To all the financial advisors and professionals I’ve met and have yet to meet,
Over the years, I’ve spoken to thousands of investors and financial advisors. When I ask both groups about how clients chose their advisors, they both agree on an answer: referrals!
Clearly the number one method of finding the right financial advisor begins with a referral from a friend, family member, co-worker or even a stranger.
I worked as a Financial Advisor for a major brokerage for years and the reality that I saw is similar to what most people see in their own chosen profession: there are good advisors, and there are bad advisors.
Just because someone has the ability to say that they are a financial advisor doesn’t means that they are going to do the same job or offer the same skills as everyone else with that designation.
As financial advisors, you know this as well!
Advisors also know that the way to grow and enhance their business is by differentiating themselves and their practice from others.
When I speak to advisors in focus groups, my first questions are typically what is their LOS (length of service) and what is their business focus? The discussion about business focus will soon translate into a dissertation about how what they do is different from other advisors in the office and how they stand out to the target client that they seek.
Standing out from other advisors is usually the best way to gain traction on the road to referrals.
Think about the conversation that your clients will have with their friends at the golf club or with family members who are considering investing. What will they say about you? What do you want them to say about you?
The reality is that you control the answer to both of those questions!
Sure the markets go up and down and we all have little control of that. But do you really want your relationship with your client to be based only on the performance of a client’s portfolio and thus subject to all of the political, economic and social elements that impact that performance? I doubt it.
Sure you may be top of mind when your client is discussing his investments with a friend when the markets are up. “My advisor earned me 14% last year”, he’ll boast and his friend will ask for your name.
But what happens when the markets go down? Will your client be open to a discussion from you or from another advisor about how they need to look beyond their investments and focus on their goals?
Focusing only on performance is a short-term game.
The most successful advisors manage their practices as a business. In a business, the most successful ones plan for, and implement strategies for, long-term success.
Long-term success for the financial advisor means a long time relationship with a client and ultimately, with their family members as well. It also means that you gain new clients from referrals by that satisfied, long time client. My years of research and own experience as an advisor leads me to conclude that this is how you build a successful business as a financial advisor.
One of the first steps in creating that successful business is to understand what type of advisor you want to be. I don’t mean an advisor that focuses on college planning versus someone who works only with business clients. No matter who your target client is, the key is to position yourself as the type of advisor that your client will stay with through good and bad markets, and who they will recommend to their friends and family members.
So the question is, who do you want to be to your client?
Let’s first take a look at what I learned from my research and wrote about in my first book (Safe 4 Retirement: The Four Keys to a Safe Retirement) about the reasons why investors should consider a financial advisor.
In the book, I lay out the following as ‘pros’, or reasons for choosing a financial advisor:
- Partnership
- Knowledge
- Save you time and worry
- A single point of contact
When evaluating how you want your client to view you when discussing aspects of their retirement, I want to stress three aspects that I feel you should focus your role as an advisor with a client or prospect on:
Partnership
This is the approach that we’ve all learned over the years. To many it’s also known as positioning ourselves “on the same side of the table” with the client. You want your client to view you as a partner on their team.
Please read that again. A partner on “their” team.
The client is not a partner on “your” team.
I’ve encountered teams of advisors who have found success by claiming that they treat all of their clients the same and their clients “buy in” to the way they manage money and their business when they become a client. Thus, the client is part of “their team” not the other way around.
Now I will report that these teams do have success. Within your office, you probably have these types of teams. I ask you however, two questions:
- Do you want to manage a hedge fund type of business (which is really what they do)?
- How do these advisors look at the end of each day (are they frazzled and do their moods mirror the movements of the market)?
To the majority of hard working advisors out there who still believe that their clients come first, I recommend that you view your ability to build a partnership with your client based on mutual respect as your first goal to long-term success.
Expertise
This again goes back to being a part of the client’s team. Your client has many things going on in their life. As a baseline, they will count on you to be a resource on their team that can address what you’ve convinced that client is your expertise – managing their financial situation and ultimately, their financial future.
This will require that you are armed with knowledge and resources that keep you up to date on all matters financial. This means that you have to be able to offer an opinion or recommendation on many questions that the client will bring to you – not just about the markets but also about such things as what car insurance they should consider or do you know anything about a particular school their child is considering or what should they do with their mortgage.
The spectrum of questions that advisors have gotten over the years has widened. The reality is that this spectrum now includes questions beyond financial and are more personal. And that’s good. Being able to help a client address the many issues that they face each day will lead to a long-term relationship.
A single point of contact
In the many talks I have given related to my books, I stress this one as a major reason why investors should consider not only a relationship with an advisor, but an exclusive one as well.
I know from my research and experience that most advisors want their clients to view them as their “only” financial advisor. This leads to gathering all of a client’s assets (advisors know how that goal has been driven into their heads by managers) and sets the advisor up to be the ongoing advisor to family members when the assets from a relationship need to be distributed.
I stress this point not from my experience as an advisor but rather as a client who had to handle the estates of both my parents and my wife’s dad. After my dad passed away, my mom saw the benefits of consolidating not only her assets and accounts with a single advisor. Fortunately my father in law also learned this lesson from my dad’s situation and he began the same process of consolidation.
