What advisers value in the advice they give

I took the opportunity this week to grab a coffee and have a good read of an excellent piece of research that was issued by PortfolioMetrix at the start of the summer. The research is called “The insider’s guide to the value of advice” and can be accessed here. It’s well worth a read, as it considers the views of almost 200 financial advisers in Ireland, UK and South Africa in relation to this important subject. It also overlays the research with further good insights from both advisers and from PortfolioMetrix, along with links to other relevant research and articles.

So what are the nuggets that the research tells us?

First of all, it was useful to see on one page the financial value of advice as identified by other research carried out by a number of large, international organisations such as Vanguard, Russell Investment and others. This external research reveals,

  • Advisers add between 3%p.a. to 4.4% p.a. in net returns for their clients.
  • Clients who enjoy an ongoing relationship with a financial adviser had pension wealth that is 50% greater than those who only got once-off advice.
  • The savings of an advised client will be 2.73 times greater over a 15 year period versus a non-advised client.

The PortfolioMetrix research asked the advisers to pick, and then rank, their top five attributes from a suggested list of twenty. As it turned out, only seven of the 25 attributes were selected by more than 25% of the respondents. Interestingly, there was one standout attribute that was selected by 76% of the respondents; Empathy. This is the ability to put yourself in the client’s shoes and really understand what is important to them. It is about gaining their confidence and building trust. As one respondent added in their commentary,

Without empathy no amount of professional qualifications is going to help you engage with clients

The next six attributes that were also chosen by more than 25% of the advisers were;

  • Life Goals (49%)
  • Peace of mind (47%)
  • Simplify (47%)
  • Personalised financial plan (41%)
  • Consistency & continuity (39%)
  • Behavioural coaching (36%)

Each of the 20 attributes were also identified as belonging to one of four categories which revealed that,

  • Soft skills are most important (35% of advisers)
  • Building the financial plan (30%) is next
  • Putting the plan into action (20%)
  • Ongoing service (15%)

The conclusions of the report cautioned though that It is also worth noting that what advisers think is valuable to their clients is not always matched by what their clients think. A study by Morningstar revealed a sizable disconnect between the views of advisers and their clients. Clients undervalued behavioural coaching whilst advisers overvalued understanding the client’s unique needs and undervalued maximising returns. The takeaway from this is that once you have articulated your own value proposition, it is worth running it past your clients to ensure it resonates with them.

This is a current and valuable piece of research that is worth reading by all advisers.

 

 

Making a family-run advice business work for all your employees

I’ve been very fortunate in the past 12-18 months to work with a great advice firm in helping their employees to develop Personal Development Plans. This firm is really committed to supporting their employees’ growth in both their current roles and in their careers overall.

As part of the work, I’ve had a series of 1:1 meetings with each member of staff. One (let’s call her Jane) is a relatively recent recruit, who opened up to me in quite a bit of detail about why she had changed jobs. After all, her previous employer is a well-regarded and respected family-run advice business. But herein lay the problem – the way her previous employer’s business was run didn’t work for Jane, who was not a member of the family. As a result, they ended up losing a highly effective and valued member of staff, despite their best efforts to retain her.

So, what can family run businesses learn from the experiences of Jane and others like her? While I’m not for one minute suggesting that your family run business displays all or even some of the following characteristics, these areas are worth checking off.

 

Have a clear strategy

Quite a number of family businesses start very small and then grow organically over many years, sometimes into very substantial businesses. Because there is often not a formal corporate structure in place, the strategy for the business can happen on the hoof and simply evolve over time.

This is all well and good for the family members who will have many informal chats at family dinners about where the business is going. However this excludes non-family members of the team, who are then operating in the absence of a strategy to get behind. They don’t share the same sense of purpose that family members will feel, and as a result feel disconnected from the ambitions of the business.

 

Don’t have two sets of rules

This is probably the biggest gripe, when it happens. Favouritism of family members in your advice business will quickly alienate the rest of the team. Your family business is exactly like any other business, needing set policies for everyone in relation to working hours, holidays, client entertaining etc.

The same also applies to behaviour around the office. You should expect the same standard from all in relation to dress code, language used and other behaviours. Letting standards slip with family members is a sure-fire way to driving a wedge between them and other team members.

 

Defined processes are a must

How work is actually carried out should be the same for everyone. Whether this is in relation to your advisers or your customer service team, standard processes should be used by all. This might apply in areas such as the recording of advice, the quality of files, the handover from consultant to internal people and the ongoing service to customers. All of these areas should be delivered in a defined and consistent way by every single member of the team. Otherwise, frustration will reign.

 

Career paths for all

It can be all too easy for family businesses to just rock along without any great career plans in place. After all, sure won’t Johnny or Mary just take over the running the business when mum/dad hang up their boots?

