospects know they won’t be sell­ing everything

Many investors are con­cerned that a new advi­sor will pro­pose sell­ing all of their invest­ments as a mat­ter of course in order to demon­strate how smart they are (and by impli­ca­tion how ill-advised the investor was in their choice of their pre­vi­ous advi­sor or to try to invest on their own.) As part of that, often investors fear that a new advi­sor will want to sell every­thing indis­crim­i­nately, regard­less of the merit of these investments.

Deal with this up front by say­ing some­thing like “It’s unlikely that we’d be look­ing at sell­ing every­thing you own.”

If talk­ing on the phone, you could say: “When we meet, I sug­gest we take a few min­utes to talk about your objec­tives and goals as an investor and then go through your most recent state­ment so that we could talk about what the can­di­dates to be replaced might be in light of that.”

If you’re meet­ing in per­son and you’ve already had the con­ver­sa­tion about the client’s objec­tives, alter­na­tively you could say: “What I sug­gest is that I take a copy of your state­ment and that we sched­ule a time to sit down again later this week. Between now and then, I’ll spend some time going through this in detail so that I can come back with spe­cific rec­om­men­da­tions on the invest­ments it makes sense to retain and those that are can­di­dates to be replaced.”

Focus on the positives

If a prospect agrees, focus first on what you’d hang on to — and err on the side of keep­ing invest­ments rather than replac­ing them.

Next, write down a list of the invest­ments you’d sell and beside that list write down what you’d replace those invest­ments with.

Then go through each invest­ment you’d sell and talk about what you like about that invest­ment and what you don’t like. After that, talk about the invest­ments you’d rec­om­mend putting in place of those invest­ments you think the prospect should sell.

The key is to take the prospect’s focus off the pain of sell­ing invest­ments that are down and replac­ing it with the gain of the alter­na­tives you’re suggesting.

Point out tax savings

If a prospect has a sig­nif­i­cant non reg­is­tered port­fo­lio, point out that they might recoup taxes by tak­ing tax losses on invest­ments that are down. You can offer to cal­cu­late how much they would get back — we all hate taxes, this can be a hot button.

Agree to main­tain exist­ing hold­ings for a period of time

If a prospect is still hes­i­tant and a key rea­son for their unhap­pi­ness relates to poor com­mu­ni­ca­tion last year, you could say: “I under­stand your con­cern about sell­ing posi­tions that are down. If you’re open to mov­ing your port­fo­lio over, we could agree to spend the first month devel­op­ing a plan for you and spend­ing some time ensur­ing that we’re on the same wave­length. Only after that would we look at mak­ing changes.”

Mon­i­tor how your port­fo­lio would have done

Sup­pose you’ve gone through all of these steps and the prospect is still reluc­tant to make a move.

As a last resort, you could sug­gest using one of the invest­ment track­ing web­sites such as Globein­vestor to set up two port­fo­lios on that site for them — the one they own and the one you rec­om­mend. As part of that con­ver­sa­tion, agree that you’ll be touch about once a month to revisit how the two port­fo­lios are doing and to answer any ques­tions they might have.

As a result of the mar­ket events of the last year, we’ve seen a spike in the level of investor skep­ti­cism. Many investors aren’t just skep­ti­cal about their own finan­cial advi­sor and finan­cial insti­tu­tion, they’re skep­ti­cal about ALL finan­cial advi­sors and ALL finan­cial insti­tu­tions. As a result, you need an approach to respond to state­ments like “I don’t want to lock in losses” that respects the level of anx­i­ety many of today’s investors feel. 

For more infor­ma­tion, please visit http://​www​.get​keep​clients​.com.

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Tags: Depressed Levels, Extent, Investments, Investor, Investors, Losses, Moving, Objection, Objective, Obstacle, Occasions, Paperwork, Prospective Client, Prospective Clients, Prospects, Skepticism, Step By Step, Step Response, Tension
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Tackling today’s number one client challenge

Wednesday, March 16th, 2011

Talk to advi­sors about the chal­lenges they face today and you’ll get a lengthy list — often headed by unhappy clients, reduced income and a strug­gle to stay pos­i­tive and productive.

While these are all seri­ous issues, for most advi­sors they are dwarfed by the num­ber one obsta­cle to get­ting busi­ness back on track — and that’s rebuild­ing client trust in our com­pe­tence and our integrity.

Given the intan­gi­ble nature of advice, it’s impos­si­ble to have a func­tion­ing rela­tion­ship with­out a min­i­mum thresh­old of client confidence.

The good news? There are clear steps that every advi­sor can take to begin the process of reestab­lish­ing trust.

One investor’s story

Rebuild­ing trust starts by under­stand­ing what’s led to its decline.

While recent per­for­mance may have been the cat­a­lyst for con­sumer skep­ti­cism, this is far from the sole cause.

A recent arti­cle in Atlantic Mag­a­zine titled “Why I fired my bro­ker” detailed why one investor became dis­il­lu­sioned with his advi­sor. In the arti­cle, he quotes a high pro­file US money man­ager to the effect that “the finan­cial sys­tem is rigged against the aver­age investor” and talks about the absence of con­tact from his bro­ker since last fall.

The good news is that he has not given up on the indus­try, but he is much more guarded going forward.

His part­ing sentences:

“Our main job now is find­ing some­one to advise us. This is a very dif­fi­cult task.

This search is made more dif­fi­cult because we don’t have enough money to make our­selves inter­est­ing to most of the best advi­sors and the typ­i­cal advi­sor is not suf­fi­ciently independent-minded to be effective.

