Different people want (and deserve) different things

How many clients have you? 200, 500 or 2,000? Often as your client base grows, it results in your number of staff growing. But the chances are that even with your increased staff numbers, you are unable (and unwilling) to provide a top-drawer service to every one of these clients…

Really the question is – why should you? After all, you derive hugely varying levels of income from each of those clients so surely the clients that are driving very high levels of income to your business deserve a higher level of service?

Of course this is not at all a novel concept! Every time you step on a long haul flight, it’s immediately obvious. Turn right for the cheap seats in Economy or turn left to be pampered in Business Class or 1st Class. And then when you book a hotel, you can pay less for a standard room or pay more for a suite with all of the bells and whistles that come with that.

Now let’s take this concept into the financial advice space where for many of you, your remuneration model is built around trail commission. If I’m fortunate enough as an investor to come to you with €1 million to invest, your trail commission might be €5,000 p.a. (assuming you charge 0.5% of assets). That’s fine if your proposition stacks up.

But what happens if I decide to place just €200,000 of my money with you? Now your trail commission falls to €1,000 p.a. Still very attractive, but obviously not as nice. However the question that’s in my head is, “What extra am I getting from you by placing the full amount with you, that’s giving you the benefit of an additional €4,000 p.a. of my money?”

If there is no difference between the services offered in each of these situations, I suggest you’ve got a challenge on your hands… Simply adding trail commission to policies without thinking through your client proposition is fraught with danger.

Not completing a robust segmentation of your clients is also very dangerous. Even without doing a segmentation exercise, I’ve no doubt that a small number of your high value clients get your best service at all times. But inevitably what happens is that there are other high value clients that slip off your radar. Either you don’t realise that they are high value or they just aren’t demanding. This is aside from some low value clients who are constantly on the phone end up getting a huge amount of attention. That’s hardly fair, is it?

So what do you do?

 

Segment your clients

For starters, do a proper segmentation exercise. Know who is valuable to your business and who is not. Don’t be put off from doing this work with the excuse of “it doesn’t capture the full picture”. Yes, there will always be exceptions within your segmentation – for example a client with very little business with you, but who constantly refers other clients to you is actually a high value client to you and should be treated as such. But don’t start with the exceptions; work out how to deal with them later on a case-by-case basis.

I’m definitely not suggesting that client segmentation be based on asset values alone – that is only one factor to be considered and used. However it is usually one of the more heavily weighted factors used by advisers in segmenting their clients.

 

Develop your service packages

Develop service packages for your business that reward clients depending on their value to your business. Make your high value clients feel really special, reward them for trusting you with their money by giving them a truly rewarding client experience. Build a moat around them and pull up the drawbridge from your competitors by providing a second to none service.

Let your mid-tier clients feel valued by your business, while making them aware that there is lots more you can do for them (if they are willing to pay for it).

And of course your no/low value clients will begin to realise that it’s a business you are running and that they don’t have 24/7 access to you. If they want access to superior service (ongoing advice from you), they pay more for it. The same as when they book a flight or a hotel room.

 

Don’t be afraid to say no

Yes, your lower value clients may want a better service possibly than you are offering and might try to demand it from you, without paying for it. Don’t be afraid to say no. You’ll only be doing this with your no/low value clients… And they are of little or no value to your business. Put your time into those clients that are of value to you – this is what your clients deserve and what your capacity allows.

The days of a “one size fits all” approach are over. Give your clients a service that they want and deserve.

5 ways to increase our income in 2019

2019 is now well underway and we’re all right back in the groove of looking after clients as well as possible, and trying to grow our businesses. As part of this, we’ve outlined five ways to help you to grow your business. While some of the thoughts are not new, hopefully this piece will act as a reminder of areas that you just should never ignore.

 

1. Get more customers

The most obvious way to grow, but often the most difficult! This one will be influenced by many moving parts; your own activity levels, the quality of your advice proposition and the number of referrals you get from satisfied customers, the consistency and quality of your ongoing client engagement processes, your networking and other client acquisition methods and all of your marketing activities. Of course having a loyal band of potential introducers (accountants etc.) is a crucial client acquisition element for many successful advisers.

Getting more customers is usually the sum of many activities. If I was pushed and had to pick one that we all can be guilty of not doing enough of? That would be to get out of your office and meet more people. Spending more face-to-face time with prospects almost always results in higher new customer numbers.

 

2. Improve your proposition

Getting more customers is great. However this also creates new challenges in terms of minding these customers into the future. What if you could earn more income without increasing your customer numbers?

