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Increase the Value of your Financial Advice Business

I’m often asked how an adviser can increase the value of their business beyond the discounted value of your future income stream. This is particularly relevant for advisers who are looking to exit, and want to achieve the greatest sale price possible for their business.

It’s an area that I’ve written about before, but you might want to consider in a bit more detail a few of the factors that could drive up that sale price in your favour.

 

The Shape of your Revenue Model

One of the key factors in driving up the value of a business is the shape of revenue in the business. Is the business mainly living off high upfront commission payments with smaller future payments due, or has the business moved to flatter commissions on protection business and trail commission / fees as opposed to upfront commission on investment and pensions business?

Obviously the latter will be far more attractive to a potential purchaser. There are many advisers actively making this shift or looking to make the shift at the moment, either on their own or with the guidance of some of the product providers.

The size of this future income stream is important, but equally so is the persistency of it. A buyer will look to see your firm’s ability to both build up and then retain clients, to ensure that this income stream will continue into the future to their benefit.

 

Your Brand Value

Is there equity (value) in your brand? Having a brand that is well known, respected, considered better than a competitor’s brand is strategically really important. It is also famous for being very difficult to measure! But there are ways that you can influence this really important factor, to help you achieve a better sale price for your business.

How well known is your brand? How much time and effort to you put into building the awareness and credibility of your brand among your target audience? Is your brand positioned where you want it to be, and equally importantly where a potential purchaser will see as attractive?

Does your brand then actually deliver? Can you prove this through any quantitative measures (brand awareness measures, customer satisfaction results) or through qualitative feedback such as testimonials from clients about their experiences of working with your business?

Being able to demonstrate this brand equity could very positively impact the value of your business at sale time.

 

Your Sales & Advice Proposition

Has your business been built successfully (but solely) around your great relationship building and client acquisition skills? While this has undoubtedly been really valuable for you, what value does it hold for a potential buyer if you are planning on walking off into the sunset?

Alternatively, some advisers have built on these skills, for the benefit of other members of their sales team by developing processes and supports to acquire and deliver advice to clients. These processes and supports ensure that if you are out of the equation, your business should continue to develop sales and deliver excellent advice-based solutions to clients. Now that is really valuable to a buyer!

 

Clear & Valuable Target Markets

A buyer of your business will place a lot of value on your business offering “something different” to them. This might be particular expertise, skills or indeed access to a corner of the market that they have failed to access themselves.

Can you offer a potential purchaser access to a new segment of the market? This might be based on a product offering (for example the corporate pensions market), a geographical area where they currently don’t have a presence or a sector of the economy (a particular business sector or group of professionals). For this to be credible, you need to be able to demonstrate a genuine focus on the area, a differentiated approach that you utilise with this segment and demonstrable results in successfully gaining traction in the target segment.

After all, if your target market is “anyone”, what are you then actually bringing to a potential purchaser in terms of new opportunities?

 

Operational Excellence

A worry for someone buying a business is the skeletons in the closet. Are they suddenly going to be faced with a load of legacy problems – poor advice that will come home to roost, poor documentation that could leave them exposed, lots of clients who are completely disengaged from your business and who really have little loyalty towards it.

These factors will seriously undermine your price. Indeed they will often completely undermine the sale of your business at all, as a buyer just won’t want to take on these challenges. That is except possibly at a real knockdown price.

The challenge for you is to deal with these issues now and address them so that you are handing over as healthy a business as possible. And getting the best price as a result!

 

These are some of the factors to consider when looking to “fatten up” your business for sale. For any of you looking to buy or sell, do these match your experiences and what other factors do you consider? All comments as ever are welcome!

Will Clients Pay Annual Fees?

The whole area of fees sends a chill down the spine of lots of financial advisers. How much do you charge? Will clients pay? Will they pay every year? These are some of the questions I’m asked all the time.

Yes we’ve seen moves towards fees in other markets, with a lot of focus on the changes in the UK in particular. But that doesn’t mean that we’re moving to a fee only environment in Ireland. In any event, I think the question of commission v fee is the wrong question… To my mind, it’s all about what you’re being paid for, rather than how you are paid.

Maybe let’s start with some of the reasons that clients won’t pay annual fees, whether this is paid by an annual fee, a monthly retainer or as a trail commission.

 

They can’t afford them

There’s no doubt, there are many clients out there who just are not in the position to write you an additional cheque every year. Their income may be low, their outgoings may be high and these clients are seeking the minimum number of financial products to meet lender requirements and to provide basic levels of protection for their families. These clients are not going to pay fees.