Uncon­ven­tion­al­ity makes me ner­vous, but less so than con­for­mity. I’m fin­ished with con­for­mity. In pick­ing an advi­sor, I’m also look­ing for some­one who is unlever­aged; some­one who is putting his own money into the invest­ments he’s rec­om­mend­ing and some­one who can explain to me, in a few sen­tences, in lan­guage eas­ily under­stood by earth­lings, his phi­los­o­phy of investing.”

To read the arti­cle: http://​www​.the​at​lantic​.com/​d​o​c​/​p​r​i​n​t​/​2​0​0​9​0​5​/​g​o​l​d​b​e​r​g​-​e​c​o​n​o​m​y​?​x​=​2​3​&​a​m​p​;​y=2

Begin by tak­ing responsibility

So that’s the prob­lem, how about the solution?

Start by rec­og­niz­ing the prob­lem, make rebuild­ing trust a para­mount pri­or­ity and begin to put spe­cific strate­gies in place to repair your rela­tion­ship with clients.

In many cases, rebuild­ing trust starts by acknowl­edg­ing some level of responsibility.

It’s not just finan­cial advi­sors who have taken a hit in their trust level. A poll of Amer­i­cans taken early this showed trust in cor­po­ra­tions at 38%, down 20% from a year ago and at the low­est level on record, well below where it stood in the post-Enron era.  In recent arti­cles in For­tune Mag­a­zine, Indra Nooyi of Pep­sico and Jamie Dimon of JP Mor­gan Chase talked about how busi­ness needs to  rebuild trust.

Dimon also addressed the issue of tak­ing respon­si­bil­ity. He wrote: “In order to address the pub­lic anger and out­rage over what has hap­pened to our finan­cial sys­tem, we in the bank­ing com­mu­nity need to take some respon­si­bil­ity. Banks, includ­ing ours, should acknowl­edge that we made some mistakes.”

In inter­views with investors, one of the biggest irri­tants is the fail­ure of their advi­sors to admit any fault or take any respon­si­bil­ity for the melt­down of their port­fo­lios. In some cases, all that investors are look­ing for is their advi­sor to say they’re sorry.

Here’s how one con­ver­sa­tion might go:

“First and fore­most, I’m truly sorry that I was unable to antic­i­pate the events of the past year. I would have dearly loved to have been able to shel­ter you from the mar­ket down­turn — unfor­tu­nately, these took just about every­one by sur­prise, me included. What I would like to talk about is what we’ve learned from this and how these lessons are shap­ing the rec­om­men­da­tions I’m mak­ing going forward.”

Four dri­vers of trust

One of the top names and researchers around the issue of how to build trust is a U.S. based con­sul­tant named Charles Green.

He’s cre­ated a trust build­ing for­mula that advi­sors can apply that has four ele­ments — Trust equals C plus R plus I divided by S.

The first three dri­vers of trust are above the line, or the numer­a­tor if you remem­ber your high school alge­bra. They’re Cred­i­bil­ity, Reli­a­bil­ity and Intimacy.

Remem­ber, there are two ele­ments of trust — trust in your capa­bil­ity and trust in your integrity.

Cred­i­bil­ity addresses the first issue. How much do clients trust your com­pe­tence and how believ­able you are in terms of the advice you’re pro­vid­ing?  Are you seen to have real exper­tise? Does your track record build your cred­i­bil­ity? Do you instill con­fi­dence in clients that you are pro­vid­ing the best pos­si­ble advice?

Even where clients have been com­fort­able on this dimen­sion in the past, their con­fi­dence in your abil­ity to pro­vide good advice has been shaken and needs to be rebuilt.

Reli­a­bil­ity basi­cally speaks to whether you do what you say you’re going to and deliver on your com­mit­ments. That can be lit­tle things — if you say you’re going to call, do you call? Or it can be big things — if you tell a client that their max­i­mum down­side risk in a 12 month period is 20%, does the port­fo­lio you con­struct deliver on that?

The third fac­tor above the line is inti­macy. Do you engage the client at a deep, per­sonal level?  Do you ask ques­tions that tap into their emo­tions and feel­ings? Do they feel that you are really lis­ten­ing to their answers — and is your rela­tion­ship with them such that they feel com­fort­able shar­ing those with you?

These first three ele­ments in the trust equa­tion make up the total above the line.

The most impor­tant dri­ver of trust

The last fac­tor is the num­ber below the line — and is as impor­tant as the first three com­bined. That below the line ele­ment is per­ceived self-orientation, in other words to what extent are clients con­cerned that you may be putting their inter­ests behind yours?

There are a num­ber of things that you can do to address this.

Do you appear to be really inter­ested in what clients have to say? Do you ever seem to be in a hurry — is there any point where you demon­strate impa­tience and the desire to move things along? Do you really seem to be lis­ten­ing to them? (There’s that lis­ten­ing word again.)

Do you con­tact them with ideas and advice even when there is no rev­enue entailed for you? Whether it be on a per­sonal or busi­ness mat­ter, if every con­ver­sa­tion has some­thing in it for you, clients may be legit­i­mately unsure about what dri­ves those calls.

And some­thing that’s espe­cially prob­lem­atic these days, are clients absolutely com­fort­able that your rec­om­men­da­tions are not skewed by the com­pen­sa­tion that results?

Recently, there has been exten­sive media cov­er­age about how advi­sors’ rec­om­men­da­tions may be moti­vated by their inter­ests rather than clients.  Short of doing some­thing for free, com­pen­sa­tion is always an issue. Even when deal­ing with accoun­tants and lawyers, some con­sumers won­der whether all the time they were billed for was nec­es­sary or actu­ally spent.

