Do you do business with family?

This subject came from a conversation I had recently with a young adviser – well at least he’s a good few years younger than me! As we were discussing target markets and where his clients come from, we had a very engaging conversation about doing business with family.

This adviser has actively steered clear of doing business with his family. His thinking was that it’s just not a good idea to mix business with family and he likes to keep the two parts of his life separate. While I understand this viewpoint, I don’t agree with it.

I completely accept that financial planning is a very personal exercise and that some of your family members may not want to share their intimate details with you. Of course that’s their right and if that’s the case, you should do your utmost to point them in the direction of another planner who you are confident will look after them well. In fact I’d go further and suggest that before you engage at all with a family member, make it crystal clear that you will be delving into the intimate details of their financial life and also potentially their health. Don’t spring this on them later in the process, as this will cause awkwardness and potentially worse, they may withhold some information from you. This is a potential disaster for everyone.

But don’t close your door to them just because they are family.  Here are some reasons why I believe your door should be open  and the choice should be theirs as to whether they walk through it or not.

Your proposition will benefit them

If your proposition is very good and positioned openly and honestly with family members, why would you not make it available to them? Be crystal clear about what you influence and control (the plan and their behaviours) and what you don’t (the markets). Make sure they know fully what to expect in advance – avoid surprises. But don’t refuse them access to your valuable proposition.

They trust you

So much of financial planning comes down to trust, having a deep belief that the adviser is in their corner and has their best interests at heart. This is sometimes a lengthy process, building up this position of trust. Hopefully with your family members, you have it from the outset – they just know that you will do everything in your power to see them right.

You have each other’s backs

We all want the best outcomes for our family and will go the extra mile. They will probably want to do business with you and help you grow your business. They know you’ll earn money from the work, but will usually be happier that this income is going to you than to some unconnected third party. Likewise, you’ll pull out all the stops for family members, you are very likely to go the extra mile to achieve the best outcomes for them. On top of this, you may transact business on “mates rates”, providing value for them too. The chances are everyone will be a winner…

You can cut to the chase

An advantage that you hold over all other financial planners is that you begin the process with lots of intimate knowledge of their situation. Of course you need to fully validate your information through careful questioning of objectives and factfinding, but you’re not starting with a blank page.

Indeed you have the added advantage of understanding any unique dynamics at play and also being able to cut to the chase… You know if pictures are being painted in strange or maybe over-optimistic hues and can gently call out your family member when this happens, as opposed to blindly accepting it as another adviser inadvertently will. With your prior knowledge, you can help to shape the most accurate picture, which in turn will help to ensure the best possible plan is developed and the best outcomes achieved.

A great source of referrals

Excellent financial planning transforms lives. Do this for your family members and they will be forever grateful, as you help them improve the quality of their lives. They’ll also tell other people and will be a great source of other new clients. Your family are happy to help you grow your business, their friends who become your clients experience the benefits of your excellent proposition and you grow your business. Winners all around.

Is it time for you to mix family and business?

Building bridges with the next generation – Part 2

This is the second in a two-part article on expanding your client base into the next generation of younger clients, by accessing the children of your clients. In last month’s article we looked at how you might build links with these younger potential clients.  In this second instalment, we’re going to consider some of the specific ways in which you might treat this younger cohort, in order for them to fully engage with you and to become long-term clients.

 

Tweak your proposition

If your proposition is all about managing assets, this is not going to resonate with these younger clients – because they often don’t have any! However what they do probably have is significant income growth potential and the ability to build an asset pool in the future. If you want your proposition to engage them, it needs to clearly reflect these factors and how you are going to help them grow and protect their wealth with these factors (low assets, high income potential) in mind. It may mean smaller steps than you usually take with clients, but with a significant end goal in sight for you of helping them grow appropriately over the long term, with you there guiding them on their journey.

