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!

 

Clever generals win wars

…and clever financial planners achieve success for clients.

Wars are won and lost by clever generals. Irrespective of the external factors that actually caused the war, they never just wander into it and start fighting. Instead they carefully consider all of the external factors that will impact their success – the strength and condition of their enemies, the conditions and terrain on which the war will be fought as well as the weather and other factors that have the potential of impacting their success in the fight.

Of course the key factor that they consider is the strength and capability of their own forces; the size of their army, the weapons available to them and the different tactics that can be deployed. In short they take a very strategic approach to the battle. Generals also know that battle conditions are an ever-moving feast – things just don’t stay the same. The battle conditions change, the strength of their own army and that of their enemy change and of course progress towards their overall goals either improve or recede. As part of this, they consider the risk attaching to different tactical options open to them – do they risk lots of men and equipment for a particular short-term strategic objective, or do they wear down their enemy through sustained and slower-moving fighting?

This is where their real expertise comes to bear, adapting to changing conditions. This is also where disastrous mistakes are made – I’m showing my age here, but just consider the decision taken by the German generals in World War II who decided in the Battle of Britain to stop bombing airfields and instead to start bombing cities. This gave the Allies valuable time to rebuild their air force and fight back. And then as the German advance stalled later in the war, the Allies planned and executed D-Day, the ultimate turning point in the war. Clever generals achieve their country’s goals and win wars.

And clever financial advisers help their clients achieve their goals and achieve financial independence. You do this in the exact same way as generals go about their job. You first of all understand what the objectives are, what is the desired end state. You then consider risk and how much is appropriate for each individual client and situation. You then consider the current external conditions and most importantly the current financial strength of your client. All of this is then evaluated and captured in the financial (battle) plan to get your client to their final objective.

Of course your real strength, just like a general’s, is that you recognise that the battle has now only just begun. From the day you develop your client’s financial plan, conditions start to change – in the external environment, the client’s own circumstances or indeed the end objective. Your real value is in the ongoing evaluation of these changes, and the adaptations and tweaks that you make to your client’s plan and the tactics (products?) that you’ve deployed to achieve their end goals.

Sitting at the heart of this is the client’s future cashflow plan, as this clearly demonstrates the current and future financial firepower of your client to achieve their ultimate objective – a bit like winning the war… Your client will see whether they need to take more risk, strengthen their resources (save more money) or maybe rein back their ultimate objectives ( similar to seeking a peace deal)!

 

So if your clients are unclear about the value of a financial plan, it might be time to tell them a good war story!

Why your clients leave you

An article in last month’s newsletter about when it’s time to fire a client drew a lot of attention! It proved to be a situation that many financial advisers have experienced. However, now it’s time to take a look at the flip side of the coin – when clients leave you.

We’ve set out below some of the reasons that clients might leave you, and what you can do to prevent it happening.

 

They lose the feeling of love

You are busy, lots of new clients coming through the front door and business is great! However at the same time, you need to guard against existing, valuable clients quietly slipping out the back door. Have a really clear activity plan for all of your valuable clients, making sure that all of them continue to feel the love every year.

Make sure your ongoing support packages are really clear in the eyes of your clients. Manage their expectations on what they can and should expect, and then deliver a quality service time after time.

 

They lose sight of the plan

The development of a financial plan is a big deal for clients. They get a strong sense of direction and can see a pathway to future financial success. If required, this often entails you putting products in place.

It’s so important to recognise that you’ve simply started the client on their financial journey. Your role then becomes one of an ongoing guide; keeping the client on track for future success and ensuring the plan is continually pointing them in the right direction. If you don’t keep the client focused on the plan (and not just the products), they can fall off the path. And this is where you risk losing them.

 

They don’t believe in the plan

This is a trickier one as you may be sailing along blindly, thinking the client is 100% committed to the plan. It is worth getting positive affirmation from the client that they are happy with the plan, that it comprehensively covers all of their aspirations and concerns and that they are fully satisfied with the proposed strategies and solutions to achieve the plan.

