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 build an intergenerational proposition?

Is this a time to be talking about an inter-generational financial planning proposition? Maybe it is… First of all during these restricted times, it’s a lot more difficult to get out and mix among prospective clients. Secondly now that you probably have a bit more time on your hands, there’s an opportunity to spend some time creating a new offering – reaching out to the children of your clients.

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 from that client going immediately to zero. Is the figure likely to be significantly different in Ireland? The good news is that there is a lot that you can do to build solid relationships with the adult children of your clients.

First of all, it’s worth considering some ways in which you can get on the radar of adult children and then remain there.

 

Get to know the adult children

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 instead that their children have a recognised and friendly face in the event of the death or loss of mental capacity of the parent. Should this happen, at least now you are a friendly face who has some chance of working collaboratively with the children into the future.

 

Look for opportunities to demonstrate your value

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.

 

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. 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. At a minimum, seek to ensure your clients and their adult children understand the structure and implications of wills, enduring powers of attorney, gifting strategies and estate planning.

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 hopefully see that you can carry out the same role for them too.

 

It is then worth turning your attention to considering 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.

 

Have a proposition that “talks” to them

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. Build a proposition and pricing structure that talks to them about their goals and needs, rather than that of more traditional, older clients.

 

Lifestyle planning is relevant

Yes, younger people usually have less assets. However 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.

 

Send them targeted communications

Sending “one size fits all” communications 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.

 

Are you the right adviser for them?

The client bases of most financial planners 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. Is it time to go out and hire a younger adviser, if you are really serious about expanding your client base among younger clients?

 

How will you charge?

This is a significant headache for advisers… how to make this segment viable, particularly as asset levels are low or non-existent. A trail commission basis probably 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.

 

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. Maybe developing an inter-generational proposition is a really good use of your time over the coming months?

 

Do people trust you?

“OF COURSE THEY DO!” I hear you shout indignantly! Because trust sits at the heart of a financial adviser’s business. It’s that critical ingredient that you can’t survive without, but unfortunately you can’t just go out and buy it, or even simply ask for it. It can only be earned by what you do, and by what other people say about you.

 

Trust in business is low…

Every year, I review the very insightful Edelman Trust Barometer, an annual, highly credible review of trust that has been carried out for 20 years now and across 28 different countries. They announce the results each year at the World Economic Forum in Davos. The full results for Ireland in 2020 are available here and are well worth a look. Edelman look at trust in each of the countries (one being Ireland) and examine trust across different sectors and industries.

 

In the chart below, we can see that trust in business in Ireland is low. While seen as somewhat competent, businesses score poorly in terms of ethical behaviour and we lag our international counterparts in this regard.

 

 

 

 

 

 

 

 

 


What’s the situation in relation to Financial Services?

As can be seen from the graph below, Financial Services is the least trusted industry sector of all. A fact we simply cannot ignore.

 

 

 

 

 

 

 

 

 

This is a critically important finding for all financial advisers to consider. While the poor level of trust applies to the sector as a whole and not specifically financial advisers, it underlines the challenge faced by all industry participants in building trust with potential clients. People you meet for the first time will often be starting out with a sense of distrust and scepticism. This cannot be ignored by you and your first task is to start building trust…

However every cloud has a silver lining. While financial services is the least trusted sector and is coming from an extremely low base after the economic crash, the sector is moving towards the other sectors. A lot done, a lot more to do…

 

 

 

 

 

 

 

 

 

Another chart that is of interest is the level of trust across different business types. This is great news for many financial advice firms out there!

 

 

 

 

 

 

 

 

 

 

“But my clients do trust me” I hear you say!

And I’ve no doubt that your clients do trust you… or else they wouldn’t stay with you. However the challenge is about appealing to all those people out there who are sceptical of the financial services industry, and potentially of financial advisers. How do you appeal to them?

It all starts with having a clear and compelling client value proposition, which is a clear, concise and compelling articulation of how the factors that are important to the customer are satisfied by you.

 

The What, How and Why of your business

To start to build a positive picture, leading to confidence in your ability in the eyes of prospective clients and ultimately to building trust, it’s worth considering the lessons of Simon Sinek, the famous author of “Start with Why”. Yes you need to be able to clearly define initially what it is that you do, so that clients can see the outcomes that they can expect. You then need to be able to communicate this effectively to clients. However it is difficult as a financial adviser to stand apart from the crowd in terms of what you do, as many of you deliver similar services.

However when you can set out in an engaging way how you work with clients, now you’re starting to get somewhere! When you are able to demonstrate the processes that you use, how you deliver advice, how you will serve your clients throughout their financial lifetimes; you are now in a strong position to start building durable trusted relationships. Potential clients will take a lot of comfort from understanding what they can expect from you, and this comfort in working with you will enhance their trust.

The real magic though in building trust is when you can clearly (and of course credibly!) communicate why you do what you do.  This will demonstrate your real reasons for being a financial adviser, your passion for what you do and ultimately your desires to deliver a really top quality proposition to your clients. And when you can communicate this effectively, this will build trust like nothing else.

 

In a future article, we will look in more detail at some of the actions you can take to help you build a trusted position in the eyes of all of your current and potential clients.

How will you justify your trail in future?

The time is fast approaching when it will be mandatory to display your commission levels on your website. It’s quite unclear at this stage how most firms will approach this, due to the bewildering number of options available in the market. But display them, you will have to.

Are you likely to get lots of questions about them? My expectation is probably not… but you might get some. The most likely area that you will be asked about is the level of ongoing trail that you charge, as this will apply to clients each year. While you should always be in a position to do this anyway, you now need to be able to justify your trail commission clearly and simply to your clients. So how might you do this?

Well in my book, sending out a 10-page report with a template economic summary and a schedule of current investment and pension values simply won’t cut it on its own. After all, where is the value that you add here? Clients will rightly expect more for the trail commission that is being deducted from their hard-earned funds.

There are also a few “hygiene factors” that clients simply expect these days – these will help you to justify the lowest levels of trail commission, but in reality, no more than that. These include the offer to clients of a review meeting once per year, and regular communications (usually in the form of a client newsletter) that from a distance helps them make better financial decisions and educates them in personal finance matters. Oh, and offering nice coffee to clients too – trust me, it helps!

But if you want to be able to comfortably justify higher levels of trail commission, you need to go a lot further. Yes, clients will want an update on their policies and regular communications etc., but they will expect more if they are paying more. Trail is much easier justified if the client feels and recognises that you are delivering a truly personal experience to them. What might this include?

 

  • Revisit 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?
  • Revisit cost of 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.
  • 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.

 

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.

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.