Com­pen­sa­tion is par­tic­u­larly a prob­lem in the finan­cial indus­try, how­ever, where it is typ­i­cally com­mis­sion based, embed­ded in man­age­ment fees or billed as a per­cent­age of an account. Even when the fees are trans­par­ent, clients some­times won­der whether they are get­ting good value.

There is no per­fect solu­tion on com­pen­sa­tion, other than being upfront and trans­par­ent — here’s what I charge, here’s why and here’s what you get for it. As well, some advi­sors need to be more open about dis­cussing avail­able alter­na­tives on how clients can pay for the advice they receive.

What’s your trust quotient?

Rebuild­ing trust will not hap­pen quickly or eas­ily — and it’s tempt­ing to put it off as a result. Given it’s crit­i­cal impor­tance, how­ever advi­sors who don’t give reestab­lish­ing trust pri­or­ity do so at their peril. Now’s the time and today’s the day to being the crit­i­cal task of repair­ing client trust.

For advi­sors who want to learn more, a twenty ques­tion diag­nos­tic online ques­tion­naire can be com­pleted at no cost at Charles Green’s web­site. You’ll receive a short report that high­lights poten­tial weak spots and makes recommendations.

Go to http://​www​.trustedad​vi​sor​.com/ and click on What’s your TQ rating?

For more infor­ma­tion, please visit http://​get​keep​clients​.com.

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Tags: Catalyst, Client Challenge, Client Confidence, Client Trust, Competence, Conformity, Decline, Earthlings, High Profile, Intangible Nature, Integrity, Minimum Threshold, Money Manager, Obstacle, Rebuilding Trust, Recent Article, Sentences, Skepticism, Sole Cause, Unhappy Clients
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Stop wasting time and money on client communication

Wednesday, November 24th, 2010

The world has changed in all kinds of ways over the last decade.

First, atten­tion spans have shrunk dramatically.

Beyond this, most every­one is much more time pressed.

And third, the level of skep­ti­cism has spiked among exist­ing and prospec­tive clients alike.

As a result, what worked in terms of client com­mu­ni­ca­tion as recently as five years ago doesn’t work nearly as well today. As a result, you need to fun­da­men­tally change how you com­mu­ni­cate with clients.

Get­ting writ­ten com­mu­ni­ca­tion read

Lets be clear, clients still want to hear from you — in fact chances are they want to hear from you more often.

But they typ­i­cally want each of those inter­ac­tions to be shorter

So  for exam­ple get­ting some­thing short once every month or two rather than a longer piece once a quarter.

Beyond this, clients are look­ing for com­mu­ni­ca­tion that’s tai­lored to their sit­u­a­tion and that, given today’s skep­ti­cal mood,  taps into cred­i­ble third party support.

Sup­pose a client received one of two things.

One alter­na­tive is a quar­terly, four page glossy newslet­ter from you or your firm talk­ing about the out­look for the econ­omy, inter­est rate fore­casts, oppor­tu­ni­ties in global invest­ing and tax sav­ings strategies.

The other option is a monthly email with an arti­cle from For­tune, Forbes, Bar­rons or the New York Times, dis­cussing one topic such as the dol­lar, prospects for the US econ­omy or trends in global investing.

When asked, which do you think clients prefer?

The vast major­ity go for the monthly arti­cles — they pro­vide not just shorter and more fre­quent com­mu­ni­ca­tion, but also tap into cred­i­ble third party support.

All in all, monthly emails with those arti­cles are much more closely aligned with what most clients actu­ally want.

Iden­ti­fy­ing if mate­r­ial is well received

Note that in some cases there is still a role for those four colour quar­terly newsletters.

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Tags: Attention Spans, Barrons, Client Communication, Email, Forbes, Fortune, Frequent Communication, Glossy Newsletter, Interest Rate Forecasts, Last Decade, New York Times, Prospective Clients, Prospects, Quarterly Newsletters, Skepticism, Taps, Tax Savings Strategies, Third Party, Time And Money, Wasting Time
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Articles You Can Send Clients (August 12, 2009) — Quality, Quality, Quality

Wednesday, June 30th, 2010

Each Wednes­day we are send­ing you 3 arti­cles you can send to clients to stay in touch and to pro­mote open lines of com­mu­ni­ca­tion with them. Its espe­cially dif­fi­cult to be moti­va­tional when there is so much skep­ti­cism about the econ­omy and the mar­ket. When the mar­ket was a scream­ing buy, clients were not exactly beat­ing down your door, and now that the mar­ket has had a mas­sive rally, the skep­ti­cism turns back to down­side concerns.

This is what the leg­endary investor Jeremy Grantham, founder of Boston-based GMO, referred to as rigor mor­tis, the immo­bi­liza­tion that sets in, and what to do about in his pre­scient and res­o­nant March 2009 newslet­ter, “Rein­vest­ing When Ter­ri­fied.” In late July, Grantham fol­lowed up on his views of what to do at this stage of the market’s advance, mostly by dis­cussing what he is doing and why, in “Bor­ing Fair Price!,” and shares his Plan C, What to do if the mar­ket overruns:

Plan C: What to do if the Mar­ket Over­runs
Given our view that we are in for seven lean years in which the mar­ket will be look­ing for an excuse to be cheap, we rec­om­mend tak­ing some risk units off the table, includ­ing becom­ing under­weight in equi­ties – between 1000 and 1100 on the S&P, if it gets there this year. Around 880 you should con­tinue to move slowly to fair value, twid­dle your thumbs, and wait to see what hap­pens. Boring!