This is where your proposition comes in. There is huge benefit in regularly and critically evaluating your advice proposition. Is it good enough? Are there more services that you could offer, which would allow you charge more? Or are you delivering the right services to your customers, but they are simply not aware of them as a result of poor communication by you? If you can improve their knowledge and engagement with your proposition, can you charge more?

I suggest you take some time out to review your proposition and how you are communicating it. You will probably be pleasantly surprised when you actually visualise the depth of services that you offer, and maybe you also will realise that you can charge more for the value you are delivering.

 

3. Attract more assets

Financial advisers often tell me of the frustrating situation in which they are only managing a portion of a client’s assets. I just don’t really get this one to be honest… Yes I can understand that a client may think they are better off having a few advisers and not having all of their eggs in one basket. However, isn’t that the adviser’s job to manage that challenge on behalf of the client?

This situation sometimes arises as a result of an adviser being happy to simply get a new client on board, even when they are only getting a portion of the client’s overall assets. But how can you advise the client properly when you are only partially informed? Surely this situation will result in a completely misaligned portfolio? And if you carry out future cashflow planning, this is rendered pretty meaningless if you don’t have full visibility.

Work on your script with clients where you suspect you are only advising on a portion of their assets. Is it possible that you are settling for partial assets too easily and are just not convincing clients and being firm about the importance of total visibility of assets?

 

4. Don’t ignore cross-selling opportunities

Sometimes it’s easier for an adviser to position himself or herself as an investment specialist or a retirement practitioner. But then sometimes as a result, the adviser can be reluctant to step outside of his or her specialist knowledge zone and advise in other important areas such as protection etc.

Yes of course you need to be confident in your capability to provide excellent advice in these other areas, but this is not really a stretch for many advisers. And no, I don’t believe that it undermines your positioning as an expert in your main area of specialisation. Clients will be grateful if you are watching their back in these other critically important areas too.

 

5. Increase your rates

This one might sound a little obvious, and also a bit unrealistic! But when did you last actually review your advice rates? I see enormous disparity between rates charged by different advisers, often when there is little or no difference in their propositions.

Sometimes it’s a case of one adviser having set their rates ten years ago when the country was on it’s knees and not having revised these rates since then, while the other adviser set their rates in recent years when the economy was on a steady growth path. So is it time for you to look again at those rates you are charging – are you selling yourself short for the value that you’re delivering?

 

These are just a few ways in which you can look to increase your income in 2019. The next step is to do some more detailed planning around each of them. The very best of luck.

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.

Questions to ask yourself when growing through acquisition

The last few years have generally been very good times for financial advisers. Many of you have grown significantly through your own efforts and those of your team. However there are many of you who have looked to turbo charge this growth through acquisition, either of a book of business or indeed through buying another advice business – lock, stock and barrel. Done well, this can help you significantly increase your growth potential. However if you don’t think it through carefully, an acquisition can result in many headaches and lower than expected results.

So what are some of the questions you should ask yourself before stepping into the market place and looking to buy?

 

Why?

First of all, be crystal clear about why you are actually in the market to buy a book or another practice. What is the strategic rationale for the acquisition? Are you seriously in growth mode, or have you simply run out of ideas in terms of developing your existing business? Maybe instead of spending your money, it’s time to really unpick your own client value proposition, get crystal clear on the type of business you are and then look at all of the potential means to grow your business. There may be better alternatives to going into the market for an acquisition.

 

What?

What are you actually looking to buy? Have you run out of opportunities in your existing business and need an injection of potential clients? Are you looking to buy a book of clients hoping you will unlock a few nuggets in the belief that your advice approach is superior to that of a selling broker? Or are you looking to buy a very well developed business that is going to lift your own business onto a new level through bringing better processes and opportunities than those that exist within your own business? The challenge in the latter situation here is to ensure you actually extract these opportunities, rather than letting the business you are buying fall back to the levels of your existing business.

Who?

So you’ve decided that the strategic rationale justifies a purchase. The question now is which book or business to actually buy. This is where you need to carry out careful due diligence to really understand what you buying: the quality of the clients, the processes, the client propositions and of course the advice that has been provided to their clients. After all, poor advice given in the past could result in a whole host of headaches for you into the future.

Are the clients that you are buying going to increase your recurring income stream over the long term, or are they going to fall away over the coming years through no relationship and loyalty to you? Are they going to really help you to gain a foothold in your target market? At the end of the day, are they going to be worth more or less than the “sum of the parts”?

The people that will come with a business (if any) will of course also be a tremendous asset or liability going forwards. You need to make clear and educated decisions as to whether they are a good fit for your business or not. Bringing in a strong group of people could really help you to drive your business to the next level.


