If you work just for money, you’ll never make it, but if you love what you’re doing and you always put the customer first, success will be yours. —Ray Kroc
The client experience refers to defining how you work with your clients. There are two ways to grow advisory practices:
1. Retain and deepen relationships with existing clients to acquire assets away, cross-sell, and earn access to their networks (e.g., the client’s other professional providers and centers of influence) for introductions.
2. Consistently acquire new relationships and their assets, fulfill their other financial needs, and also earn access to their networks for introductions.
However, business growth can be limited by a lack of organization and structure in financial advisor (FA) practices such that there is little if any time for new client acquisition. What separates top FAs from the pack is an efficient and effective structure and organization that allows time for both servicing their existing client base and acquiring new clients, managing their assets, and fulfilling their other financial needs.
The key points in this chapter are that:
• Client retention and advocacy are functions of high-quality client service deliverables and are mandatory to earn growth from existing clients and the acquisition of new clients.
• You must manage your quality and proactive client service system tightly to ensure that you:
• Deliver the right levels of services to the right clients.
• Leave enough time to grow your business through new client acquisition.
• Deliver service levels consistent with the value of clients, their needs, and your business and its profitability.
Client retention is the most important priority for an FA as it is the entry point for growing the business. An effective and proactive client service brings retention as well as loyalty and advocacy. Retention is keeping what you have today; loyalty is keeping what you have today “forever”; advocacy is keeping what you have today “forever” and receiving introductions to prospective clients. There are many components of a proactive Client Service process that can deliver retention, then loyalty, then advocacy.
The second most important priority is getting new business, but the first priority is client retention because if you are not servicing your current clients’ wants and needs and keeping what you have, it’s not likely you will be able to get introductions to prospective clients from either current clients or Centers of Influence (COIs). Introductions to prospective clients from either current clients or COIs will represent about two-thirds of your business growth opportunities. Being able to talk about how you service your existing base needs to be fact-based.
High-quality client service leads to growth through introductions from high-quality clients and COIs. It’s high-quality client service that avoids having to spend the time, cost, and effort to replace clients. Effective client service must also be proactive, not reactive. Service leads to retention, but retention is not enough for growth. Growth requires advocacy. Advocacy requires approaches that go beyond mere satisfaction. Just satisfied is not enough to allow FAs to reach their growth goals. Loyalty and advocacy are a function of clients being extremely satisfied. This is defined as being rated a 4.7 on a scale of 1 to 5, what has been called a WOW!
The April 2016 J. D. Power study1 supports the need to improve service deliverables in the financial services industry:
The full service investment advisory industry is undergoing a historic shift, driven by an actively engaged investor population that is demanding a more hands-on approach from their advisors. According to the J. D. Power 2016 U.S. Full Service Investor Satisfaction Study . . . a steadily increasing number of investment advisory customers have disrupted conventional thinking about full service and selfdirected advisory services, favoring a hybrid approach in which advisors become validators, or sounding boards, but not final decision makers. . . . Validators (36 percent of full service investors) want to make their own decisions, but still have access to an advisor for support and as a sounding board.
The study also says that “full service firms will need to adapt to these changes by providing more value and transparency to investors, making a clear case for the value they provide vs. lower-cost alternatives.” It is this search for value that drives the need for a more effective client service experience than ever before. As the study reports, “Nearly 4 in 10 investors (38 percent) indicate their advisor did not help them set goals or discuss risk tolerance, and only 42 percent indicate their advisor met key performance indicators (KPIs) related to setting goals, implementing strategy and ongoing tracking.” These are “after the sale” service needs.
Part of the value of high-quality client service is that it’s a baseline to earn introductions to prospective clients. In addition:
• A satisfied customer is a loyal customer. “Customers who rate you 5 on a scale from 1 to 5 are six times more likely to buy from you again, compared to ‘only’ giving you a score of 4.8.”2
• Client retention is less costly than client acquisition and more profitable. It’s apparent that FAs have spent countless hours, significant energy, and many dollars to acquire new clients and their assets. With all the investment in acquisition, client retention via client loyalty is your best bet for a profitable and growing business.
According to Bain & Company,3 it costs six to seven times more to acquire a new customer than retain an existing one. Marketing Metrics4 also says, “The probability of selling to an existing customer is 60–70 percent.” The probability of selling to a new prospect is 5–20 percent.
Even if you deliver quality service, satisfied customers may defect. The Harvard Business Review (HBR) article “Why Satisfied Customers Defect” points out that “except in a few rare instances, complete customer satisfaction is the key to securing customer loyalty and generating superior long-term financial performance . . . the more competitive the market, the more important the level of customer satisfaction.” The article further states that “there is a tremendous difference between the loyalty of merely satisfied and completely satisfied customers.”5
It is clear that client satisfaction drives client loyalty, but there is a question as to how much satisfaction and how much loyalty. In the HBR article, “Putting the Service-Profit Chain to Work,” the authors show that if clients are highly or very satisfied, their loyalty is also very high. Clearly, “very satisfied” is not specific but may suggest a loyalty of over 80 percent and perhaps approaching 100 percent. There are two points to be made:
1. To succeed with client retention and growth, clients and centers of influence must be completely satisfied. It is primarily those who are completely satisfied with you and your exceptional service who will be pleased to advocate for you and be a potential source of introductions. These are what we have also referred to as engaged clients.
2. The second point may be reiterative of the first—that is, it is not enough for clients to be merely satisfied. The VIP Forum of The Executive Board once showed that very satisfied investment clients, those in the zone of affection, are three times more likely to use their primary provider for their next financial action as compared with somewhat satisfied clients and twice as likely to refer their primary institution. The VIP Forum defined the zone of affection as a rating of 4.7 or better on a 1 to 5 scale, with 5 being high.6
Note that the best way to understand client satisfaction in detail is through an independent formal survey, a topic for another time.
The same HBR article also states that a Xerox survey some years ago showed that “customers giving Xerox 5s (5 = very satisfied) were six times more likely to repurchase Xerox equipment than those giving 4s (4 = satisfied).”7 The article further suggests that clients fall into three zones:
1. The zone of affection is where clients are very or close to very satisfied and whose loyalty is highest. The higher the satisfaction, the higher the loyalty and the closer to advocacy.
2. The zone of indifference is where clients are generally satisfied and perhaps on occasion slightly dissatisfied. Loyalty and retention ranges widely, and clients are susceptible to defecting depending on a number of factors. These clients are not advocates.