Oth­er­wise, it is time to focus on the lesser issues: which types of equi­ties are cheaper or more expen­sive than the mar­ket. This leads us back once again to the bet on qual­ity stocks.

This week I thought it would be inter­est­ing to focus on some thought pro­vok­ing, but pos­i­tively bal­anced sub­jects of dis­ci­pline and direc­tion. Ideas, that is, that would spur calls to action. This week’s selec­tion is about the impor­tance of Qual­ity in invest­ing, now and timelessly.

Jeremy Grantham, a quiet giant in the pan­theon of great investors says this week, in Reuters, that the time has come to focus on qual­ity and value, and get rid of junk. Seems like a log­i­cal thing to do, but nat­u­rally it is not. Get­ting out of invest­ments that have had a strong run is emo­tion­ally very dif­fi­cult, and then tak­ing the pro­ceeds and putting them to work in high qual­ity assets, but have under­per­formed the mar­ket, is even more dif­fi­cult. Sep­a­rat­ing the wheat from the chaff is an idea that is eas­ier said than done.

In short, Grantham says its time to be “long qual­ity, and short junk,” as those stocks and bonds that were most bat­tered in the cri­sis had the best performance.

Qual­ity in focus after investor binge on cheap assets, Reuters, August 11, 2009

U.S. investor GMO cal­cu­lates that the 40 stocks in the S&P 500 with prices above $50 ral­lied 21 per­cent on aver­age between March and April. The 50 stocks with prices below $5 ral­lied 115 percent.

Credit mar­kets have seen a sim­i­lar trend with Bank of America-Merrill Lynch’s once bat­tered global high-yield bond index gain­ing some 45 per­cent since March.

Now, how­ever, investors are look­ing for the cream to rise to the top.

“Long qual­ity (or long qual­ity and short junk) is sub­stan­tially the most out­ly­ing bet avail­able today in all global equi­ties,” GMO Chair­man Jeremy Grantham wrote to the firm’s clients.

By the way, Grantham’s new focus is high qual­ity energy and energy tran­si­tion stocks. This is all cov­ered in “Bor­ing Fair Price!”

It should be obvi­ous from sim­ple arith­metic that pop­u­la­tion growth is on a direct col­li­sion course with increas­ingly scarce resources. For mil­len­nia, food con­straints held the world’s pop­u­la­tion nearly con­stant. About 12,000 years ago, these con­straints were altered sig­nifi cantly with the start of orga­nized agri­cul­ture. Then, around 200 years ago, the so-called Agri­cul­tural Rev­o­lu­tion – the intro­duc­tion of sci­ence to farm­ing – allowed for another dou­bling in out­put. All of this was dwarfed, how­ever, by the har­ness­ing of hydro­car­bons – the sun’s energy stored over hun­dreds of mil­lions of years. This remark­able pat­ri­mony is now about half gone, and some time in the next 10 to 40 years, half of all of our resources will have been used or, stated another way, one last dou­bling will remain.

David Rosen­berg, Gluskin Sheff’s Chief Mar­ket Econ­o­mist, attests to the over­bought nature of low qual­ity stocks in this rally with these facts in his July 27th notes:

• The 50 small­est stocks have rebounded 17.2% from their nearby July 10th lows, out­per­form­ing the largest 50 stocks by 750 basis points.
• The 50 most shorted stocks have ral­lied 17.6%, out­per­form­ing the 50 least shorted stocks by 880 basis points (over the same time frame).
• The 50 stocks with the low­est ana­lyst rat­ings have out­per­formed the 50 with the high­est rat­ings by 380 basis points.
• 85% of the mar­ket has already bro­ken above their 50-day mov­ing aver­ages, which in some sense high­lights an over­bought mar­ket, but the other three fac­toids still attest to a low-quality rally.

Bloomberg reports that the US econ­omy is defy­ing its most irrefutable skep­tics by turn­ing around, that the Obama stim­u­lus is working:

U.S. Enters Recov­ery as Stim­u­lus Refutes Skep­tics (Update1), Bloomberg​.com, August 12, 2009

Recov­ery from the worst reces­sion since the 1930s has begun as Pres­i­dent Barack Obama’s fis­cal stim­u­lus — derided as insuf­fi­cient and budget-busting months ago — takes effect, a sur­vey of econ­o­mists indicated.

The econ­omy will expand 2 per­cent or more in four straight quar­ters through June, the first such streak in more than four years, accord­ing to the median of 53 fore­casts in the monthly Bloomberg News sur­vey. Ana­lysts lifted their esti­mate for the third quar­ter by 1.2 per­cent­age points com­pared with July, the biggest such boost in sur­veys dat­ing from May 2003.

“We’ve averted the worst, and there are clear signs the stim­u­lus is work­ing,” said Ken­neth Gold­stein, an econ­o­mist at the Con­fer­ence Board in New York.

The new pro­jec­tions, fol­low­ing better-than-anticipated reports on man­u­fac­tur­ing, employ­ment and home con­struc­tion, echo gains in investor con­fi­dence that have pro­pelled the Stan­dard & Poor’s 500 Stock Index to its high for the year.

Finally, high qual­ity dividend-paying stocks have under­per­formed the mar­ket dur­ing the recov­ery, and while they are never a sure bet, div­i­dends and the abil­ity to main­tain one, serve as evi­dence of a company’s rel­a­tive strength and qual­ity. Con­sider wad­ing into dividend-paying stocks or funds as a way to get into the mar­ket at a time when focus is shift­ing towards being “long quality.”