How?

So you’ve found your purchase target. If you’re simply buying a book of business, the chances are this is going to be a fairly straightforward transaction based on a multiple of the income stream. However if you are actually buying the entire business, there are many other factors to consider.

Are the existing owners remaining involved and if so, in what capacity? Are they going to be part owners of your newly enlarged business, keeping them with “skin in the game”? If they are remaining as shareholders, they are much more likely to stay committed to growing the business. On the other hand, if they are remaining in the business simply to help the transition, you should be looking to build in clear earn-out targets. This will ensure that you reap the rewards of their ongoing involvement, as they will be financially incentivised to help you transition the clients into your business.

You should also examine closely the profitability of the business you are buying. If they were struggling to make meaningful money, how are you now going to do it? Can you see cumbersome administration practices that you can immediately replace with your own well-developed processes, extracting immediate savings? Can you see savings to be made in terms of people – maybe you don’t need all of their staff? And possibly you can see opportunities to broaden the proposition that was offered to their clients, increasing the revenue potential. Any of these factors will help you realise more profit potential.

These are just some of the questions that you should ask yourself before you step into the market to buy another firm. Buying a business is a big step – take your time, ask yourself the hard questions and do careful due diligence in order to seriously enhance your prospects for success.

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.

What exactly is Lifestyle Financial Planning?

We have seen quite a significant movement over the last few years of Financial Brokers extending the services they offer to their clients, through the delivery of lifestyle financial planning. While this service may not be suited to every client, or indeed you cannot justify delivering it to every client, the shift is happening. This is because of the value that lifestyle financial planning brings to people’s lives and because of the deeper and more engaged relationships that develop between the Financial Broker and the clients that it suits. So what is it all about?

 

What is lifestyle financial planning?

Lifestyle financial planning consists of four main phases, and each of them in turn are required. The four phases are

 

1. Discovery

This is the phase that gets skipped over the most, which is a shame as this is the most important of all of the stages. This is the phase where the planner finds out the lifetime goals and ambitions of their client, where the client can visualise the outcomes in their own terms – the type of life that they will lead, the possessions that they will own, the impact they will be able to have on the lives of others, what they will do and achieve in their lives.

Until you know the answer to these questions, what are you planning for? Just building a pot of money with no idea of what it will allow your client to do?

This phase is carried out by careful and well thought out questioning by you. And then listening intently. It is not “airy fairy”, instead it is the most important conversation that you will have with your client as you get to understand their hopes and dreams

 

2. Planning

This is where the planner then uses his/her expertise to develop the roadmap for the client to get from where they are today, to achieving the life they visualised in the discovery phase. This is generally a comfortable area for Financial Brokers, where you can utilise all of your experience and technical skills to develop a plan for your clients. As a result though of the comfort at this stage, some brokers rush to it without properly completing the discovery phase – when that happens, you are no longer carrying out lifestyle financial planning.

Important also to this phase is the use of future cashflow planning. Without it, it’s not really lifestyle financial planning. When using this process you can demonstrate to clients if they are on track to lead the life they visualised, and if not what they need to do to get on track. You can show them the impact of unforeseen events and how to plan for them, the impact of changing goals and of course the actions they need to carry out, or products they need to put in place to achieve the plan.

 

3. Implementation

The most straightforward of all of the phases and an area that Financial Brokers excel in. This is where you assist the clients in carrying out the required activities (e.g. budgeting, wills, power of attorney) and where you put the required financial products in place that will play a role in achieving the goals of the plan.

 

4. The ongoing journey

This is again a really important stage that sometimes doesn’t get enough attention. Regular contact and scheduled meetings sit at the heart of lifestyle financial planning. The ongoing interactions turn the plan into a real journey towards the client achieving their lifetime ambitions. They are the opportunity to review and restate / change goals, review the progress and performance of the actions and products that were implemented and keep the client on track in terms of their behaviours with their money and their investments.

Without these meetings happening as scheduled, it is akin to pushing a boat away from the harbour wall to sail the stormy seas alone… You need to be beside your client at every turn, helping them to navigate their way towards their dreams. These review meetings also give you the opportunity to stay close to your client, and to gently remind them of the incredible value that you are bringing to their life.

Equally importantly, having a robust and valuable ongoing service also enables you to justify your ongoing charges to the client.

This shift towards lifestyle financial planning is to be welcomed. It increases the value of Financial Brokers in the eyes of their clients, provides a richer client experience and builds value in your business through easier justified ongoing charges.