3. The zone of defection is where clients are extremely dissatisfied, somewhat dissatisfied, or often at least slightly dissatisfied. Loyalty and retention ranges. Clients are highly susceptible to defecting depending on a number of factors. Some of the most extremely dissatisfied and angry clients are dangerous and could do harm to your practice (e.g., bad mouthing).
To produce very loyal clients who are advocates, advisors need to create a pool of highly satisfied clients in the zone of affection. This is where the magic can happen.
The HBR article, “Why Satisfied Customers Defect,” states that “where competition is intense, we found a tremendous difference between the loyalty of satisfied and completely satisfied customers.” It goes on to say, “Occasionally, the match is so good that even a 5 on a 1-to-5 satisfaction scale doesn’t fully capture the strength of the relationship.” There are “individuals who are so satisfied, whose experience so far exceeds their expectations, that they share their strong feelings with others. They are apostles.” 8
Here are a few more findings on the rewards of client loyalty:9
• Over the previous 12 months loyal clients gave an average of $376,000 each to their primary financial advisors—an amount more than 16 times greater than that given by satisfied clients to their primary financial advisors.
• In the coming 12 months, 94.4 percent of loyal clients were extremely or very likely to give their primary FAs more assets.
• Just 33.5 percent of the satisfied clients planned to give their primary financial advisors more assets to invest.
• Just 13.4 percent of the moderately satisfied clients planned to give their primary financial advisors more assets to invest.
Vince Lombardi said, “Perfection is not attainable. But if we chase perfection, we can catch excellence.” Perfection in client service needs to be a target so we can catch excellence. It has also been said that “the most difficult part of attaining perfection is finding something to do for an encore.” Be assured that there is always more to do.
Delivering satisfaction and therefore gaining loyalty requires a process and a strategy. It is not a one-time event. All client-facing processes and service MUST BE EXCEPTIONAL. The six core client-facing processes and their high-level components are shown in Figure 3-1.
We will discuss each of these processes from a service and value perspective. These core client-facing processes all provide value to the client and are part of the services value you deliver for the fees you charge. We will develop your Client Service Model or Promise to summarize your deliverables in a form you can share with clients, prospects, and centers of influence. Your structured processes and deliverables will differentiate you, and the formality of a written service model will also distinguish you.
Figure 3-1 | Six core client-facing processes.
• Structured processes deepen relationships. Deepening relationships happen because we are delivering completeness and consistency. Every process and each step in its execution is intended to ensure that nothing falls through the cracks. Processes, executed well, provide consistency. The intent is a consistent client experience that signals what you do and how you do it. Explaining the steps you are taking a prospect or client through prepares them to understand what you are delivering and makes them better able to explain to others how well you work. These “others” are your prospects.
• Deepened relationships lead to asset growth through account consolidation. This is a primary goal of financial advisors. Using outside data sources, most firms project that most clients have about the same amount of assets away as assets held by that firm. At the same time, most FAs claim they have all their clients’ assets. A holistic financial planning approach and a trusted advisor can uncover assets held away.
Financial advisors know the important rationale for their investment recommendations. Those recommendations and decisions to be made must be in context of the complete financial picture of the client. At times, however, securities and other liquid assets are held with the advisor and elsewhere, whether with other advisors or in tax-deferred accounts at their workplaces. It may also be important to making effective investment recommendations to include less liquid assets, whether real or personal property and anything else of value that can be converted into cash. There are cases where retirement plans may include converting various less liquid assets into liquid assets. Better decisions with respect to asset allocation are made when all assets are under single management or, at a minimum, are known to any advisor making those investment recommendations.
These reasons then become opportunities to identify and acquire assets away. There are points within each process to discover those assets. They should be identified in the initial intake process and uncovered when developing a financial plan, putting together a legacy plan, making investment recommendations, or reviewing a client’s portfolio. Conversations are opportunities to gather assets away.
• Deepened relationships lead to asset growth via introductions based on outstanding service. This is one of two primary goals of outstanding client service, client retention, and client acquisition. We will discuss introductions and/or referrals in Chapter 9. One of the keys to “earning” introductions is delivering such high-quality service that clients would like their family and best friends to also have the benefits of working with the advisor who does such great work.
• These relationships reduce costs of acquiring “replacement clients.” As retention rates approach 100 percent, the need for replacement clients does not exist. Instead, time and effort can be directed toward new client acquisition.
• You increase cross-sell from knowing your client well. The more you know about your clients and their families, the better able you are to identify needs beyond investments, whether it’s insurance, lending or other banking solutions, or legal or accounting services. You may not provide legal or accounting services but if the need generates an introduction to a CPA or Trust and Estate attorney, this becomes an opportunity to attract a quid pro quo, because you are a problem solver.
• By being a problem solver you increase trust and confidence and show your value. Delivering your services in a consistent and complete manner, understanding your client or prospect in depth, being clear about what you do and how you do it, and constantly being a helpful and considerate problem solver builds trust and confidence while you are delivering solutions that are always to the benefit of the client.
To set your client service strategy, let’s look at each of the six core client-facing processes. We will separately address the “Client Planning and Review Process” in Chapter 6.
The intake process is about working with a prospect in the sales process to convert that prospect into a client. There is additional material in Chapter 5 to detail the intake process conversations.
The intake process is a three-phase meeting construct that gives you the opportunity to demonstrate your strengths and capabilities at the initiation of your relationship. The organization and structure of this approach provides service and value to the client because it provides completeness and consistency that results in high-quality client plans.
• Meeting 1 is about the prospects and their family. In this meeting the prospects should be speaking 80 percent of the time; you are listening and taking notes. All you have with you is paper and pencil—no charts, no iPad, no visual aids. This is NOT a presentation meeting. The talking you do is focused on asking and answering questions. You have no prescriptions, recommendations, or opinions until you fully understand the prospects.
• Meeting 2 is about the client’s finances and financial experiences. Assuming you have a meeting of the minds in Meeting 1 and you get along, have built an initial level of trust and likability, and both believe you can help the prospects, then you schedule Meeting 2. You will ask the prospects for the material you need to get an indepth understanding of their financial situation and experiences.
• Meeting 3 is about discussing your strategy and plan for the prospects and their family. Assuming Meeting 2 and the material you have meets your needs for a professional analysis, you are ready to discuss a plan for their future financial well-being. This is NOT a “proposal”—it is a plan, which is more assumptive and personal. A plan assumes the sale as a prelude to the question, “Are they ready to agree to work together?” Your plan is general enough so the prospects cannot implement it themselves but specific enough to define the actions they need to take with you. The on-boarding process is also designed to ensure completeness and consistency so that new clients feel part of the firm and your practice and receive all the components they need to feel comfortable that they made a good decision.