Stock Div­i­dends Make a Dif­fer­ence, Wall Street Jour­nal (via Yahoo, with­out a sub), August 12, 2009

As the stock mar­ket con­tin­ues to recover, more investors are eas­ing back into the mar­ket. While stocks have had a good run, they remain well off their record lev­els reached in 2007.

Given the car­nage of the past two years, it’s unsur­pris­ing that some peo­ple are hes­i­tant to invest in the stock mar­ket. One strat­egy to con­sider when wad­ing back in is to look at dividend-paying stocks. Such stocks, or mutual funds that focus on dividend-paying stocks, often called “equity income” funds, pro­vide you with an income (the div­i­dend) while giv­ing you a chance to ben­e­fit from cap­i­tal appre­ci­a­tion of the stock.

Beyond the div­i­dend income, there are sev­eral rea­sons for invest­ing in dividend-paying stocks. One, com­pa­nies that can main­tain or even increase their div­i­dend pay­outs in the cur­rent envi­ron­ment are prov­ing their strength. Also, in the wake of var­i­ous account­ing scan­dals, a steady div­i­dend is proof that a com­pany is actu­ally mak­ing the money it says it is mak­ing. While accoun­tants can fudge lots of num­bers in a quar­terly finan­cial state­ment, they can’t con­jure up the cash required to make div­i­dend payments.

Update: Globe and Mail’s David Berman asks how much longer this low-quality rally can last? No div­i­dend, low growth: Big returns: But how long can low-quality stocks lead the mar­ket?

On a final note, we would love to hear from you with your sug­ges­tions and your feed­back, as well as arti­cle sub­mis­sions. Please let us know if there are some other areas that we could help you to cover. Thank you!

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Tags: Amp, Bet, Discipline, Downside, Excuse, Gmo, Immobilization, Investor, Jeremy Grantham, Lean Years, Massive Rally, Overruns, Pantheon, Quality Quality, Quality Stocks, Quiet Giant, Reuters, Rigor Mortis, Skepticism, Underweight
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A starting point to rebuild client trust

Wednesday, June 9th, 2010

In recent con­ver­sa­tions with investors, I have been struck by the level of skep­ti­cism many feel about whether their advisor’s and firm’s inter­ests are truly aligned with theirs.What’s espe­cially inter­est­ing is that the major­ity of these investors haven’t fired their advi­sors — but are sim­ply look­ing at the advice they’re receiv­ing with a much more jaun­diced view.

An arti­cle in the May issue of Atlantic Mag­a­zine, titled “Why I fired my bro­ker” does an excel­lent job of cap­tur­ing the broad sense of being unsure who to trust that many investors today share.This arti­cle is not a rant, far from it. Rather it presents a ratio­nal recita­tion of some of the ele­ments that have caused rea­son­able investors to become skep­ti­cal (and in some cases cyn­i­cal) about the advice they’ve received in the past and are get­ting today.

Five of the key mes­sages in the article:

1. Like many, this writer and his wife feel shell-shocked by last year’s down­turn. “I took a ran­dom walk down Wall Street and got hit by a bus.”

2. Investors are inter­pret­ing mes­sages about the need to focus on the long term as being a cop– out on the part of the finan­cial indus­try. What the writer hears is “Give up — you’re not going to make money for five, ten or twenty years, get used to it.”

3. Many investors are par­a­lyzed because of the level of uncer­tainty we’re all oper­at­ing in. A Nobel prize-winning econ­o­mist says “You no longer know the world you live in — it’s unclear what rules apply.”

4. This writer, like many investors, is unsure who to believe and who to trust. Bill Gross, America’s best known bond man­ager, says “The sys­tem is rigged against aver­age investors.” The writer goes on to say “My cru­cial mis­take was believ­ing that bro­kers, wealth man­agers and the cable-tv ora­cles who make up the finan­cial ser­vices indus­try com­plex had my best inter­ests at heart.”

5. Despite the title of the arti­cle, he says “I didn’t fire my bro­ker — he fired me, when I haven’t heard from him since before September.”

Con­sider tak­ing twenty min­utes this week­end to read this arti­cle — and think about whether some of your clients might be feel­ing the same way that this writer does.

http://​www​.the​at​lantic​.com/​d​o​c​/​p​r​i​n​t​/​2​0​0​9​0​5​/​g​o​l​d​b​e​r​g​-​e​c​o​n​o​m​y​?​x​=​2​3​&​a​m​p​;​y=2

The good news is that he is not giv­ing up on invest­ing or on work­ing with a finan­cial advi­sor. In his con­clud­ing remarks, he writes “Our main job right now is find­ing some­one to advise us — this is a very dif­fi­cult task.”

There is much work ahead for the finan­cial indus­try. High on the list of tasks is rebuild­ing trust among many investors, not just trust that the mar­ket will be a good place to be going for­ward but trust in the advi­sor and firm they work with.

An impor­tant first step is under­stand­ing what has led to the height­ened skep­ti­cism on the part of many investors — and this arti­cle is as good a place as any I’ve seen to begin that process.

In future arti­cles, I’ll explore how to go about rebuild­ing trust with investors.

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Tags: Bill Gross, Bond Manager, Cable Tv, Client Trust, Conversations, Cop, Downturn, Economist, Financial Services Industry, Mistake, Nobel Prize, Oracles, Random Walk Down Wall Street, Rant, Recitation, Skepticism, Twenty Years, Uncertainty, Wall Street, Wealth Managers
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Three steps to building prospecting momentum

Tuesday, May 18th, 2010

Given mar­kets over the past year, today should be a great time to be bring­ing new clients on board — after all, his­tory shows that clients move when they’re unhappy, not when things are going well.

