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Improving the Connection with Your Prospects and Clients

Have you considered what is going to propel growth in your business in the coming months and years? Schwab conducted a research study in March 2009 which shows the greatest 3 enablers of growth are:

1. Closing the deal with prospects – 75%
2. Maintaining quality service – 73%
3. Adding new technology for scalability – 67%

So what is your strategy for closing more prospects more quickly and improving client service? How are you going to maintain and enhance your client service? Success comes back to the old adage “know thy client”. People pay lip service to this, but do they really do it? And how well?

My view is that you will not know the motivations of your prospects and clients and how to communicate with them until you objectively know their DNA behavioral style. Once you know their DNA you can more quickly build a deeper relationship and also match them with the right choices for purchasing your products and services. Trust will be developed very quickly and your sales will increase.

This is the foundation of our DNA Marketing system (go to www.dnabehaviormarketing.com). Our DNA Marketing system provides you with an online behavioral marketing system whereby all of your prospects and clients can complete a profile online on your website. From there you will be able to seamlessly communicate with the prospects and clients on their terms and also customize your product and service offerings based on who they are. Using this system will deepen and scale your marketing. Also, this approach addresses one of your greatest barriers to growth which is not having enough time for business development and marketing.

Advisor Trust

The theme at this week’s FPA Conference in Anaheim centered on trust. Becoming the trusted advisor is not a new idea however, it is increasingly talked about.

The question is how do you become the trusted advisor? How do you accelerate trust in your advisory relationships, and for that matter in any relationship?

Building trust is directly related to how you behave in relation to others. What many do not know is that the starting point for trust starts with your behavior. If you do not trust yourself, then you will not trust others and others will not trust you. What we have learned from research is that some people are not naturally wired not to trust and hence will always have more inherent difficulty in building trusted relationships. So, these skeptical people have to be more conscious in developing trust with clients (and their team).

Interestingly, based on our extensive behavioral profiling of financial advisors, over 70% of them would be low on trust or more skeptical. So, why do you think there is such a lack of trust of our industry, and now being trusted is being valued so much? It is also fair to say that being completely trusting as a person can be naive. Some skepticism is reasonable so long as it is healthy.

Now, you need to address how you are going to improve your level of trust. The first step is gaining clarity of who you are, your talents and your life purpose. When you have the personal confidence to be who you are your fears start going away and generally trust builds. We help people through this step by having them firstly take the Business DNA Natural Talents Profile.
The second step is to uncover your client relationship management performance. We do this by having you take the AdvisorTRUST 360 Profile. In essence, the profile is a behavioral client performance evaluation. The process involves you rating yourself and having at least 3 clients each rating you on 75 performance items across the following 7 key areas:

1. Communication
2. Results
3. Relationships
4. Emotional Intelligence
5. Trust
6. Advisory values
7. Advisory competence

The profile report identifies areas of strength where you are positively building trust with clients and areas where further development is required.

With this information a coaching program can be put in place to help you improve your trust and level of client satisfaction. The reality is that every person will have performance aspects needing development across these 7 areas. Even those who inter personally may naturally build strong trust could be lower in demonstrating advisory trust in terms of the results and processes side of their service delivery.

If you would like to learn more and participate in the AdvisorTrust 360 Profile please contact us at inquiries@businessdnaresources.com

Global Transition for High Net Worth Individuals

I have just read KPMG’s Swiss Financial Services Newsletter for August 2008. The newsletter provides very sharp insights into the increasingly complex international needs of high net worth individuals. The outcome is that the consulting team will need to have a greater global outlook and more sophisticated approach to the technical and human issues impacting the HNWI client.

Some of the key trends driving the changes in how HNWI’s need to be serviced are:

  1. Investments of HNWI’s are continuing to become more global and diversified
  2. Stronger demand for superior life quality resulting in lifestyles taking on a growing international flavor
  3. Family members living and working internationally away from the home base
  4. HNWI’s want their consultants to play a collaborative role – working with them, not for them
  5. Demand for a higher set of values including ethically correct behavior, social recognition and reputation

Specifically for the consultant this will mean their service model needs to meet the following requirements for the HNWI:

  1. Capability to deal with many different legal and tax jurisdictions, which means increased complexity and recognition of cross border issues
  2. A personal approach and outlook which is cross cultural and able to adapt to diverse human requirements
  3. Focus on comprehensive, customized solutions with a holistic perspective that take into account the concerns of the HNWI, short and long term goals in life and multi-generational family issues
  4. Clearly understand their vision and be able to anticipate their unique needs
  5. Understand them in the context of a larger relationship which encompasses both family and business matters
  6. Provide a single point of contact with access and the ability to coordinate a worldwide, comprehensive network of professionals
  7. Be free from conflicts of interest and exercise absolute independence
  8. Innovatively deliver and implement best in breed solutions
  9. Have systems that assure complete security and confidentiality
  10. Provide the reliability of a recognized brand name

I definitely believe this is the new world order for HNWI services. Very few can do it individually. Great collaboration will be needed to be successful.