That unspoken career path is fine for the children of the owner, but not for the rest of the team. They want to see where their own careers are going, how they are going to grow in the years to come. Will there be promotion opportunities and a chance to earn more money for greater effort? Will there be ownership opportunities in the business or in a sub-section of the overall business? These are critical questions that your staff members will want clarity about.

 

External oversight

This final area will help the business owner to keep him/herself on their toes! It can be hard to give time to the seemingly less urgent and more subtle issues of the business when the day-to-day pace is frenetic, as is often the case in advice businesses. These areas can end up being relegated down the priority list and never addressed properly.

This is where an external mentor or a board of directors will help you. They will help you to see the wood from the trees, as they won’t get caught up in the minutiae of the business. They will help you to address all of these issues by keeping the development of the full team on the agenda and not letting it slide – they’ll keep you focused on meeting the challenges of your business.

 

Family run businesses play an extremely important and valuable role in the Irish financial advice community. They have delivered many of our brightest and most effective financial planners and advisers. Consider the areas outlined above, and your family-run business can build a broad, effective team and can join that elite cohort.

When times are tough… kiss frogs

These are tough times for advisers at the moment. Yes, your businesses are more resilient than most, mainly down to your efforts in recent years in building up a strong recurring income stream. But this still doesn’t fully compensate for the slowdown in new business that many of you are experiencing.

I know from recent conversations that some of you are finding it difficult to stay positive as prospective clients (and some of you yourselves) are slow to re-engage in face-to-face meetings on the back of Covid-19 concerns. After all, it can be difficult to pin prospects down at the best of times! Unfortunately I have to admit that I’ve seen a few advisers’ heads go down in the last few weeks….

So, it’s time for a collective pick-me-up. Here are a few thoughts to help get you going again.

 

Set yourself achievable daily goals

So the goals you set at the beginning of the year of seeing two clients every day are gone by the board. That’s ok, times have changed and you had no control of the change. But you can now re-frame your goals.

Don’t keep looking at how far you’re falling short of your turnover / recurring income target for 2020. Instead focus your effort and goals on the process, rather than the outcome. Set clear daily goals for yourself that are based on activity. We all know that as sure as night follows day, positive outcomes follow increased activity levels. Your goals might be,

  • The number of prospects you will reach out to
  • The number of existing clients you will phone
  • The number of relationship “just checking in” emails you will send
  • The blog post / social media activity you will carry out

 

Celebrate small wins

Don’t beat yourself up because you’re not writing €x,000 in new business every week. Instead celebrate your smaller wins – the number of positive client conversations you’ve had, the thank-you responses to your relationship emails. While on their own these might not seem to account for much, in time as the economy gets back to normal these clients will remember your support during the tough days.

 

Call in favours

Everyone knows that lots of small businesses are finding it tough at the moment. As a profession, financial advisers have always and consistently shown their spirit of community and helping nature. You tend to be good for an introduction, a referral, a client testimonial for one your suppliers and if you can help someone, you tend to do so.

Now it’s your turn. You need a little help, so ask for it. It might be for a referral, it might be for a testimonial for your website. Ask and you will generally receive.

 

Kiss the frogs

I learned this one from a friend of mine (you know who you are!) a few years ago. He was out of work for a while and his head never went down, even though the economic environment was tough at the time. When meeting him for (yet another) coffee, he told me about the number of meetings he had in the diary that week, just catching up with contacts. I remember saying how impressed I was that he was so active in staying out there at such a difficult time. His answer was that if he kissed enough frogs, one would eventually turn into a princess! A few weeks later, he landed pretty much his dream job, thanks to kissing lots of frogs.

Activity leads to better results. Make the calls, meet people for socially distanced coffees, even where the potential appears low. These are your frogs. It beats sitting in the office.

 

Do something / anything

On the theme of doing nothing, don’t let days slip past. Rather than twiddling your thumbs, achieve something every day. Review your proposition, your website, your marketing messages. Write a blog post. Even clean the office, but don’t do nothing.

 

Remember that this is temporary

The world might appear a little grim at the moment, but this will pass. There are better days ahead and you want to give yourself the best chance of hitting the ground running when they arrive.

 

So, small goals, small wins, seek help and stay busy. And keep kissing those frogs.

What do you do when the flow of new clients dries up.

As advisers are adjusting to working remotely from the office and distanced from clients, the challenge of attracting new clients has now been raised with me a number of times.

Most advisers have adjusted quickly to servicing existing clients, however attracting new clients has been more challenging. While the recent economic upheaval has created a difficult backdrop for all, the issue has been particularly challenging for advisers whose main source of new clients traditionally has been by referral, particularly where the adviser had an effective way of asking for referrals. Because client conversations are not quite as smooth when using Zoom etc, advisers are finding it more difficult to have effective referral conversations.