Advi­sors need to do three things to take advan­tage of this opportunity:

1. Con­vic­tion and confidence

Many advi­sors tell me they have seen an ero­sion in con­fi­dence around their abil­ity to pro­vide good advice and serve clients well. Being con­fi­dent in the value you bring is the nec­es­sary first step to prospect­ing success.

2. Pri­or­ity

Sec­ond, you need to carve out the time to focus on prospects, whether it be two hours a week or twenty two. In my con­ver­sa­tions with advi­sors, many say that exist­ing clients con­sume all their time and there’s no energy left over to focus on prospects. This is some­times avoid­ance behav­iour, ignor­ing the real­ity that almost every advi­sor will see client defec­tion in the period ahead and that new clients will be needed just to main­tain assets at the exist­ing level.

3. Approach

Finally, even advi­sors who are talk­ing to prospects about pro­vid­ing a sec­ond opin­ion report that the response is often an indif­fer­ent one. Even if you bring con­fi­dence in your advice and give prospect­ing pri­or­ity, you need an approach that responds to today’s investor reality.

That approach has to address the level of skep­ti­cism that marks many of today’s investors — they’re not just dubi­ous about their own finan­cial insti­tu­tion and finan­cial advi­sor, many are skep­ti­cal about all finan­cial insti­tu­tions and all finan­cial advi­sors. As a result, even investors that aren’t all that happy are often reluc­tant to move, not sure it would be bet­ter else­where and tak­ing a “devil you know” view towards mak­ing a change.

The result is that with many investors, you have to earn the right to get them to share their state­ments and give you the oppor­tu­nity to pro­vide a sec­ond opinion.

If you’ve been com­mu­ni­cat­ing with prospects reg­u­larly over the past cou­ple of years, chances are you’ve earned that right.

And if you’ve built recog­ni­tion, cred­i­bil­ity and vis­i­bil­ity in the com­mu­nity a prospect belongs to, this may not be an issue.

But if you’re going at this from a stand­ing start, you will often need to start by build­ing trust.

Here’s how one Chairman’s Club level advi­sor went about doing this last fall.

In late Sep­tem­ber, she approached her clients and said: “Given mar­kets over the last while, my team and I are spend­ing a lot of our day stay­ing on top of all the avail­able infor­ma­tion on what’s hap­pen­ing. Going for­ward, I’m going to be select­ing one arti­cle each week that I think is par­tic­u­larly use­ful and send­ing it on Fri­day after­noon to any clients that are inter­ested in get­ting this. The sources of that arti­cle could be as diverse as The Wall Street Jour­nal, the Econ­o­mist or a com­men­tary from a lead­ing money man­ager. Is this some­thing you’d be inter­ested in receiving?”

The response was over­whelm­ing pos­i­tive — clients were anx­ious, the sources she talked about were cred­i­ble and she was send­ing only one article.

She then approached prospects, explain­ing that she was send­ing one arti­cle each week to any clients who were inter­ested and would be happy to extend this to that prospect as well. Again, she got a very pos­i­tive reaction.

Six weeks later, in early Novem­ber, she began fol­low­ing up with these prospects. She asked them if they had any ques­tions on the most recent arti­cle she’d sent and also asked if they’d like to sched­ule a time in the next two or three weeks to sit down and talk about what was going on in the mar­kets and about their own sit­u­a­tion. While not every­one she talked to jumped at the offer, the response was gen­er­ally very pos­i­tive — even peo­ple who didn’t want to meet right then gen­er­ally left the door open to talk­ing in early 2009.

Every advi­sor is dif­fer­ent and no approach will work for every­one. Just bear in mind that to cap­i­tal­ize on today’s prospect­ing oppor­tu­nity, you need con­vic­tion about your value, the right level of pri­or­ity and a process that is aligned with today’s investor real­ity. Put those three things in place and you too will see new clients come on board.

For more infor­ma­tion about Dan Richards, visit http://​www​.get​keep​clients​.com

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Tags: Assets, Avoidance Behaviour, Confidence, Conversations, Conviction, Defection, Devil, Erosion, Financial Advisors, Financial Institution, Financial Institutions, Good Advice, Great Time, Level 3, Momentum, Priority, Prospects, Second Opinion, Skepticism, Three Steps
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A proven approach to build trust with prospects

Wednesday, May 12th, 2010

Given the spike in skep­ti­cism, build­ing trust and cred­i­bil­ity with prospects has never been more important.

Of course, the best way to do that is to get intro­duced by refer­ral a refer­ral — the rea­son refer­rals work is that they’re a trans­fer of trust; when a client refers you to a friend or col­league, the trust that your client feels towards you is trans­ferred to their friend.

Beyond refer­rals, another way to build trust is by offer­ing to share tes­ti­mo­ni­als with exist­ing clients about the expe­ri­ence they’ve had work­ing with you. The idea here is that when you’re talk­ing to a prospec­tive client on the phone or meet­ing with them, you’re able to say “Here are com­ments from some clients about the expe­ri­ence they’ve had work­ing with me.”

And on that piece of paper you have five short com­ments with the names of actual clients.

Ways to make tes­ti­mo­ni­als more effective

There are a few things that can make tes­ti­mo­ni­als more effective.

First, you have to use actual client names  — ini­tials largely defeat the pur­pose of the exercise.