You need to show your strengths, capabilities, values, integrity, and character in each meeting. Again, your grooming, your welcome, your demeanor, your teammates, and your opening comments, as well as the physical environment in which you meet, needs to approach perfection. There is no point in striving for less. Consider the following:
• Meet with both parties when there is a couple relationship. If your prospect is part of a couple, you must meet with both parties. From a pragmatic perspective, it is imperative to develop in-depth and personal client relationships with both people from the beginning and throughout your relationship. When one client of a couple dies, there are often outside pressures from other family members on top of grief to deal with during this highly challenging time. Many articles report the loss of client assets when the male spouse of a couple passes away. For example:
• “While few women seek a new FA before the death of their spouse, over 70 percent do so in the aftermath of the funeral—though they may wait to take action for several months, or even several years.”10
• “While their husbands are still alive, few women plan to leave their FA. Yet in the months and years after they become widows, up to 70 percent do just that, according to some estimates.”11
If you don’t meet with both spouses in the first meeting, you are the advisor of the person with whom you first met. You need to keep the relationship with both parties equal throughout the relationship or you will likely be part of the 70 percent who lose the assets upon the death of the spouse. You know that men’s life spans are shorter than women’s. In addition, adult children and others can hold sway on a surviving partner if they have an advisor they like and trust.
From a service and value viewpoint, traditionally, women haven’t taken an active role in their investments and financial planning. While this is a changing paradigm, it is likely changing more slowly than necessary and changing more with millennials than with boomers. Some brokerages and advisors don’t treat women with equal respect. Because Wall Street has historically been largely male-dominated, some of the language used when talking about money is ego-based, and women may relate differently to investments and financial planning than men do.12 It is critical, respectful, and appropriate, as well as of value and service, to treat couples in any relationship as equals in all ways—from what you say and how you say it, to the amount and the type of professional attention you pay to each partner. You need to understand each partner’s wants, needs, goals, risk attitudes, time frames, etc. They may well differ, and two perspectives are required if you want to appeal to the household as a unit. This is a big topic and outside the scope of this book, so let’s just say that we strongly suggest that you always treat partners in relationships with equal respect and focus.
• Listen for your client’s message. Have you really listened to the message the client is sending? Can you subjugate your ego to listen, hear, and understand your prospects?
This is not a lesson in listening. There are myriad media, courses, and articles to learn listening skills. One website13 simply says:
Listening is the ability to accurately receive and interpret messages in the communication process. Listening is key to all effective communication. Without the ability to listen effectively messages are easily misunderstood . . . communication breaks down and the sender of the message can easily become frustrated or irritated.
If there is one communication skill you should aim to master then listening is it. Listening is so important that many top employers provide listening skills training for their employees. This is not surprising when you consider that good listening skills can lead to better customer satisfaction, greater productivity with fewer mistakes, and increased sharing of information that in turn can lead to more creative and innovative work.
Many successful leaders and entrepreneurs credit their success to effective listening skills. Richard Branson frequently quotes listening as one of the main factors behind the success of Virgin.
Effective listening is a skill that underpins all positive human relationships. Spend some time thinking about and developing your listening skills—they are the building blocks of success.
Listening results in better discovery, better recommendations and decisions, better plans, more respect for you, and uncovering opportunities based on the prospects’ true wants and needs. These results all benefit your prospects and clients. This is service and value.
Your job in this first meeting, then, is primarily focused on listening in order to learn about your prospects: who they are, their family, their wants, their needs, their goals and situation. Where are they today, where do they want to be at some future point in time, and when is that time?
We do not have a separate chapter on the financial planning process because:
• Financial advisors and financial planners should be well aware of this process and capable of delivering financial plans to their clients.
• Many firms already provide financial planning tools and support to their advisors. It is a must to use them.
• There is already a plethora of resources available on this subject, so we limit our discussion to some current thoughts and experiences that can add value to your process.
Carl Richards is a financial planner and blogger for the New York Times. His first book, The Behavior Gap, makes outstanding points about financial planning and its value to the client that advisors can effectively deliver. These points go beyond software and tools by discussing the role of financial planning in the client’s financial life.
Many Americans do not have their financial lives in order because they don’t have their life plans in order. If we don’t know what will make us “happy,” then it’s difficult to make financial decisions that support those goals. Life decisions have to be made before financial decisions can be made. While financial planning is about knowing where you are today, where you want to be at some later point in time, and how you will (or have to) behave to get there, Richards points out that financial plans themselves are worthless unless goals are established first. If goals change, plans have to change, so the process of financial planning is what is vital. Essentially, if you put together a plan and it becomes “shelfware” while your life and goals move on, it’s of little value. However, if the plan is re-created on a regular basis—annually or as needed, based on changes—that plan can keep current with the client. Therefore the value is ongoing and continuous. At least two things are true: Financial planning is not a one-time event, and the “tool” itself is not as important as the process. You bring great value to the process by helping your clients establish their life goals as well as their financial goals and by delivering your process on a continuing basis.
Richards brings reality to the process and delivers verbiage that can help advisors help clients in understanding these realities. The Behavior Gap is a worthwhile and easy read. He says, “No plan will cover every situation—and that’s okay. You don’t have to choose the perfect investment or save exactly the right amount or predict your rate of return or spend hours watching television shows about the stock market or surfing the Internet or stock picks. You don’t need a plan for every contingency.” He asks, “If planning isn’t the solution to our money problems, what is? More simply, what can we do to get what we really want?” He gives us his answers, which are the points advisors need to get across to their clients:
• “We can stop chasing fantasies. We are not going to get what we want by beating the market or picking the perfect investment or designing the perfect bulletproof financial plan. In fact, when we try to do these things we get into big trouble.”
• “We can protect ourselves—to a point. Risk is what’s left when you think you’ve thought of everything. Our assumptions about the future are almost always wrong. We can never think of everything—but we can take sensible steps to protect ourselves from life’s inevitable surprises.”
• “We can embrace uncertainty. If we aren’t locked down into a rigid plan, we can recognize and seize opportunities when they come up.”
• “We can decide what we really want. When someone asks you what you really want out of life, you’re probably not going to say you want an investment that delivers good returns. Like the rest of us, we want to be happy and fulfilled. Your financial decisions should align with what you know about yourself and the world. The more you know about yourself, the more successful your investments will be—that is, the more they will align with your true goals as a human being. Deciding what you really want takes an awful lot of work, but once you know what you (and your family) really want, you will know what to do—how much insurance to buy, where to invest your money, whether to quit your job and start a new venture.”
• “We can make decisions that make sense. We can’t control the markets or the economy, but our behavior is up to us. Sensible, reality-based choices are our best shot at reaching our goals.”
