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Framing: Re-frame the Presentation of Ideas and Suitable Solutions

This post is part 2 of our 10 part series on Financial Behavioral Insights from our Financial Performance in the New Behavioral Economy White Paper. The financial behavior insights will help you gain greater self-awareness for recognizing some of your own behavioral tendencies and also those of investors.

Behavioral Insight 2:? Framing

Chris, a financial advisor, has invited 20 clients with similar levels of wealth and age to his office for a lunch and learn presentation by Paul Southwick on a new investment strategy. The new strategy is to provide a mix of dividends and capital growth with some downside protection. Chris has vetted the investment and believes it will fit his clients well. Paul uses a PowerPoint presentation with great content in it about the bottom line of the investment and is an articulate presenter. As he goes through the presentation there are clearly some who get it and want to sign up, there are others who are totally confused by the details and switched off, others who want to do more research and some who need to understand how it meets their security needs. After the lunch Chris is very concerned about the mixed reaction and losing client trust. He knows the product is sound and he will invest personally.

Behavioral Insight
The difference between what the advisor said and what the client heard will be attributable to the behavioral lens of each. The communication of products and solutions must be adapted.

Framing, financial advisor, customizing the message, customized experience, client engagementHave you ever attended a presentation like the one Chris arranged and been de-energized, bamboozled and confused by the investment proposal and not responded? Understanding investors learning styles and propensities for receiving information, new ideas, strategies, products and solutions is critical to successfully presenting to them. This will increase the chance that they understand the proposal for what it is and how it is relevant to them.? The mistake many advisors and fund managers make is that they naturally present to investors through their own lens. Instead, they should be re-framing how they present to be much more on the investors unique terms.

Advisors need to appreciate that with 20 people in the room there could be 20 different reactions, because each person is unique. The best way to get around this is to re-structure the proposal being presented into 4 quadrants so that each broad category of behavioral needs is addressed: 1. The big picture and how it relates to achieving goals and bottom-line returns, 2. Indicate how their lifestyle needs are met along with telling them the names of the people involved in managing the product or solution, 3. Address financial security and provide feelings, 4. Make the solution tangible and provide the history and research details.

Learning Point:
Advisors need to use behavioral insights to customize their communication with clients and to re-frame the presentation of ideas and suitable solutions so the client interprets the information as intended.

What are your thoughts? For additional information on discovery through behavioral profiles, click here.

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.

Dreams and Goals

Would you prefer to be asked about your dreams or your goals?

Last week in one of our Wealth Mentor Community Calls we discussed this very question. Prior to the meeting, I had the Wealth Mentor participants read a book called the Dream Manager by Matthew Kelly. This book really brings out the connective power of encouraging people to get in touch with their dreams.

The point that emerged during the discussion was that most people would prefer to be asked about their dreams rather than goals. The word dreams is softer and has greater resonance for most people. Also, the concept of dreams is less restrictive and more free-flowing. Goals are perceived more as actions and objectives that need to be defined and measured. People often associate “SMART” with goals – specific, measurable, actionable, realistic and time based.

Kelly also brings out in his book how important dreams are to building your relationship with money as they are fundamental to who you are. He really emphasizes how life and financial decisions are totally integrated. Therefore, getting in touch with your dreams is fundamental to building both your life and wealth.

In a nutshell, if you want to open your client up to what they really want in their financial life then consider firstly asking them about their dreams. The goals can be discussed and worked out later. They will usually come from the dreams. You may find that this is also more fun which also helps build the trust.

No harm could be done by getting your clients to read the Dream Manager. Even if all you do is ask your clients to write down a big list of dreams then you are off to a great start in discovering who they are and building a great relationship. Imagine the possibilities when you get couples doing this or what could happen in a family meeting?

What Are You Passionate About?

In recent weeks, I have had so many conversations with people where passion has come up in various ways. So, I thought it would be good to put some more energy into it by commenting on it in my blog. I even did a very interesting interview with one of our Wealth Mentor’s last week on how he had found his passion and what it has meant to his life over the past few years.

My approach in working with client’s has been to fairly early on in the conversation ask them: What are you passionate about? I have found this to be a very powerful question in finding out where their life is at and where they want to go. This is so important if you are helping someone set their goals and direction. I do not really believe you can do financial planning for a person without knowing their passion because it is so fundamental to their life. Having clarity of your passions regardless of what they are means you can make decisions with confidence and commitment. 

When you think about it, this question is very important regardless of what role you are playing in the person’s life. If you are a business consultant of any sort it is important. Or even if you are just a friend, coach or in some way have an interest in the person’s life the question will really open up a great discussion. 

Discussing passion will really help you get below the surface and connect with the person. You will build a fantastic bond and it is likely the memorability factor will be high. You may even change the person’s life because they will be liberated to reveal something that is core to their life which they had not been fully conscious of. This happened to me, and it set me on the path I am on now. 

So, think about bringing this question into every conversation. It may also bring you closer to your own passions.

What Are You Passionate About?

In recent weeks, I have had so many conversations with people where passion has come up in various ways. So, I thought it would be good to put some more energy into it by commenting on it in my blog. I even did a very interesting interview with one of our Wealth Mentor’s last week on how he had found his passion and what it has meant to his life over the past few years.

My approach in working with client’s has been to fairly early on in the conversation ask them: What are you passionate about? I have found this to be a very powerful question in finding out where their life is at and where they want to go. This is so important if you are helping someone set their goals and direction. I do not really believe you can do financial planning for a person without knowing their passion because it is so fundamental to their life. Having clarity of your passions regardless of what they are means you can make decisions with confidence and commitment.

When you think about it, this question is very important regardless of what role you are playing in the person’s life. If you are a business consultant of any sort it is important. Or even if you are just a friend, coach or in some way have an interest in the person’s life the question will really open up a great discussion.

Discussing passion will really help you get below the surface and connect with the person. You will build a fantastic bond and it is likely the memorability factor will be high. You may even change the person’s life because they will be liberated to reveal something that is core to their life which they had not been fully conscious of. This happened to me, and it set me on the path I am on now.

So, think about bringing this question into every conversation. It may also bring you closer to your own passions.

Sow Into Others Lives and Grow Your Own

Last week a colleague of mine sent me the following quote:


Every time you build into the life of another person, you launch a process that will never end. ? Howard Hendricks

This quote has a very powerful message which I feel all of us should think about and action.

You do not necessarily need to be a wealth mentor or a life coach to help others build their lives. Although, this level of focused training and the personal development coming with it will help you have enormous impact.

Regardless, of what you are doing in your life or where you are at, helping others in some way to build their lives will be a powerful experience for them and for you. You can do this as simply as asking them a great question, being curious about them, going for a walk or doing an activity together, sharing a story, writing an article that gets published to the masses or delivering a workshop. There are many ways to impart your wisdom and life experiences.

Think about what might happen if you help somebody else grow in their lives. They will remember the moment, become more empowered and ultimately want to help many others. They will do it subconsciously any way because of their own growth, but even better if it is intentionally done.

In essence, by helping others grow and build their lives you will be part of a movement which will have amazing and never ending impact.

In recent times, I have become a lot more intentional about helping others of all ages through helping them discover their life purpose. I have found that when people discover their life purpose they want to share the experience with others. What is your life purpose? How could you help other people grow in their lives?