Sec­ond, you can say a bit about them — the area they live in and per­haps what they do. So for exam­ple, it might say Paul Smith, North Toronto, Con­sul­tant or Cor­po­rate Exec­u­tive or Retired.

And in the per­fect world, you’d bor­row from Amer­i­can Express and talk about how long they’ve been a client — for exam­ple client since 1990, client since 2001, client since 2006.

Finally, you can make the tes­ti­mo­ni­als rel­e­vant to your prospect.

So you could say “Here are five com­ments from retirees, or senior cor­po­rate exec­u­tives or busi­ness owners.”

By mak­ing the tes­ti­mo­ni­als more rel­e­vant to your prospect, you increase their impact.

Get­ting client agreement

There are two steps to get­ting a client testimonial.

The first step is get­ting a client’s agree­ment to pro­vide it.

And once a client has agreed, you have to actu­ally get the tes­ti­mo­nial itself.

The best way to get a tes­ti­mo­nial is face to face, although it can be done over the phone.

Let’s sup­pose you’ve just had a meet­ing with a client you’ve worked with for a num­ber of years. Your sense is  that they’re rea­son­ably happy and also that their per­son­al­ity is fairly open and out­go­ing — they’re not some­one who is secre­tive or with­drawn or uptight. In the per­fect world, in fact, at some point in the past they would have referred some­one to you.

At the end of the meet­ing , you say:

“Paul, I won­der if I could ask a favour.

When I’ve been meet­ing with prospec­tive clients recently, a cou­ple have asked if they could get a             sense from exist­ing clients of the expe­ri­ence that they’ve had work­ing with me.

As a result, I’m approach­ing a few clients about the pos­si­bil­ity of get­ting a short writ­ten             com­ment about what their expe­ri­ence has been that I could offer to prospec­tive clients.

And I won­der if you might be able to help me out by giv­ing me a com­ment I could use, along with             four or five other clients.”

Asked that way, most clients will agree.The key is how you started — “I ask­ing for a favour.”

And you’ve also said that this client will be one of five or six, so won’t be sin­gled out.

Get­ting the testimonial

Now you have agree­ment to pro­vide a tes­ti­mo­nial, but you don’t actu­ally have the tes­ti­mo­nial.

Some clients will say “Why don’t  I write some­thing down and I’ll send it along to you?”

The prob­lem is that now you’ve lost con­trol. The client may or may not send it and you don’t want to be hound­ing them. In fact, they may actu­ally start duck­ing phone calls on other things because they feel guilty about not send­ing your tes­ti­mo­nial, so it could strain the relationship.

And even if you do get the tes­ti­mo­nial, you may not be able to use it — it might be too long or too con­vo­luted.

After a client agrees to pro­vide a tes­ti­mo­nial, your response should be

“That’s great, thank you very much — I really appre­ci­ate your help on this.

I won­der if I could take two final min­utes and ask you — if you had a friend or some­one at work ask about your expe­ri­ence work­ing with me and how you’d describe me, how would you answer that question?”

Then you sit back and lis­ten and write down how your client answers that ques­tion.

Sup­pose your client says:

“I have found Dan very good to deal with. He’s man­aged risk in my port­fo­lio, is on top of my             account and is always quick to respond to my questions.

Your response to your client is “here’s what I heard you say” — and you play back the words the client just said, per­haps in some­what short­ened form.  And then you say:

“That’s exactly what I’m look­ing for — could I use that?”

Most clients will quickly agree, relieved because they’re off the hook and now you have your tes­ti­mo­nial.

Get­ting client agree­ment on per­sonal information

There are a cou­ple of final details.

First you have to get client agree­ment to use their name, say­ing some­thing like:

“Paul ‚thanks again for your help on this — I truly appre­ci­ate your help.

I’ll send you the final list of all the tes­ti­mo­ni­als. If it’s okay I’d like to use your name and say you             live in North Toronto and per­haps say that you’re a con­sul­tant, but won’t pro­vide any per­sonal infor­ma­tion beyond that. Are you okay with that?”

Depend­ing on your firm, you may also have to get clients to sign an agree­ment to allow you to use their tes­ti­mo­nial and dis­close their names — you should obvi­ously but­ton this down before talk­ing to clients.

Note that there is an upfront invest­ment of time to put together your client tes­ti­mo­ni­als. By spend­ing that time, though, you can dif­fer­en­ti­ate your­self with prospects and build trust and credibility.

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Tags: American Express, Building Trust, Business Owners, Client Names, Client Testimonial, Colleague, Compendium, Corporate Executives, Credibility, Initials, North Toronto, Paul Smith, Perfect World, Piece Of Paper, Prospective Client, Prospects, Referral, Referrals, Skepticism, Spike, Target, Two Steps
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Articles You Can Send to Clients (July 15, 2009)

Friday, December 18th, 2009

As pref­aced in today’s newsletter:

Dur­ing this period of height­ened require­ments for com­mu­ni­ca­tions to your clients, keep­ing in touch with your net­work of clients and prospects is crit­i­cal. While there is no sub­sti­tute for one-to-one meet­ings and phone calls, weekly or peri­odic emails are an effec­tive way of stay­ing vis­i­ble and devel­op­ing frank and open dis­cus­sions with both clients and prospects.

Start­ing today, and every Wednes­day from today, as a ser­vice to you, we will be send­ing a list­ing of 3–5 arti­cles from high value sources (e.g., G&M, WSJ, NYTimes) that you may use to send to your clients and prospects as part of your com­mu­ni­ca­tions strat­egy. We will also include some help­ful pref­ac­ing notes that you may use as well.