• “We can trust our luck. . . . Most financial planners (and advisors) don’t like to talk about luck”. . . but “one of the lessons is that you aren’t in charge of everything. Do what you can, and then relax.”
• “We can trust ourselves. In the end, financial decisions aren’t about getting rich. They’re about getting what you want—getting happy. And if there is a secret to getting happy, it is this: be true to yourself.”
These are part of Carl Richards’s belief system. Hopefully they make sense to you and your clients and prospects. They point to some of the things advisors can do to add value to their clients.
• Help the client focus on the reality of the markets.
• Put an investment policy statement in place that incorporates appropriate asset allocation and diversification approaches.
• Frequently validate with the client that their goals, family, or extended family situation, income, values, and financial situation have remained constant or have changed.
• Perhaps the most valuable deliverable you provide is managing client behavior when changes take place, especially in the markets. We know markets go up and down. We know the challenges of managing client behavior in changing markets. You don’t have to go back very far to recall the panic some clients, and advisors, experienced in 2008. Behavioral management is one of your biggest and most difficult challenges, but this is where value-add takes place.
Richards says, “I coined the term ‘behavior gap’ to label the gap between investor returns and investment returns. I’ve used the behavior gap to describe all kinds of situations where our behavior leads us to subpar results. Impulses to buy and sell are dangerous. Clients rely on me to help them get their impulses under control.” That chapter in his book is titled, “We Don’t Beat the Market, the Market Beats Us.” One of the advisor’s primary jobs is creating the discipline for clients so they stick with the plan instead of making irrational decisions. Serenity is inversely proportional to expectations.
This is true not only for market movements but things like savings and spending as well, all of which are part of good financial plans. Though you are responsible for your behavior, you can’t control results.
Carl Richards delves into the area of “life planning” or “financial life planning,” an approach that has a small number of excellent proponents including Carol Anderson of Money Quotient (http://moneyquotient.org/), Mitch Anthony of Financial Life Planning Institute (http://www.flpinc.com/), and George Kinder of The Kinder Institute of Life Planning (https://www.kinderinstitute.com/). Richards makes the point that the moral is “whatever you have to do to gain self-knowledge, do it. Find out who you are and what you want. Then you can stop wasting your life energy and your money on stuff that doesn’t matter to you—start making financial decisions that will get you to your true goals.”
As Mitch Anthony says, “If you want to survive and thrive, your value proposition must move from ROI to ROL (Return on Life)—which means helping your client get the best life they can from the money they have.”
If you think ultra-high net worth (UHNW) individuals get over money concerns, see the article “Secret Fears of the Super-Rich.”14 A study by Boston College asked the question, “Does great wealth bring fulfillment?” The study addressed people with fortunes in excess of $25 million.
• “The result is a surprising litany of anxieties: their sense of isolation, their worries about work and love, and most of all, their fears for their children.”
• “The respondents turn out to be a generally dissatisfied lot, whose money has contributed to deep anxieties involving love, work, and family. Indeed, they are frequently dissatisfied even with their sizable fortunes. Most of them still do not consider themselves financially secure. . . .”
• “One respondent, the heir to an enormous fortune, says that what matters most to him is his Christianity, and that his greatest aspiration is ‘to love the Lord, my family, and my friends.’ He also reports that he wouldn’t feel financially secure until he had $1 billion in the bank.”
The point is to understand that your HNW clients need your help to put money in context of life. Only humans can satisfy deep interpersonal needs. That’s how close the best advisors get to their best clients. Read an outstanding article in Fortune, “Humans Are Underrated,”15 which was adapted from a book by the same name by Geoff Colvin.
You can and should make these points a part of your services and value-added deliverables. You have enough information in this chapter and Chapter 1 to develop your very powerful Unique Value Proposition.
Carl Richards delivers an excellent summary of the financial planning process. Use these ideas in your UVP to stress your financial planning deliverables and the value they provide with continuing and ongoing service.
There are a number of reasons why we’re hesitant to spend time planning for our financial future. It’s time-consuming; it makes us anxious; we’re not sure how to do it. But I think the most important reason is a subtler one. I think we have confused the process of financial planning with its supposed end product: a financial plan.
Financial plans are worthless, but the process of financial planning is vital. A plan assumes that you know what’s going to happen—even though you don’t. By contrast, planning in its truest sense is a realitybased process that allows for life’s unpredictability.
We don’t know that inflation will average 3 percent annually, or that the stock market will go up 8 percent annually, or that we’ll be able to save 10 percent of our pay (or what that pay will be), or when we’ll retire (we might not get to choose), or how much retirement will cost, or even when we’ll die (at age 61? 78? 92? 37?).
Financial surprises are the rule—not the exception, which means that your plan, whatever it is, will be largely based on more or less plausible fiction—or even outright fantasy. Remember, however, good things happen as well. The process of planning may—in fact, probably will—require us to chart a course that’s headed in the direction we hope to go. That may involve making some assumptions about the future. But reality-based planning acknowledges that some assumptions are mere guesses. We make the best guess we can. Then we can move on to the more productive business of investigating our current motives and circumstances, so that we can act from a place of understanding—not hope, not fear, but clarity.16
Richards does caution us that “once you have a general idea of your destination, the focus should shift to what you can do over the short term. Focus on the next three years” because . . . “financial planning based on reality tends to lead to better results.”
Carl’s concepts and words are excellent. Read and use them.
There are several additional points that Michael Kitces brings to the discussion of financial planning as it is executed today in most cases. In his Nerd’s Eye View blog, Kitces says, “Financial planning is . . . increasingly focusing around an approach of identifying and understanding client goals, and then crafting a plan to help the client succeed in achieving them.”17 Similar to Carl Richards’s comment, Kitces says:
The reality is that in practice the goals-based approach doesn’t always go as smoothly as hoped. Some clients haven’t crafted their goals yet in the first place, while others have goals that are wildly unrealistic and force planners to be the bearers of bad news. Often the goals-based planning process can get mired down in countless iterations of alternative ‘what if’ plans, culminating in a giant physical tome that clients aren’t committed to and is never read again after being presented away.
But perhaps the fundamental problem with goals-based planning is simply that it puts the cart before the horse; clients shouldn’t be selecting the goals to pursue until they understand what the possibilities are in the first place!18
Kitces suggests using “the software interactive with clients to explore the possibilities of multiple scenarios and understand the tradeoffs just to arrive at what the goals should be in the first place. Once the possibilities have been selected, realistic goals can be chosen, and then a more productive series of financial planning recommendations can be delivered for implementation!” In addition to being an interesting idea for realistic goal setting, this approach would get the client deeply involved in the process and hopefully committed to an execution of the plan. This doesn’t obviate the suggestion to continue the planning process on a regular basis. Having said that, we would want to limit the iterations of the plan because, given the number of variables in the plan and the uncertainties of the future, plans are only a temporary picture of today’s estimates. The process of ongoing and continuing planning is what we want to focus on.