My advice? While referrals were and will always be a rich source of new clients, they can’t be your only approach. It’s time to go back to the first principles of marketing and to consider in particular the concepts of Segmentation, Targeting & Positioning (STP).

 

Some definitions

So we’ll start with a 30-second marketing lesson. Here is a definition of each, as set out by Philip Kotler, the grandfather of marketing education.

  • Market Segmentation: Dividing a market into distinct groups of buyers with different needs, characteristics or behaviour, who might require separate products or marketing mixes.
  • Market Targeting: The process of evaluating each market segment’s attractiveness and selecting one or more segments to enter.
  • Market Positioning: Arranging for a product (or service) to occupy a clear, distinctive and desirable place relative to competing products (or services) in the minds of target consumers.

 

What’s happening in the financial adviser market in Ireland?

Many financial advisers realise that a “one size fits all” proposition just doesn’t cut it any more. Either for the client who is looking for more than a generic service, or for the adviser who cannot profitably or successfully deliver the same service to all clients irrespective of their value, characteristics, needs etc.

As a result, many advisers are undertaking segmentation exercises by analysing both potential customers and their existing client bases. The goal is to identify all of the different groups of customers, possibly by sector, by business potential metrics, or by demographic factors.

Once the segmentation exercise is completed, the next task is to identify the segment(s) that you are going to target. These may for example be SME business owners within your county and surrounding counties, or corporate executives aged over 50. It’s quite possible that you will also decide to target another group such as newlyweds – they might offer lower value today, but offer growth potential in the future. You will decide your target groups based on your access to those people, the segment potential, your areas of expertise and specialism, the capability of your advisers etc.

Most advisers are relatively comfortable with these first two steps, it’s the third step of positioning that challenges people more. This is where you aim your proposition, your services and your communications at the groups you have identified to target. The reason people are uncomfortable with this is because through targeting specific groups, there is a risk of not appealing to others outside of your target groups – of leaving people out.

Of course the alternative is to try and talk to everybody, but the significant risk with this is that you can end up appealing to no-one.

 

Why STP is so important for financial advisers today

It’s this final step of having the courage to position yourself within a specific target market (or even a niche) that is a step too far for many advisers. They struggle with the idea that while attracting new clients might be quite tough today, that it might actually be easier if you narrow your focus! How does this make sense?

If you offer a generic service to clients, they will recognise this. They won’t feel any particular connection with what you do, as it is not targeted at them. Instead if you have a clear target market and all of your communications are aimed with that group specifically in mind, the customers within that group will connect with your messages and are more likely to view you as a specialist who is out to serve their specific needs.

There are lots of very good financial advisers operating in the Irish market. At the end of the day, how are you going to stand apart from the crowd if you offer a very generic service? Instead the answer may lie in identifying your ideal clients, and then developing your proposition and communication approaches to target them in a very structured way.

 

 

How do you stop your clients from blowing up their plans?

I hear the stories from advisers every day… the client who simply knows better, who knows that now is the time to enter / exit the markets or to switch asset allocations because of a stroke of genius that they have had. I’m not proud to admit it, but I have been that client too, thankfully not in the recent past.

All the research shows you, and you’ve seen on many occasions with your own eyes that more often than not this ends in failure. Clients are better off taking a long-term approach and sticking to the plan and the portfolio constructed to achieve their goals. However it’s not you that needs to be convinced, the question is how do you prevent your clients from blowing up their plans?

First of all, it’s useful to recognise and understand some of the behaviours that clients may display, that can result in significant damage.

 

The stroke of genius

Clients unfortunately are usually not as clever as they think they are when it comes to market timing and expected future investment trends. Experienced investors learn time and time again that time in the market is better than investment timing. So be awake to that client coming to you with a great investment idea or wanting to “tweak” their strategy where the reason is based on their instinct as opposed to the long-term objectives of their financial plan.

 

The herd mentality

People are influenced by their peers. We all learn a lot from them, some good, some not so good. Unfortunately when it comes to investments, your clients are better off shutting out the noise and staying focused on their own plan, listening to you as their financial expert. More often than not, you are going to prevent them from making mistakes. Listening to pals is how people ended up buying apartments in Bulgaria, borrowing to buy into already geared property funds etc. Remind them of this, bluntly if you have to. They’ll thank you later.

 

Recency bias

Another dangerous one for your clients. They give more weight to recent information and trends, as opposed to longer-term trends. However you know that markets work in cycles, they go up and down, but that over time stock markets climb inexorably upwards. Remind your clients of this, and just because markets have taken a bit of a dip, now is certainly not the time to sell up and run.