The unfortunate part is that they didn’t begin these processes sooner and more importantly, I didn’t discuss the importance of doing this sooner. This is a point that I stress in my books and speaking appearances to advisors.
In my first book I also talked about the “cons” of working with a financial advisor:
- Cost
- Bad advice
- Incentives
- Selling you what you don’t need
- Good financial advisors retire, too
I think that these “cons” can be effectively addressed by the advisors who do three things:
Maintain full transparency on cost
One of the points I’ve learned in my research with investors is that they appreciate a full and clear discussion about what they’ll pay for your services.
In fact, in my first book, I stress this as one of the points that they should do when choosing a financial advisor – ask them how they get paid. If you’re afraid of this question, you may need to reevaluate your business model.
I hear advisors say to me all the time in research sessions about the concerns of discussing price and fees, “cost is only an issue in the absence of value”. In other words, if you provide value to your client, cost will not be an issue.
Do you provide value to your client? How do you evaluate value to your client?
I would venture to say it has less to do with your ability to provide the best performance on their portfolio and more to do with how are able to satisfy and address the many goals and objectives they discussed with you like can I retire when I want? What kind of school can my kid go to?
What I’ve also learned from advisors is two things when it comes to discussing cost with a client or prospect.
First is that they will often respect a client more when they do ask about cost. The second and probably most important thing for an advisor is that when you discuss cost at the start of a relationship, it will probably be the only time you’ll discuss it. And that goes for good and bad markets alike.
By addressing cost up front in a relationship, you reinforce the value and resources that you bring to the client and as long as you can convey that value to that client, cost will not come up again even in light of poor market performance.
Position your practice as a team
This goes back to the need to show your client and prospect that you have access to many resources and can provide value to the relationship.
We’ve seen more and more advisors become part of a team over the last decade. The reasons for doing this are varied – share expenses, share expertise, bring on specialists in different investment areas.
When sitting down with a new client, advisors like to show materials that display the many members of a team and the roles that each plays in bringing value to a client. Many times the client associate is brought into initial discussions with a client as they will be the primary point of contact to a new client. This is all good and helps to address the concern of advisors leaving or retiring. Having a team structure in place will help when there becomes the need to transition a relationship from the parent to the child as well.
What about the sole practitioner? Are they at a disadvantage? Not necessarily.
As it simplest, the sole practitioner can (and should) position their client associate as a key member of their team while also stressing the firm’s resources as extensions of their team. I’ve heard from many sole practitioners who have included their office specialist on insurance or banking on their team roster that they provide to clients and prospects. The reality is that no matter what size firm or broker/dealer you work with, you have resources available to you and you should highlight them as part of the team that you present to clients and prospects. If you make these resources available to your clients, noting them as such is appropriate.
Know your client!
This is the “golden rule” that we’ve all been taught. It’s also the way that you will be able to effectively address and “concerns” or objections that people will have about working with a financial advisor. In essence it forms the foundation for my advice to retirees and pre-retirees considering the services of a financial professional and it should form the foundation for your business going forward as well!
Let’s be clear on this point.
Years ago, we all agreed to the advisor “hippocratic oath” or what was known as Rule 403 – know thy customer. To handle this, firms came up with profiling forms that asked advisors to fill out many pages of details about our clients and their financial situations. They became little more than approaches to discover the other assets of clients and proved so cumbersome that most advisors discarded them and followed the path of least resistance.
Over the years, I’ve met many advisors who have taken a structured approach to this process and have incorporated such information including the ages of extended family members, real estate holdings, and insurance carriers.
But to really know your client, is it appropriate for us to be asking them only about their financial goals and objectives?
This will not only allow you to truly KNOW your client but will also differentiate you from other advisors who are NOT asking for this information.
As we mentioned earlier and as I point out in my first book, the primary way that investors choose their financial advisor is by referrals.
Referrals come from client satisfaction. They come from providing value to each client relationship you have.
Ultimately they come from clients who will confidently say that their advisor is exclusively focused on the client’s interests first and foremost!
My research with investors and advisors clearly indicate that referrals are based on two primary reasons. Before I tell you what those reasons are, I must tell you first that neither of these reasons is based upon performance!
Sure, there will always be those referrals that will come based on a client’s performance. However, when that performance is no longer what the client expected, will you still maintain that client or will they leave seeking the better performing advisor?
To build your business on a performance driven basis is folly. It may work in the short term but in the long term, these are the two primary reasons for referrals that you should focus on:
- My advisor really understands me and my personal situation.
- My advisor is different from other advisors.
So if you’re looking at growing your business and more importantly, helping your clients, you need to be asking yourself how can you best understand your client and how can you best differentiate yourself from other advisors?
Differentiating yourself means that you demonstrate that you really know about your clients. Don’t limit your questions to just asking about their assets. Ask about their lives, their dreams, their hopes and their needs and those of their family. Client satisfaction comes from trust. Trust comes from a genuine caring for someone.
When I was an advisor, I was taught to act like the person you would trust your parents’ account to. Would they only be interested in their assets or would they be genuinely interested in them and their well being? Honestly ask yourself how you’re treating your clients today and if it’s the way you would want your parents to be treated.
Perhaps that’s the NEW “golden rule” for any financial professional.
Jack Tatar