In another article Kitces says, “Creating a financial plan starts with gathering the client data, which many advisors request by providing clients with a ‘data gathering form,’ typically structured in a manner that makes it easy to input the data into their financial planning software.” He goes on to say, “The caveat, however, is that in practice clients often don’t fill out the data gathering form. For some, they feel it’s too much work.”19 Regardless of the form or survey you mail to clients or prospects or advisors to fill out, the vast majority will not complete the task. If you want data and/or signatures from a prospect or client, it should be done in person and you should fill out forms with or for them. Filling out forms with prospects or clients enables you to gather much more and better data and dig deeper into responses. If the client or prospect is worth having, it’s worth working the forms with them.
Perhaps more important, Kitces says:
For most, the problem is simply that they aren’t organized enough to provide all the requisite information. And may even feel guilty or embarrassed about the fact that they’re “failing” in the very first step of the financial planning process. So what’s the alternative? Ditch the data gathering meeting, and have a “Get Organized” meeting instead. In other words, make the first meeting with the client about getting them financially organized in the first place.20
He goes on to discuss how to execute that meeting. The “get organized” meeting is a very insightful idea and can be a great part of your service delivery model for top-tier clients, adding tremendous value. This is the opportunity to help your client establish rational life goals for the near term, mid-term, and long term and establish a lifelong relationship that has mid-term goals become near-term goals and long-term goals become mid-term goals, etc. Now you are becoming your client’s CFO.
Finally, many of the plans that advisors prepare are often limited in scope when compared to those of a financial planner who may charge $2,500, $3,500, or significantly more. It depends on the complexity of the plan, including the assets of the client and how else the planner earns her or his income.
Figure 1-4 was an example of one planner’s deliverables. As an advisor, this may be what you are competing with. Though the figure identifies 53 deliverables, it’s important to note that not all clients require every deliverable; some deliverables may be high level and actually drawn up by strategic partners for a separate fee (e.g., wills and trusts), and many of the elements are likely part of your normal review plans (e.g., insurance reviews).
There are many other resources for advisors that provide additional details on the subject of risk management and the opportunity it provides. Most firms and advisors also have access to support for key risk management solutions. The importance of this process is the consideration of risk as it affects your client’s financial plans.
The following are a few of the risks that advisors need to work on with their clients. Risk management is a critical part of the financial planning process. The intent is to protect one’s goals, dreams, treasure, and personal well-being from those “what ifs” before they become “what nows.”
There are four broad categories of risk to consider: Income risks, Expense risks, Assets and Investment risks, and Credit and Debt risks.
1. Income risks. The basic risks and reasons for investing in securities portfolios are well known to advisors and discussed as part of financial planning—namely, to fulfill the client’s goals and dreams after their current income stream ceases. Goals and dreams include, but are not limited to, a comfortable retirement, college for children, caring for a spouse and others as needed, vacation homes, travel and toys, etc. Some people’s goals and dreams are primarily about freedom, as least when work first ceases.
a. Robert Laura, in his Forbes article “Three Retirement Goals People Never Achieve,”21 says that “retirement doesn’t come with a voucher that says you get 20, 30, or 40 years to do whatever you want, when you want. It can, and often does, change in a moment, making it important to eliminate excuses and maximize the opportunities you have today.” Having said that, the risk here is clients not being able to afford their dreams. This is the risk they are counting on you to minimize.
b. If income stops prematurely due to death, disability, long-term illness, or loss of job, the individual and family may be left to cope without enough income to pay debts and living expenses, no less dreams. Plans should be made to handle such calamities. These situations can be addressed through insurance of many kinds, and it’s incumbent on the part of the advisor to ensure that appropriate discussions have taken place so these risks and others are considered. You will want to document these discussions and consider appropriate notation to the client on how the situation was addressed.
2. Expense risks. These are other risks that can seriously affect the financial plan. Spending via budget management should be tracked and kept in line with the plan, as should income and emergency spending. The latter needs to be part of the plan as well and can be monitored by the client and/or the advisory team.
3. Assets and investment risks. Savings like expenses also need to be tracked to plans. As Carl Richards says, “While making wise decisions about how you invest your money is important, it doesn’t have nearly the impact of working hard and saving more—let alone starting a business, going back to school, or reinventing yourself in any number of ways.”22 Of course you are tracking investments and return on investments as well as inflation and changes to real and personal property values if they are part of the plan.
4. Credit and debt risks. Debt and any other items that are part of the plan need to have attention focused on them as well.
You can see that annual to biannual plan reviews are likely necessary and there is significant work involved. All of these items are part of managing the plan that you developed with the client. Obviously the more effort, the more time and cost, and that is part of the value of your services, whether charged separately or as part of your asset fees. We are not suggesting the details of tracking and monitoring are done by the advisor, but rather by part of your team, real or virtual. These services can be separately billed if required and appropriate.
Again, there are volumes of resources for advisors in this area and this is their primary area of expertise. Advisory firms provide significant resources and support in this area including, but not limited to, research, model portfolios, asset allocation models and guidelines, and support desks.
The investment planning process, a subset of the broader subject of wealth management, is a core capability of advisors who have gone through much training and experience. Our goal in this section is to show the value you add over and above portfolio construction, which is essentially a commodity and could be accomplished by technology. Today’s competitive investment management/wealth management marketplace requires a consultative selling approach and has for almost 50 years. Before “consultative selling,” selling investments tended to be about products. Advisors may have called clients or prospects to buy a “hot stock,” offer a bond with a good interest rate and rating, or offer “penny stocks” or some high-performing fund, among other offerings.
The term “consultative selling” first appeared in the 1970s book Consultative Selling by Mack Hanan. It describes a selling technique in which the salesperson acts as an expert consultant for the prospect, asking questions to determine the prospect’s needs and wants, then using that information to select the best product or service to match those needs.
Consultative selling also works with value-added selling. Properly done, the consultative process digs deeply into the prospect’s wants and needs starting with the “intake process” and continuing through all six of your core client-facing processes. The intent is for you to be able to incorporate the prospect’s wants and needs and match them with the wealth management solutions you offer. The consultative approach is also intended to discover your prospect’s emotional as well as financial wants and needs, and, critically, to develop rapport as an expert who truly understands and will be an outstanding resource for your prospect. Building rapport will develop by sharing information that is both helpful and valuable while not pressing too soon for a commitment. By demonstrating your understanding, even compassion when appropriate, your expertise, and how you can meet your prospect’s wants and needs, you will earn the right to establish a mutually beneficial relationship. Consultative professionals do not rush the process.