Personally, over the past 10 years my approach to this has been to play the role of “brains trust” to HNWI’s by firstly understanding who they are at a deep level. Then as part of this role, be the independent sounding board to deal with the complex issues and bring in the right specialists as and when needed.

Wealth Mentoring Your Clients….Managing Behavior

Hang on. Where is the market going to? Will the Dow be 5000 in the next few months by June 2009 or 22000 in 6 years? Who knows. They are interesting questions. I have placed my own personal wager on the markets reaching these levels in those time frames with some friends. I have often talked about this with friends and clients since 1999. Japan could still get messy for the world yet as it has many unresolved issues. These problems coming down the pipeline have been a big part of my move into the human behavior business.

However, this whole discussion does call into question what is our role in advising clients? Is our role to help them manage their behavior or to get the highest maximum performance?

I have always said that financial planning risks are the sum of human behavioral risks (client and advisor) and market risks. Our whole Financial DNA program for investors and advisors has been predicated on this. Whilst the market itself cannot be managed by a client their reaction to it can be which comes back to human behavior management. There is university research which shows that 5% of a person’s wealth comes from their investments and 95% from their behavior.

I do believe 75% or more of our role is to save clients from themselves by helping manage their behavior. This involves educating, guiding, coaching and empowering them. What we call “Wealth Mentoring”. By adopting this approach you will be helping your clients obtain superior returns which far out weigh any level of fees that you can charge. The reality is that the key to successful investment is managing behavior.

Wealth Mentoring Transforms the Client Experience and Enhances Value

For the Wealth Mentoring approach to be successful the advisor must transform the client experience they provide. The client needs to experience the feeling that their life is more than money, their money has been humanized, a sense of improved relationships, discovery of life purpose and meaning, and finally a tailored portfolio built from the inside out. Then there must be an ongoing development experience involving wise counsel with the client knowing they have an improved quality life. Understanding their behavioral style and preferences is fundamental to all of this. Behavior shapes life decisions which in turn influence financial decisions. The linkage is very close.

Importantly, the value proposition to the client needs to be communicated. There are many tangible and intangible benefits of this approach. Research shows average mutual fund investors will over a 20 year period do themselves out of nearly 60% of the return produced by the average equity mutual fund. This means the average investor will significantly underperform the market and his own investments. So, if the average mutual fund return over the last 20 years is 10.81% and the average equity fund investor has averaged 4.48% then there is a 6.33% difference which represents the cost of not having a good planner. Hence a financial planner charging fees of 1% per annum and/or a retainer is very good value.

What is great is that now we have turbulent times lots of other leading commentators are coming out of the woodwork and giving this message loud and clear. We are at the start of a cultural revolution in the role of advisors in financial planning and the investors attitude to it. A revolution that is client centered and one from which everyone who plays the right game of managing behavior will be big winners. The philosophy of Understanding People before Numbers is here to stay.

The Advisors Value Proposition of a Wealth Mentoring Approach

Our last Whitepaper summarizes research that we have recently performed of 100 advisors with AUM over $50m. The conclusion is that far more client discovery could be performed and there is plenty of scope to introduce more fee based services which address the life of the client.

In my view what is ever good for the client will generally be good for the advisor in the long run. Lets look at why a behavioral “wealth mentoring” approach is good for the advisor’s bottom line let alone the credibility of their financial planning process and business.

The ROI for an advisor of adopting a systemized behavioral approach is driven by the ability to aid advisors in:

1. increasing client acquisition rates
2. increasing walletshare among existing clients
3. providing the justification for higher advice fees
4. increasing client retention rates
5. improving advisor productivity
6. increasing the business value.

Advisors who integrate a behavioral system into their practices find that they achieve these ROI goals by:

1. Establishing trust more rapidly with prospective clients through anticipating their communication, investment, and lifestyle needs

2. Gathering more assets from existing clients by positioning themselves as the client’s trusted advisor. Wealth mentoring facilitates client interactions that go well beyond investments and provides the basis for a deeper relationship with each client.

3. Supporting higher planning and advice fees through the offer of a powerful discovery process. Financial advisors may also use client centered systems to add new revenue generating services such as couple or family facilitation, executive life balance programs etc.

4. Improving relationships with problem clients. Advisors often struggle with a segment of their clients because their natural behaviors differ greatly with those of the advisor. While advisors may keep these relationships in good times, rocky markets require more careful facilitation to help clients feel understood.

5. Advisor productivity increases because once you know the behavior of the client it is easier and quicker to identify their needs, manage them and keep them committed to a plan. Alot of time can get burned for an advisor dealing with client changes and problems after year 1 which could have been addressed up-front.

6. Greater documentation of who the client is enables relationships to be transferred to other people within the practice and also when it is sold. This has a very positive impact on business value.