Keep in touch, and , by the way, if and when you find use­ful arti­cles, we would be extremely grate­ful for your submissions.

Below is this week’s selec­tion of arti­cles that you can send to clients.

Here are three arti­cles that I thought you might find inter­est­ing which dis­cuss the eco­nomic out­look of Lak­sh­man Achuthan, one of the fore­most econ­o­mists in the US, the out­look for stocks from the Wiz­ard of Whar­ton, Jeremy Siegel, and an arti­cle from the Wall Street Jour­nal about the oppor­tu­nity in income/dividend pay­ing stocks (as a gen­eral heading).

The Reces­sion is Over!
ECRI declares the reces­sion over with the US econ­omy track­ing up to 2.4% in the third quarter…

http://​www​.slate​.com/​i​d​/​2​2​2​2​7​42/

Source: Slate​.com/​W​a​s​h​i​n​g​ton Post

There is a great deal of skep­ti­cism about the econ­omy, and many mixed offer­ings in terms of opin­ion on out­look. The Slate​.com arti­cle, The Reces­sion is Over!, dis­cusses the con­trast­ing view of Lak­sh­man Achuthan, of ECRI (Eco­nomic Cycles Research Insti­tute), one of the most highly regarded inde­pen­dent econ­o­mists, known for a long list of accu­rate and pre­scient eco­nomic fore­casts, who points out that three sig­nif­i­cant lead­ing indi­ca­tors are cur­rently flash­ing green.

They’re (ECRI) the Spocks of the eco­nomic fore­cast­ing crowd—unemotional, unin­vested in any­thing but the logic of what his­tory and their dash­board tell them. “From our van­tage point, every week and every month our call is get­ting stronger, not weaker, includ­ing over the last few weeks,” says Achuthan. “The reces­sion is end­ing some­where this sum­mer.” In fact, it may already be over.

********

Jeremy Siegel: ‘The Mar­ket Will Stage Another Recov­ery’,
Knowledge@Wharton, June 24, 2009

http://​knowl​edge​.whar​ton​.upenn​.edu/​a​r​t​i​c​l​e​.​c​f​m​?​a​r​t​i​c​l​e​i​d​=​2​267

Jeremy Siegel, Whar­ton School Pro­fes­sor, Direc­tor of Wis­dom Tree ETFs and author of the invest­ing clas­sic, Stocks for the Long Run, says that now that the reces­sion will not turn into a depres­sion call stocks are poised for a recovery.

Siegel: Well, of course, we had a tremen­dous down­turn from Jan­u­ary to March, a plunge. And we’ve had recov­ery back to those Jan­u­ary lev­els, basi­cally. So year-to-date, we’re sort of even on the mar­ket. Actu­ally, in Asia, we’re well above it. Mar­kets are about 20% higher than the year-end. For the emerg­ing mar­kets and the Asian mar­kets, there’s been a much bet­ter recov­ery, because there’s been a bet­ter eco­nomic recovery.

It’s always very hard to pre­dict the stock mar­ket. It’s cer­tainly tak­ing a breather now. I main­tain that if we can keep oil at the $70 level, and if inter­est rates on long-term bonds, 10-year bonds, don’t go much above 4%, the mar­ket will stage another recov­ery that could bring it up another 15% to 20% — really, by year-end. It’s hard to know exactly when that will take place. But I think peo­ple really see [that] the recov­ery is com­ing. Again, just like they were relieved that, “Oh, it’s not a depres­sion, it looks like it’s end­ing,” [they see] we are get­ting some recov­ery. I think if the [price of oil] and inter­est rates … remain sta­ble and low, we will put more money in stocks. There’s still over $4 tril­lion in money funds that are earn­ing about 1% or less, which is not as attrac­tive as rates that I believe could be moved into the mar­ket, once prospects of the recov­ery seem more certain.

********

Bright Out­look for Income Investors
July 4, 2009 — Wall Street Jour­nal — By Tom Lau­ri­cella
Out of last year’s tur­moil in mar­kets a bright spot has emerged for investors look­ing for income — The pay­out on dividend-paying (or income-paying) stocks has gone up as a result of share prices falling fur­ther than payouts.

The main point of this arti­cle is that bat­tered high qual­ity div­i­dend stocks as well as gov­ern­ment bonds are now offer­ing higher real rates of return as a result of infla­tion run­ning at 2% or lower.

Yes, div­i­dends may have plunged — but share prices have fallen fur­ther. Trans­la­tion: The per­cent­age pay­out of many dividend-paying stocks has actu­ally gone up. Some tra­di­tional yield plays — such as util­i­ties — look attrac­tive. Bond funds, aside from U.S. gov­ern­ment bond funds, offer other options.

And investors shouldn’t dwell too much on yields that seem low. What mat­ters is how they com­pare to inflation.

“When investors see a yield of 4% or even 3.5%, it looks like a low-yield invest­ment,” says Fran Kin­niry, head of the invest­ment strat­egy group at Van­guard Group. “But with infla­tion run­ning at 2% or lower, the yields on fixed income or even equi­ties aren’t that poor.”

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Tags: Communications Strategy, Dashboard, Dividend Paying Stocks, Dividend Stocks, Earnings, Economic Cycles, Economic Forecasting, Economic Forecasts, Economic Outlook, Economists, Income Dividend, Jeremy Siegel, Lakshman, Leading Indicators, Offerings, Open Discussions, Periodic Emails, Prospects, Recession, Skepticism, Slate, Spocks, Vantage Point, Wall Street Journal, Washington Post, Wharton, Wsj
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