Consultative selling has advanced over the years and needs to be customized to the industry in which it is used. However, the tenets are the same; understanding the client as discussed in the intake process, building rapport as is done in every communication with the client or prospect whether business or social, understanding the value and benefits you offer in the context of the client’s situation, being expert at what you do, and building confidence so that you can present a plan that delivers solutions to the client’s needs and having them know you are acting as their trusted partner in a fiduciary manner.
Essentially, the steps in a wealth management consultative process include working with the investor interactively to:
• Define their attitudes toward investing, their experiences with investing, their personal and family situation, their work situation, their income, the level of investment risk they are willing to accept, their wants, needs, dreams, and goals as discussed.
• Articulate and prioritize the investor’s financial needs and life goals to ensure a meeting of the minds.
• Assess the investor’s financial situation and needs. The FA works with the client’s current situation in terms of current and projected income, all forms of assets including investments and real and personal property, their status with regard to insurance, even health, hobbies, and other interests, etc.
• Create a portfolio investment approach that is intended to help meet the investor’s objectives, through an initial planning document.
• Develop and agree to an implementation strategy to enable the initial plan. Working together, the investor and advisor would then modify the plan as needed and/or desired.
• Review the progress of the investments to the plan and goals and, as needed, periodically adjust the portfolio. This is an ongoing and interactive process with the client and advisor incorporating any changes to the current situation of the client and/or markets as appropriate.
The Client Service process represents a summary of many of the deliverables we have discussed to this point. The sum of your deliverables are intended to be presented formally to your clients as your “promise” to them of your services—hence, your “Client Service Promise.” This promise is intended to be a key part of generating loyalty and advocacy from your client as well as differentiating you as a financial advisor. The set of deliverables is rarely put together in a formal, written manner. The written promise is also rarely presented formally to the client by FAs. The primary pushback has been a concern about putting the promise in writing. We agree that if the advisor does not intend to deliver some component of the promise it should not be included. However, if it is included, it needs to be delivered. Because clients would have some expectations for the fees they pay, some or all of what you promise may have been discussed in your sales process.
In the manufacturing industry, “service level agreements” (SLAs) are legally binding contracts and agreements between a customer and the service provider. Your Client Service Promise is essentially the same concept with different deliverables.
Figure 3-2 shows a sample Client Service Promise that we will detail further and discuss how it can be created. This particular Client Service Promise is for an A-level or “Diamond” client. It is two pages in length. There are similar service promises for B, C, and D clients. We have chosen the four names Diamond, Platinum, Gold Plus, and Gold as the levels of client service. It may be a small point, but we suggest that each level client get a positive name. (Don’t use names like Silver, Brass, Tin, or Lead. Noncomplimentary naming conventions are inappropriate and don’t represent how advisors need to think of their clients.)
The process for building a customized Client Service Model or Promise begins with the “Client Service Matrix” spreadsheet. The spreadsheet is about two pages encompassing about 70 rows of deliverables. It lists the six structured client-facing processes we have been discussing and makes the point that we deliver these processes to every client. (Note that we have not yet discussed the Client Planning and Review Process, which is covered in Chapter 6.)
There are five functions listed on the Client Service Promise that address client deliverables:
1. Planning
2. Investing
3. Communications
4. Extended Services
5. For Internal Notation Only—services the advisor can deliver (e.g., sending a birthday or Thanksgiving card, dinner or lunch meetings, etc.) but are not shown as deliverables because they are relationship builders
Since this is a spreadsheet, additional rows representing additional deliverables can easily be added.
Each tier will or will not be provided particular deliverables based on the advisor’s practice. If you wish to deliver that line item you merely annotate that cell with an X, as shown in the sample Client Service Matrix (see Figures 3-3 through 3-8).
Figure 3-2 | Sample Client Service Model.
Street Smart Research Group, LLC
Practice Optimization for FAs
James Advisor, Senior Vice President
Diamond Service Model
Certified Financial Planner®
Certified Private Wealth Advisor®
Deliverable |
Frequency |
Planning Services |
|
Lifestyle and Retirement Planning |
Annual |
Philanthropic Planning |
Annual |
Private Bankers—Cash and Liquidity Management |
Annual |
Liability Planning and Management |
Annual |
Estate and Insurance Analysis and Planning |
Annual |
Wealth Transfer Planning |
Annual |
Education Planning |
Annual |
External 401k Guidance |
Annual |
Intergenerational Family Planning |
Annual |
Investment Management |
|
Investment Policy Statement |
Annual |
Investment Process |
On-Going |
Integrate Multiple Accounts |
On-Going |
Investment Planning, Advice, and Management |
On-Going |
Portfolio Manager Reviews |
Monthly |
Communication Plan |
|
In-Person Performance Reviews and Progress Tracking |
Semi-Annual |
Telephone Portfolio Review |
Semi-Annual |
Check-In Call |
Monthly |
Mailings (TBD) |
Monthly |
As Required |
|
Visit Place of Business |
Annual |
Invitation to Firm Sponsored Events |
As Available |
Topical Events, Education Seminars, and Workshops |
As Available |
One on One Special Events |
As Available |
Extended Services |
|
CPA Package (1099) |
Annual |
Year-End Gain Loss |
Annual |
Online Access and Support |
On-Going |
Contact CPA |
Semi-Annual |
Update Missing Cost Basis Information |
As Required |
Banking Solutions |
As Required |
The Essential Organizer |
Initial |
Client Experience Survey Results |
Annual |
Private Briefing |
As Required |
The FIRM NAME Advantage |
On-Going |
James Advisor, Senior Vice President
Diamond Service Model
Certified Financial Planner®
Certified Private Wealth Advisor®
Note there are two additional columns for consideration:
• Time in Hours (required for this deliverable)
• Person Responsible (FA, Client Associate CA, or outsource to a third party if appropriate, designating the person responsible by initials)
The time in hours can be used to estimate workload. Essentially an X along with time and the person responsible can be used to estimate cost of service. This can be used to develop tier-based profitability. More discussion on this topic is needed but is not specifically addressed in this book except for the costs of contact in Chapter 4.
Once the Xs are filled in by tier, the service promises are completed by using the template for Tier A. Tiers B, C, and D are simply a matter of deleting rows that aren’t part of that tier’s deliverables. As needed, items unique to B, C, or D tiers can be added as the template is a Word table.