Of course this becomes a lot easier with cashflow planning as the client can see before them the progress they are making, the further progress needed and whether they are on track or not. This clarity builds their financial confidence.

 

They don’t understand the plan / and or solutions

People don’t like to feel stupid. Some clients may appear to understand everything you tell them, but in fact may be bamboozled by the language and terminology that you use. Be careful that you talk to them as clients, keeping your language simple. Don’t talk to them with language you use with fellow professionals as your client may not understand you. This will undermine their trust in you and rather than appear stupid, they may prefer to deal with someone who they understand and connect better with.

 

They think the grass is greener elsewhere

Some clients leave because they believe another adviser will get better results for them. If another adviser is developing a better, more comprehensive plan for your client, you’ve got a problem. However if another adviser is promising “better returns”, you need to confront this. Clients can get greedy and blinded when confronted with unrealistic opportunities. You need to constantly remind your clients that you (and other advisers) have no control over markets or timing and that your role is identify a portfolio that reflects their specific needs, and not simply to suggest a portfolio with the highest potential returns (and risk). You need to remind them of the valid expectations they should have and how this relates back to the financial plan.

Some clients will leave anyway. Keep the door open to them – they may return when they recognise the grass was greener elsewhere.

 

These are just some of the reasons clients leave you. Ongoing, open communication with your valued clients is the key to preventing them slipping out the back door. Getting new clients into your business is hard work, keeping them there requires the same level of energy and attention.

Take action when it’s time to fire a client

It’s hard enough to get clients in the first place, I hear you say… But sometimes relationships just don’t work out and it’s time to part ways. This arises relatively infrequently in personal relationships, and it also arises fairly rarely in adviser / client relationships. But just as it doesn’t make sense to stay in a bad marriage, it also doesn’t make sense to stay in a toxic or doomed adviser / client relationship…

 

Relationships can turn sour with clients

We’re not talking here about the odd grumble that a client may have. When markets take a bit of a dive, the natural reaction of a client is to get nervous. Some will have an open conversation with you about their concerns, others will stew silently, some might lash out a bit at you. There’s nothing wrong with any of these reactions – your skills as an adviser need to stretch to noticing client reactions, dealing with them accordingly and bringing your client’s attention back to what matters – their financial plan.

Instead we’re talking here about the client who is simply never happy – your service is too slow when it’s not, your charges are too high when they are in fact fair, their fund performance is not good enough when it’s not your fault and the client also doesn’t want to take any risk. If the client can find an opportunity to moan, they immediately take it. When your phone rings and your heart sinks when their number comes up – everyone knows the feeling.

Let the client go – fire him or her. A client who doesn’t recognise your value is no good for you or your business.

 

The time comes to break free

I was chatting today to an adviser that I really respect about a specific client of his. It’s about the tenth conversation we’ve had about the client, who is simply never happy. My adviser friend has jumped through hoops for him over the last few years – regular draining meetings and phone conversations, numerous excellent and time consuming reports, meetings arranged with providers, exceptional service at every turn. All the time having developed an innovative financial plan for the client, that is on course for delivery via a solid investment strategy. And all of this has been delivered for a very reasonable fee.  There has never been a word of thanks or even grudging positivity from the client.

The adviser has ploughed on as the annual fee, even though extremely reasonable is not insignificant. The adviser didn’t want to lose the fee… until recently, when the client started arguing over the fee level (again). The adviser told me today that, about 4 weeks ago he fired the client. He told the client he would not deal with him any more and would facilitate fully his move to another adviser or organisation of his choice.

The client took it badly, told the adviser he was going anyway and went off to talk to other advisers. The faraway hills were not greener – the client soon arrived back a bit sheepishly saying that he(!) had reconsidered and would stay on the existing fee. The adviser said he was no longer a client and wouldn’t be taken back.

 

Don’t look back

Yes the adviser misses the fee a bit. But the cost of that is far outweighed by the liberating impact that getting rid of the client has had, both for him personally and for his business. He knows his proposition is excellent, his fees are fair, his communication is excellent and his results for clients are as good as can be achieved. However this experience caused him to re-evaluate what he does and question that maybe the fault lay with him as the adviser and not the client.  Having done this exercise though, it re-confirmed to himself that his offering is excellent. He has more time for other clients, renewed confidence in what he offers and a certain pride that he stood up for his own principles. He doesn’t dread phone calls, and the slog associated with that particular client is gone. All of this is worth a lot more than a fee.