 

Loss aversion

This is a really interesting one – clients feel the pain of losing money more than twice as much as they experience the joy of gaining the equivalent amount of money. This makes your job harder – clients remember the bad days and forget the good and you bear the brunt of this aversion to loss. You need to constantly remind clients of the gains made and help them to maintain perspective of the overall picture, as opposed to the small blips along the way.

 

So these are a few ways in which client behaviours can result in them blowing up their plans. The question is how do you stop them from doing so? After all, this is where you can add enormous value to your clients…

First of all, you need to keep coming back to the plan and ensure your clients stay focused on their goals. Keep reminding them to shut out the noise that comes from the media, friends or wherever, attempting to drag them away from the plan. Changes in investment strategy should be driven by changes in their goals, not the other way around.

Of course it is critical to start with a well-constructed, diversified portfolio. But to most investment advisers, that is actually the more straightforward part. Whether you do this yourself or you have outsourced this to an expert 3rd party, it is important that you have a tested process that will help your clients to achieve the best results possible.

Finally, talk to your clients about behavioural finance and about the types of biases and negative behaviours as outlined above. Let them know that you’re not just making this up, that there is a real science sitting behind this! Introduce them to some of the leading experts in this field such as Daniel Kahneman, Robert Shiller and Richard Thaler. When clients understand the impact their behaviour can have, they will hopefully be less likely to succumb to displaying these negative traits. Your life then becomes a lot easier, and your clients grow their wealth without the frustration of suffering by their own mistakes.

Get active in your partnerships

Developing a strong partnership with a professional introducer requires skill, patience and most of all – a lot of proactive effort. Yes, some relationships with the likes of accountants begin with a couple of clients being introduced to you, but this usually peters out if that ongoing commitment to keeping the partnership alive quietly falls away. So what are the key steps for you to go through in order to build durable and strong introducer relationships?

 

Develop your accountant value proposition

You may have done all of the work developing your client value proposition (CVP), but you’re not finished yet! After all, your CVP is the articulation of the value experienced by your clients, however you now need to be able to communicate the value experienced by accountants in dealing with you. Your CVP starts with understanding your clients and in a similar vein, your accountant proposition starts with understanding accountants; their challenges, the partnerships that they value, where you can provide services that they will truly value etc. If you can help them to solve the problems that they face every day, well then they will place enormous value on your services! So first of all, really understand their business, identify the areas within it where you can add value and then demonstrate that the way you will work with their clients will seriously enhance their own client relationships.

 

Communicate your value time and time again

You then need to get in front of the accountancy partners time and time again to remind them of the value that you can add and to get regular client referrals. There are many ways you can do this; here are a few examples;

  • Add the partners to your own communication programme: Connect with the partners on LinkedIn and also get their permission to be added to your newsletter subscriber list. Let them see the expertise and thought leadership that you have to offer.
  • Develop bespoke presentations: These are for the initial meeting with the partners and should focus very much on the role of the accountant and how you can assist them in their own role. Personalise each presentation to the role of the particular partner’s area of specialism – for example the presentation to the tax partner should focus on pension reliefs, tax efficient protection products and other tax angles that you can bring to the table. This shows knowledge, understanding and willingness to engage in their areas of challenge with their clients.
  • Case Studies: Prepare a number of case studies of innovative solutions that you’ve implemented and know are relevant to challenges that are typically faced by the accountant. Don’t leave them guessing as to how you can help, join the dots for them!
  • Briefings for partners: Keep the accountants briefed on issues within the life and pensions industry that they need to be aware of, but may not be that knowledgeable. This can be through email contacts, lunchtime meetings or other such channels.

 

Develop joint marketing activities

And then you need to also promote the accountancy firm and help their bottom line! First of all, refer clients to them whenever possible. If you give them new clients, they are certainly going to try harder to reciprocate. Then offer the accountant the opportunity to include guest posts in your newsletter. This gives the accountant welcome exposure to your clients. You can then look at hosting joint events to which you both bring clients, take a speaking slot to impress the guests, all of this with a view to both you and the accountant meeting the other’s clients and building new relationships.

 

Prove your value with clients

Of course the biggest barrier to accountants referring clients to you is fear. Fear that you will somehow mess up and as a result cause difficulties for the accountant with their client. So when they do take the leap and finally refer a client to you, it’s imperative that you do a good job (as you do!) and then make sure the accountant is aware of it. How do you do this? You might seek a testimonial from the client, which you then share with the accountant. Alternatively you can email the client a few weeks after the end of your work with a short client satisfaction survey – again you will share the results with the accountant.

 

These are just a few thoughts on building profitable and lasting relationships with accountants. Build their trust, remove their fears, align yourself to their proposition and demonstrate your value time and time again. And then you will be well on the way to breaking the back of that search for new clients!