 

Lifestyle planning is relevant

Quite often advisors will say that lifestyle financial planning (and cashflow planning in particular) just doesn’t really engage younger clients. I strongly disagree with this… How you position lifestyle financial planning is the key here and also how you charge for it will be an important factor (see the final point below). The reason it is so relevant is that younger people tend to have heads full of future dreams, goals and ambitions, more so than older people where life has become a little more settled and simple. Younger people have no sense though of how achievable their dreams are, or what they need to do to bring them to reality. That’s where your skills as a lifestyle financial planner come in.

 

Targeted communication is a must

Producing regular and engaging communications for your clients is a significant challenge. However you’ll need to accept that it’s going to become even more of a challenge as you build up a cohort of younger clients. Sending “one size fits all” content to your younger clients that you use to engage your clients in their 50’s and 60’s just won’t wash – your younger clients won’t be able to relate to it.

You will need to alter your communication approach with your younger clients, by developing separate content that connects with them and their specific challenges at their stage in life.  It’s definitely more effort, but worth it in the long run.

 

Look at the profile of your team

Something that we see time and time again is that most client bases tend to generally reflect the adviser in terms of age and other demographics. Potential clients tend to gravitate to people that they can easily connect with, who appear to be “like them”. This is something you need to carefully consider with younger clients. If you’re 20+ years older than your target younger clients, are they really going to connect with you? Or will they feel more comfortable with a younger adviser who they can easily relate to, and who will be with them over their full financial journey. If you have younger members within your advice team, maybe you should hand all of these younger clients over to them? If not, is it time to go out and hire a younger adviser, if you are really serious about expanding your client base among younger clients?

 

Consider an alternative pricing model

This is a significant headache for advisers… how to make this segment viable, particularly as asset levels are low or non-existent. Unfortunately the answer here is that you may need to take a bit of a bet here with these clients. A trail commission basis won’t work for you and these clients may well baulk at / not see sufficient value in a standard retainer or fee arrangement. So you may need to review your proposition to a “lite” version at a lower cost, with a view to increasing the services and your fees as the years progress. This is a tough one to get right, but can be achieved with careful planning and execution. The payoff will be down the road.

 

Building bridges to the next generation is a significant challenge, both in terms of attracting them and then delivering a proposition that engages them. However if you do this well, it will add significant long term value to your business.

Building bridges with the next generation (Part 1)

This is the first instalment in a two-part article about expanding your client base into the next generation of younger clients, by accessing the children of your clients. In this first piece, we consider the challenge of gaining access to the children of clients. Next month we’ll look at how you make this work within your business.

For many established advisers who have been offering financial advice and solutions to their clients for many years, their challenge is that their clients belong to the same generation as themselves. These clients are moving towards retirement age, at which stage they will stop accumulating further assets, and in fact will start de-cumulating, through living off their ARFs and other investments built up during their working lives. And as their assets reduce, so does the remuneration of many advisers whose charges are based solely on asset values.

But an even bigger problem arises when these clients die. In the United States, it is estimated that children do not retain their parent’s adviser in 90% – 95% of cases after their parent’s death. This results in the adviser’s remuneration going immediately to zero. Is the figure likely to be significantly different in Ireland?

This is a shocking figure! Shocking because of the sheer size of the figure, but on the other hand the good news is that there is a lot that you can do to build solid relationships with the adult children of your clients.

 

Get to know them

First of all, make sure that your client’s children know who you are. Seek permission from your client to introduce yourself to them – not to hound them for business, but simply positioned so that their children have a recognised and friendly face in the event of the death of the parent. Your client will want their finances handled efficiently and as per their instructions. To assist in this, at this stage you are suggesting that their children should know,

  • Who you are
  • Where and how to contact you
  • The broad areas where you are helping their parents (obviously with the parent’s permission).

Should a death occur in the family, at least now you are a friendly face who has some chance of working collaboratively with the children of your deceased client, rather than some faceless organisation that the client doesn’t know, doesn’t trust and will be generally wary of dealing with.