Figure 3-3 | Structured process section of the Client Service Matrix.
Figure 3-4 | Planning section of the Client Service Matrix.
Figure 3-5 | Investing section of the Client Service Matrix.
Figure 3-6 | Communications section of the Client Service Matrix.
Figure 3-7 | Extended services section of the Client Service Matrix.
Figure 3-8 | Internal “notation only” section of the Client Service Matrix.
Now that we have an extensive and formal Client Service Promise and a set of deliverables, we need to answer the question, “Is it enough?” Some advisors offer many or even most of the discussed deliverables. However, many FAs may not formally discuss their deliverables with or present them to their clients, and most clients couldn’t list a majority of the deliverables that are delivered to them. It’s impossible to understand the value of what is being delivered to you if you don’t have a solid understanding of what those deliverables are and have agreed they are elements you want delivered.
It is important to understand which deliverables clients value and how much they value them. We recommend that advisors discuss the Client Service Model or Promise they develop for their clients and have a discussion about what they deliver and what the clients value. As well as determining what each client values, you learn what deliverables you should keep on delivering, enhancing, or even deleting for that client. You are also setting the client’s expectations as well as your own. It’s simply a meeting of the minds and is worth reviewing annually or as appropriate. You are now balancing client value and the cost of servicing that client. It’s a good way to run a business. We agree that cost and profitability has many nuances and the process is more complex than discussed here, but this is a good start for our business.
There is, however, a progression of service expectations or a growth of service expectations over time. It’s never enough because that which pleased, even delighted, a client yesterday becomes a basic expectation today. Client’s requirements, wants, and needs change over time. In essence, “delighting” the client and solidifying his or her loyalty takes more and more effort over time. What may have been a unique service 10 years ago over time became a “normal” expectation and has now become “expected.” Therefore, to delight and retain the loyal client takes more and more and continually growing levels of service over time. An example is the Central Asset Account. First announced 30 years ago, it was a source of excitement to attract significant new client assets. The creation of Central Asset Accounts has become so “normal,” so expected, that its unavailability creates dissatisfaction and a competitive disadvantage in today’s financial services world. Its original excitement quality has become a normal expectation and quite possibly a basic requirement for many of today’s investors.
We have already stated that marketing to existing clients is significantly less expensive than marketing to potential clients. Cross-selling to current clients is also more likely to occur than cross-selling to new clients or prospects. Loyal clients can be defined as clients who conduct business with only you now and plan to conduct business with only you in the future. They are also interested in considering new strategies, services, and solutions you recommend while resisting the “pull” from your competition. They also provide solicited and unsolicited referrals.
We have established that client loyalty and retention are based on client satisfaction but that “mere satisfaction” is likely not enough to allow FAs to reach lofty goals. And we have also attempted to show that delivering satisfaction and loyalty is a process and a strategy, not an event.
The issue in financial services, as in other industries, is that this has to be displayed on a continuing, ongoing basis: contact after contact, opportunity after opportunity, and month, quarter, and year after month, quarter, and year. In terms of adding value, you have to go beyond the core value of the client’s expectations. When performance coaching financial advisors you learn that every advisor works on their core values: rational investment planning and execution, 100 percent accuracy, timely and regular contact, etc. These are expected and no longer the base for client loyalty or retention. All advisors express their strengths of investment expertise, experience, education, integrity, performance standards, and caring. These capabilities are also expected and no longer the base for client loyalty or retention. Though we need to make sure solid deliverables are in place, these skills, capabilities, and values do not differentiate advisors from many of the other 285,000 or more financial professionals they compete with. All advisors at least claim all these characteristics.
Dr. Noriaki Kano23 developed a model that speaks to adding client value over time. This model of client satisfaction, and hence loyalty, predicts that the degree of client satisfaction is dependent on the degree of need fulfillment, but is different for different types of client expectations.
In short, Dr. Kano’s model looks like Figure 3-9.
Kano’s model of customer satisfaction is a function of need fulfillment. The model addresses three types of customer requirements.
Expected requirements are so obvious to the client they do not state them overtly as requirements. When these requirements are met, the client says nothing and probably doesn’t even notice. When these features or services are not present, the client complains. Continually improving on meeting these kinds of needs will not elicit client loyalty or delight. Satisfying basic needs allows a company or individual to get into the market.
Examples: Telephone dial tone, brokerage statements
The following are Basic/Expected deliverables in a full-service brokerage:
• Investment planning and execution
• 100 percent accuracy
• Integrity
• Expertise
• Experience
• Education
• Timely and regular contact
• Portfolio reporting
• Caring/personal touch
These are “fundamental” to quality delivery. Clients overtly state these needs and are very aware of them. When these needs are met, clients are satisfied; when they are not met, clients are dissatisfied. For many types of requirements in this category, it is possible to deliver more than client requirements and generate additional perceived benefit. Satisfying performance needs allows a company or individual to sustain and remain competitive.
Example: Performance reporting
It is important to note that deliverables such as estate planning, education planning, tax-advantaged strategies, financial/retirement planning, and Central Asset Accounts are at this point in time nondifferentiated services. Most FAs and virtually all significant advisory firms preach and teach these as standard deliverables.
The following lists Performance/Normal deliverables in a full-service brokerage:
• Estate planning
• Education planning
• Tax considerations
• Retirement planning
• Financial planning
• Asset allocation
• Performance reporting
Clients have needs they are not aware of. These are referred to as “latent” needs. They are real, but not yet in most clients’ awareness. If these needs are not met by a provider, there is no negative client response. They are not dissatisfied because the need is unknown to them. If a provider understands such a need and fulfills it, the client is rapidly delighted, as happened when Central Asset Accounts first emerged in the late 1970s. Satisfying excitement needs allows a company or individual to excel and be world-class.
Example: 3M Post-it Notes when first introduced
Sources of excitement, when they are first introduced, tend to become expected as the market becomes familiar and saturated with them. That which delighted the client yesterday becomes a basic expectation as competition makes it an undifferentiated service. “Delighting” the client and increasing their loyalty takes more and more effort, and cost, over time. Service offerings that were seen as premium yesterday may be considered ho-hum today. To keep your clients loyal and attract new business, you need to continually create “delight” with strategic updates.
A question remains as to what are the latent client demands that will delight them and provide a differentiated solution. We see several possibilities. One is a function of poor execution on the part of some of today’s industry participants. Two other opportunities relate to enhanced services—financial and nonfinancial.