In terms of metrics, here is what we base the wealth mentoring value proposition on:

1. We have seen trends that advisors who adopt a client centred methodology are increasing their gross asset under management revenues by 25% or more per annum from new clients. Further, we are seeing them increase their fee for service revenues by 15% or more per annum. Also, there is enhanced client retention. Of course success from using any system is also up to the effort of the advisor.

We believe it is possible in respect of an average practice to help the principal advisor double their net take home profit over a 4 year period. This is achieved from segmenting the client base so it is fundamentally more productive and building the AUM and fee for service revenues from the top 100 or so clients. This is a substantial return on investment from our costs and the coaching cost.

2. From point 1, there is the ongoing business benefit that the increased revenues and profits translate to increased business value on sale. What we have also seen is that the behavioral data enables greater transferability of clients which is fundamental to the business value as revenue and profit sustainability post the sale are fundamental to the value.

Managing Your Clients Through Turbulent Times

Well the stock market has gone to 10 year lows. Has it hit the bottom? That is not necessarily the crucial issue although this downward spiral will be raising more fears. What is crucial is how you handle this situation in terms of your own behavior and managing that of your clients. If you read my last blog you will see research is showing that advisors are on the whole not going far enough in client discovery and in particular understanding behavior.

Here are some tips for managing your clients which are all based on having greater behavioral understanding:

  1. Help your client to objectively face the reality of their situation. This requires understanding how they will innately respond to times of change and difficulty. Are they a rational decision-maker or a procrastinator?
  2. To make your clients feel comfortable and respond to your advice communicate on their terms not through your lens.
  3. Re-evaluate your clients risk tolerance – most measures of risk tolerance are situational. You really want to know their hard-wired risk tolerance as this will be the paradigm from which they make decisions now and in the future.
  4. Build a behavioral portfolio for your clients – base the asset allocation on who they are.
  5. Review the clients product suitability from a behavioral standpoint.
  6. Re-build the overall financial plan recognizing who the client is and their changed circumstances.
  7. Critical to helping your clients move forward is to help them find what their true life purpose is. After all they will still be breathing tomorrow. So lets get a positive state of mind on how they will live their life.
  8. Review your client service team. Have you got “round pegs in round holes” for serving the clients? The advisor client match process is very important.
  9. Transform the client experience you provide. Look how you can make every aspect of it totally client centric and you will be amazed at the bottom line results.
  10. Project positive energy and confidence. This means being very comfortable with who you are and your planning approach. People like animals sense fears and will react.

Remember times of change and difficulty bring opportunity. Are you up to it?

Advisor-Client Chemistry

Do you have the right clients? This is a very topical issue for many financial planners, particularly those who have already built a business to a reasonable level. Actually, it is as important as the client selecting the right advisor.

In the end there must be a mutual relationship with the parties comfortable with each other. The relationship cannot start out (but it often does) with the client simply having dollars in the bank account and some financial planning needs, and on the other side the client believing the advisor has the skills and the necessary integrity. In fact, these are all assumed to get to the point of the first meeting. Bob Veres of Inside Information (www.bobveres.com) has written a great article this month called “Segmentation or Bust” mainly directed at advisors to consider the structure of their client base.

Our business is all about looking at the behavioral style of the clients and also the advisors. So, not unexpectedly, the approach we take is to match clients and advisors based on their behavioral style. This is very much an inside-out approach, however all great relationships start below the surface. Human behavior is at the core. The great thing is that the Financial DNA system measures natural behavior which means we can reliably predict the behavioral style of the advisor and client in terms of how that person will always be, particularly under pressure. I would say that our approach must still be blended with a number of other more traditional selection factors such as client size, service style, values, expertise, etc. that are mentioned in Bob’s article.

To help the advisor we have developed an Advisor/Client Compatibility Matrix. The matrix is a one page grid which matches profile styles based on the level of modification that will be required between advisor and client. To be clear, it does not say you cannot work with someone, but it does say who will be easier (green box on the matrix) based on less behavioral modification – this is where communication, chemistry, etc. is likely to be higher. Hence, this is where the relationship will be naturally more sustainable over a longer period with less stress. So if you are an advisor wanting to segment your client base a reliable starting point is now provided.

I do not necessarily advocate that you fire those clients who will require more behavioral modification (red box on the matrix). This will be a warning sign that you have to put more work into adapting to maintain the relationship. Although what you may wish to do is allocate these clients to a partner who is different to you or hire someone who is different to you to provide a complementary style. Many advisors have found this approach to be foundational for selecting their next hire. Or in how they deliver client service with a team-based approach. Hence, the planner may get the relationship started and then another person on the team steps in.

Are you interested in the value of your practice? Importantly for advisors, this approach also helps you to identify to whom you sell your business. The sustainability of the relationships and hence the revenue is critical to business value.