 

Demonstrate your value from afar

Then when you are introduced to your client’s children, take the relationship very slowly. Look to add value by adding them to your ongoing communications networks, after first of all finding out which communication channels they want you to use. – depending on their preferences, look to add them to your email newsletter, connect with them on LinkedIn, follow them on Twitter etc. If you are hosting a relevant seminar, you should even consider suggesting to your clients that they bring one of their adult children along to it.

Now you have an opportunity to remind these adult children regularly of the value that you add to your clients (and their parents), and how in time you could also add value to them. Carefully chosen messages of the value that you add just might get them to contact you as a financial need arises in their own lives.

 

Include them (as appropriate) in their parent’s financial plans

This is obviously an area in which you need to tread carefully, but there may well be areas of a parent’s financial planning in which it makes sense to involve their adult children. As parents move towards the later stages of their lives, wealth transfer, estate planning and legacy building tend to become important areas for consideration.

While parents may not want to share every small detail of their financial situation with their children, some planning will make lives easier down the road.

Talk to your clients (and their adult children) about the importance of having a will. Talk all of them through the benefits of putting an enduring power of attorney in place. Build a partnership with a good solicitor who can put these in place for them.

Ensure your clients and their adult children understand the structure and implications of making gifts from a parent to a child and of Capital Acquisitions Tax. Make sure they are aware of the annual exemptions available so that they can avail of these exemptions whenever possible.

 

At the end of the day, you want the opportunity to demonstrate to the adult children of your clients that you really care about your clients, that their interests are paramount in everything that you do. They will see you a valuable, trusted adviser to their parents. And they will also see that you can carry out the same role for them too. And how you do this last piece will be covered in a follow-up piece next month.

Are you providing enough value for your trail commission?

I’m fortunate to be dealing with several of the best and most progressive financial planning businesses in the Irish market. A common trait among these firms is their constant challenge and revision of their own proposition, ensuring they can deliver ongoing value to their clients consistently and through every interaction.

Another trait that they seem to have in common is that they all enjoy very little push-back from clients about their own charges, whether these are paid by flat fees or trail commission. They each have very simple and transparent charging structures, and never try to duck a conversation about their charges, having enough confidence in what they do and the value they provide.

These firms have all moved way beyond sending out a 10-page report with a template economic summary and a schedule of current investment and pension values. They recognise that there is little value added there and that clients rightly expect more for the trail commission that is being deducted from their hard-earned funds. There is never a half-hearted offer of a review meeting…

So, what should you do to provide value and justify your trail commission?

 

An important step is to make sure the review meetings happen – whether these are annually, half-yearly or quarterly. A client not wanting a meeting is never time saved and a victory. It is a missed opportunity for the client, and a lost chance for you to add value and further justify your ongoing charges.  If a client is questioning the need to meet because they are too busy, offer easy alternatives such a one-hour remote review meetings. Have a clear agenda and send this to the client in advance, setting out the importance of the review. Agenda items might include the likes of the following,

  • Revisiting their life goals: This is all about the client. Have their circumstances changed and/or have their hopes, dreams and ambitions for the future changed? Are you and the client still looking in the same direction, focused on the same goals and destination to achieve?
  • Revisiting the cost of their goals: How do their changed ambitions and goals affect the plan, if at all? Do they need to spend more, or less? Do they need to save more, or less? Can they retire earlier or is their wealth transfer plan affected? It is so important that you review the impacts of all changes to goals within your client’s future cashflow plan.
  • Demonstrate how their plan is still the right plan: You can give the client comfort that previous decisions still hold true, or they need to be tweaked to reflect changes in the client’s life or in relation to their future ambitions. As you know, doing nothing is very often the optimal strategy.
  • Review choices and assumptions made: Things change, outside of the lives of your client and outside of your control, whether it be in the economy, the personal finance market or the taxation environment etc. Sometimes action is needed, often it is not. Review and restate the choices and assumptions made.
  • Show that your recommended solutions remain the most suitable: Or change them if not…
  • Shut out the noise: Deal with your client’s concerns about what they read in the weekend papers or heard in the news that morning. Gently (but firmly) remind them of the long-term planning approach that you have taken together and the folly of them reacting to the news. Remind them of the dangers of attempting market timing, thinking short term and changing their investments based on fads or using the rear-view mirror.
  • Be a leader: This will follow from all of the above. If your client sees you as their voice of reason and valued guiding hand, they will seek out your advice at every turn in relation to their personal finances. And they will recognise that this is a highly valuable service and worth paying for.
  • Stay in touch: Outside of your meetings, stay in touch with your clients. Keep your clients engaged and educated through a regular, thought-provoking newsletter. Enhance this further with a number of topical webinars throughout the year, bringing in external, expert speakers to add real value to your clients.