One possibility to delight the client comes from consistently and continuously “walking the talk” instead of just “talking the talk.” An example we have detailed is to establish a Client Service Model or Promise for each client that varies based on the client’s value to the advisor’s business. That value considers more than assets and revenues and is established based on the quality of the relationship, whether the client provides introductions, future potential, and other factors. We outlined a minimum number of face-to-face meetings per client, a minimum number of telephone-based portfolio reviews per client, and a minimum number of check-in calls per client. Every meeting has an agenda and goal and every face-to-face meeting is intended to solicit feedback and introductions as appropriate. (This will be discussed in Chapter 6, Your Client Planning and Review Process.) Advisors are coached to prepare a summary for every meeting with top-tier clients. This is to be shared with the client with any follow-ups required by the advisor and client.
There is still a lot of “talking the talk” instead of “walking the talk” in service delivery. A new level of service delivery that will meet and exceed client expectations calls for a new delivery and cost paradigm. This leads us to a discussion of enhanced services, financial and nonfinancial.
Given constantly growing client expectations and competition from many sources, one of the possibilities for delighting the client is a new set of financial services that are a “facsimile” of family office services for clients with perhaps $1 million to $5 million and even up to $10 million and more in assets under management. Such services could include:
• Higher levels of financial planning
• Legal guidance and/or paralegal services
• Tax advice and even preparation
• Accounting services such as record keeping, budgeting, bill paying
• Family governance
• Clinical social workers to help clients with true goal definition
• Family support partnerships for senior care facilities and geriatric planning
These are an exemplary subset of the types of services that family offices for the ultra-wealthy already often provide. Many of these services could be provided by affiliated strategic partnerships at separate fees.
Questions remain such as:
• Are these services implemented through regional centers at the firm or through affiliated strategic partnerships?
• Which clients receive which services?
• How are these services paid for?
• What happens to the referral-based relationships advisors have already established with Centers of Influence?
• Where do we find the time and expertise to offer these services?
Such services could include:
• Assistance with identifying legitimate and relevant sources of health information and curating other lifestyle needs24
• Family education programs
• Business and personal security
• Concierge services such as travel planning
• Luxury acquisition services
• Property management
These are also an exemplary subset of the types of services that family offices for the ultra-wealthy may provide. Questions also remain such as:
• How are these services implemented?
• Is there enough demand to warrant organized lifestyle services?
• How are these services paid for?
The next step will be to determine which clients or prospects will value which services. This is one of the themes of life planning.
As Wayne Dyer said, “There is no scarcity of opportunity to make a living at what you love to do, there is only a scarcity of resolve to make it happen.”
Execution is critical because small advantages in key areas or deliverables can make a large difference in results (recall the Law of Fractional Advantage, discussed in Chapter 1). Put another way: “All you need to do to win at anything is to be slightly better than your competition,” and “We don’t have a problem knowing what we should do. The problem is that we just don’t do it!”25
• Define and implement your six core client-facing processes:
• Intake Process (Chapter 5)
• Financial Planning Process (Chapter 3)
• Risk Management Process (Chapter 3)
• Investment Planning Process (Chapter 3)
• Client Service Process (Chapter 3)
• Client Planning and Review Meeting Process (Chapter 6)
• Commit that every client you are willing to accept to your practice will receive an appropriate version of these processes based on the needs of the client, the deliverables they deserve, their value to the business, and the fees you charge in compensation for the value you deliver.
• Client loyalty and retention based on “delighting” clients has significant value.
• That which pleased and even delighted the client yesterday becomes a basic expectation today.
• Delighting clients and solidifying their loyalty takes more and more effort and cost over time.
• Opportunities to delight the client come from at least three sources:
• Improved execution
• Enhanced financial services
• Enhanced nonfinancial services
A case in point . . .
• A recent WealthManagement.com article26 quotes investors speaking about their new financial advisor.
• Old firm
• The place sounded awesome with celebrity sports people as clients. I was pretty star struck.
• The office was designed to impress; lots of framed articles about their famous clients. The lobby in the building was really cool.
• We met with one of the main guys whose name was on the door and two other people—someone more junior and an account manager who would take care of basic stuff like wire transfers.
• They waved their arms and talked about the stock market and how they handle other clients. They were selling us; I wasn’t paying attention.
• We meet with them about once a year and in between we’d get statements and other things, like their investment committee’s views.
• I might as well have been getting notifications from a bank—that’s how impersonal it was.
• I came to realize we were just a little slice in their pie. They were doing the absolute minimum to keep our assets.
• I never once felt they tried to understand us. They were only interested in a very narrow part of our life—literally just our investment account. This is how your money’s doing. Nothing else. We never talked about our children, our interests. They had no desire to learn about anything to do with our lives. And they never tried to educate me.
• I didn’t have a grip on our relationship to money—that’s their job. They’re wealth managers.
• New firm
• In the first year, they did some very basic work, getting our portfolio allocated the way they thought was best for us. That involved a lot of questions about our goals and needs.
• They also have gone above and beyond the call of duty, like recommending some things that weren’t even in their interest, but were right for us. For example, when we wanted to refinance our house, they suggested getting a shorterterm mortgage, which required taking out money from the account—money they would not be earning a fee on anymore, as a result.
• We meet with them about once a quarter, but we don’t see a partner like we did at the other firm. It doesn’t bother me. That partner wasn’t very helpful.
• They ask us about our kids, their schools, real estate, our car, our lifestyle, etc. We’ve talked about those things over time and they’re constantly updating our profile.
• They have a monthly cocktail party at their office that’s really nice. I’ve only gone once or twice, but I liked it. You get to meet other people at the firm and other clients. We feel we have a bond with them.
For any client with whom you want to develop a relationship, who would do less than this new firm? If you cannot deliver this as a basic set of services, you are not delivering value to the client. Robo-advisors don’t do these things but they are inexpensive. While there are varying costs and ways to charge for robo-advisors, they often cost as low as 25 basis points. Any competitor in this industry that doesn’t offer the services of the new firm should not accept the client in our view. What would your clients say about your firm?
We’ll end with a favorite quote from Lewis Carroll in Alice in Wonderland.
“Well, in OUR country,” said Alice, still panting a little, “you’d generally get to somewhere else—if you ran very fast for a long time, as we’ve been doing.”
“A slow sort of country!” said the Queen. “Now, HERE, you see, it takes all the running YOU can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!”
Elite advisors run twice as fast.
Sections of Chapter 3 are based on The Behavior Gap: Simple Ways to Stop Doing Dumb Things with Money by Carl Richards (New York: Portfolio, 2012) and Michael Kitces’s Nerd’s Eye View blog, with permission from Carl Richards and Michael Kitces.