I’m not suggesting that the decision to fire a client is easy and should never be taken lightly. But do you have a client who is dragging you down, takes up too much time, keeps you awake at night, moans about you to others and makes you question yourself and what you do? Because if you do, you should consider whether they deserve a seat on your bus.

 

Every day you help your clients to live the life they want. Do yourself a favour and live the life you want – don’t suffer clients who don’t deserve you.

Help your clients retire properly

One of the primary reasons why clients reach out to financial planners is to plan for financial security in retirement. Of course, financial planners today deliver far more than helping clients to simply save money for the future. You help clients to visualise what their retirement will look like, you put a cost on this life and then develop a plan to help your clients to achieve the life that they want.

This is very valuable, but clients need more help than this.

Retirement has a huge impact on clients, who overnight go from being very busy people to well, maybe not having a lot to do… Not working any more creates a huge void in their life. Of course for some, this is a very welcome space, for others it brings a range of issues with it. When they’ve hung up their boots, it is often only then that people recognise how important their colleagues were as part of their social fabric. When this daily interaction is no longer there, loneliness can ensue. Of course on top of this is the loss of a sense of purpose every day. Before retirement, your client got out of bed every morning to go to work, to earn money and to achieve their work objectives. Now these are no longer there, what drives them every day?

As their financial planner, you can help your client prepare fully for retirement by expanding your conversations far beyond the financial aspects of their later lives. Here are some areas that you might help them consider,

 

Being with their partner every day

This is not a punishment! But it will definitely take adjustment for both your client and their partner. Routines will now change for each. Your client needs to develop a new routine and the immediate thought might be to hang out with their spouse every day. However their spouse may be happy with their own existing routine (that doesn’t include your client) and might not want to change it.

Of course the answer is in finding a balanced approach. It is about awareness of each other’s space, routines and hopes for the future together. The key to this is talking about it and working through it together. As their financial planner, you can gently guide this conversation.

 

There is time to fill

The thinking around this needs to begin long before retirement. The working day, including commuting time often punched in 11 or 12 hours every day. That’s a lot of time to fill now, so how is your client going to do it? Are they going to play lots of golf? Are they going to study or do voluntary work? Are they going to travel to all those places they had long promised themselves to see?

Your clients need an activity plan, as well as a financial plan. You have worked with many clients as they transition into retirement. Tell the stories of these other clients, how they transitioned, the activities they carried out, how they made retirement work for them. Hearing other people’s experiences is always a useful guide.

 

Encourage clients to mind their health

You have seen the cost of clients getting ill. Bring good health practices into both your client’s financial plan for retirement and also their activity plan. Will they join a golf club or a leisure club with a pool and gym? Will they go for a walk every day?

Also encourage your clients to stay sharp mentally too. Their plan should include cashflow for meeting friends, getting out and about and maybe even going back to college to study? All of these will help your clients stay fit and strong.

 

Remind your clients of their value

Your client has so much to offer in terms of experience, expertise and time. Some people can retire with a perceived loss of value. Previously a company and colleagues relied upon them, and now that is gone. All that actually needs to change here though is that while previously your client was paid for their time and expertise, they can still use their skills, but maybe without payment or for lower payment. Your client will now work on their terms, for someone / a charity that they want to work for, at times that suit them and in ways that make them feel good about themselves. Your client will add enormous value, whether that’s to a voluntary organisation, coaching a sports team or mentoring less experienced business owners. Many retired people build up nice little income streams for themselves in retirement, by putting their skills and expertise to work, all on their own terms.

 

Helping your clients to get their finances in order is very important for them to enjoy a happy and satisfying retirement. But it’s the other factors that will make them feel good about themselves and will help them to live their life to the full for many years to come. As their financial planner, you can guide your clients to think about these areas and help them achieve a full life after retirement.