 

Do all of these well and you will have no issues in justifying your trail commission. You won’t be looking to hide your commission levels away somewhere on your website, instead you will want to discuss them with your clients, proudly taking the opportunity to demonstrate to them the incredible value you deliver each year.

Are you pulling the strings for effective partnerships?

Business owners and wealthy individuals today utilise the services of a whole range of professional service providers. They often have relationships with an accountant, a solicitor, a tax adviser and a financial planner. Pulling all these disparate pieces together into a coherent strategy is a tricky business, and I suggest that the person best placed to complete this work is the financial planner.

The financial planner is the only person who tends to have oversight of everything that is going on in a client’s financial life, both within the client’s personal life and their professional life. The other professionals tend to work with clients on a more transactional basis, while the financial planner’s relationship is different. He / she understands the long-term financial objectives of the client, completes a very detailed factfind of the current circumstances and develops a roadmap to achieve those financial objectives. And the financial planner works with the client year after year.

I personally see my financial planner as the hub of my financial affairs because he provides a broader range of value to me. Yes, he has of course developed my financial plan and ensured I have the right investments, retirement planning and protections in place – I’d expect no less. But he also guides me in relation to much broader financial-related issues.

I’ve written on many occasions about the range of value-added services that you can provide, beyond the basic plan and products that you arrange. Just to mention them again, these include supporting your client or referring them to a specialist in the areas of,

  • Budgeting
  • Cashflow planning
  • Tax advice
  • Advice about bank accounts
  • Wills and Enduring Powers of Attorney

All of them are really important to get right for your client. And then there’s also the big opportunity for your business…

 

Build effective collaborations

It’s equally important to carefully manage the relationships with the other professional advisers. Firstly, you want everyone to collaborate effectively in the very best interests of your mutual client. Then with a more self-interested hat on, you also want to really impress these other professionals, with a view to them seeking out your services in the future. In my travels in out of the offices of financial planners across the country, it’s in this second area that I sometimes see planners selling themselves a little short and not driving home their potential future opportunities…

Here are a couple of ideas to help build stronger collaborative relationships with a professional network.

 

Communicate your value time and time again

A goal should be to get in front of the network 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 a tax partner should focus on pension reliefs, tax efficient protection products, tax efficient investing 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 these professionals. Don’t leave them guessing as to how you can help, join the dots for them…
  • Briefings for partners: Keep your network 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 your network 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 them the opportunity to include guest posts in your newsletter. This gives them 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 your network partner meeting the other’s clients and building new relationships.

 

Prove your value with clients

Of course the biggest barrier to professional network partners referring clients to you is fear. Fear that you will somehow mess up and as a result cause difficulties for them 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 your partner is aware of it. How do you do this? You might seek a testimonial from the client, which you then share with them. 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 your network partner.

These are just a few thoughts on building profitable and lasting relationships with a network of professional partners. 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.

Why your clients leave you.

A previous article that we wrote about when it’s time to fire a client drew a fair bit of comment… 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. Should they expect an annual face-to-face meeting or will you meet them remotely? Or should they expect an annual meeting at all?

 

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.

As part of this, it’s also important to recognise that you may be unaware at this point of significant changes in their circumstances. These changes may require big changes to the plan. Those check-in review meetings are so important, to ensure the client and you remain on the same page…

 

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.