 

They don’t see why they should

This is a more interesting group… These people can afford fees, have multiple financial advice and product needs but don’t see why they should pay for it each year. Whose fault is this? Well it’s theirs if they think that they can get your services for nothing. But maybe it’s your fault if they just don’t place enough value on what you do? You need to consider;

  • How much value are you providing beyond setting up products?
  • How robust and valuable is your planning and advice model?
  • How well do you communicate this to clients?
  • How well do you link this value proposition with your charging basis?

Get these right and you’ve a better chance of convincing this group to pay your fee each year.

 

They know another adviser who won’t charge a fee

There is always another adviser who will undercut you on price, indeed there are execution-only options out there for clients. However this is where the focus is solely on the product implementation. If you can demonstrate to the client that the fee is for the excellent and valuable advice that you give and that this will positively impact their outcomes, they are more likely to decide based on value gained rather than the price paid.

This group is a tricky one for advisers who hate to see a client go elsewhere. But if you’re not being paid a fair price for the value that you bring, it sometimes makes sense to walk away…

 

So what are the main activities that you need to undertake in order to give yourself the best chance of convincing your clients that the annual fee is worth paying?

 

Develop a compelling advice proposition that clients value

I know that there is a huge amount of talk at the moment about the need for a clear value proposition… But it really is a basic requirement if you hope to convince people to base their purchase decision on value rather than price.

Your value proposition needs to demonstrate to clients and potential clients, what you do, where you add value, why this is important to them and the positive impact that you will have on helping them achieve their financial objectives and better outcomes. Think this through from the client’s perspective – if they can’t connect with the value for them, you’re going to find it more difficult to justify your fee.

 

Make sure clients value your advice, not the product purchase

Move the conversation away from choosing the right product and then implementing it. At the end of the day, the clients don’t place much store on this. Advisers who are today receiving large portions of their income from fees focus more on helping the client really understand their life and financial objectives and then develop a plan for the clients to help them achieve these objectives. The products merely become vehicles to help them get there.

 

Deliver a great service and review process

If you’re going to look to charge your clients each year, you’re going to need an ongoing service that clients believe is second to none and worth the price paid. This will mean being available, adding value throughout the year and communicating regularly with clients.

Central to this is developing a really powerful review meeting. This is not just about communicating updated values (even though you do this too), but it is about really demonstrating to the client how they are progressing towards their financial objectives, and why continuing on this journey with you offers them the best opportunity of achieving their desired outcomes. So broaden this meeting out, bring in all of your undoubted experience and expertise and package it, so that your clients will seek out these value meetings with you, year after year! And it makes it easier for you to justify your fee.

 

What experiences have you of charging fees? What are the main hurdles that you encounter? Please feel free to leave your comments below

 

 

Photo credit:www.LendingMemo.com

Beat your competition all ends up!

You’ve been approached to pitch for the opportunity to advise a really great prospective client, maybe a wealthy individual with a lot of assets to manage or a pension scheme for a local company. However you also know that another adviser has been given the same opportunity….

So what do you do? One route obviously is to go in “as cheap as chips”, provide your advice for free and cut your transaction price to a level that just about makes it worth your while. Yes, you’ll win some clients this way, but not the ones you really want. Because every future conversation will result in a haggle over your price – no surprise really as you started it!

The alternative is to beat the socks off your competitors and demonstrate to the prospective client that you’re the only game in town for them to consider. Your challenge is to have demonstrated this by the end of your first meeting (your pitch) with them. Here are 5 ways you might achieve this;

 

Know the customer better than your competitor

Today there are so many ways to learn lots of really valuable information about your prospect before you meet them. This can give you a real edge, enabling you to anticipate questions or issues and to chat knowledgeably about areas of interest to them. At the very least, it shows your interest in them and their business.

Starting with their company website, you can learn about their business, getting a sense of their markets, their size and what is important to them. The prospect that you’re about to meet might feature in the “About Us” section so check this out too.

Check out their social media profiles. In particular LinkedIn may give you very rich information about the person. You can learn a lot about the person professionally, as well as their interests etc. You can also see if you have connections in common – this can be useful for the social chitchat at the start of the meeting.

 

Focus on their objectives and outcomes, not yours!

At the meeting, your initial goal needs to be to connect with the person and build trust before you can get into problem solving. To do this, you need to find out what their problem or challenge is and fully understand what their actual objectives and goals are. What will success look like for them? What will they consider a good result?

Your questioning style is very important here. The key is to use lots of Open questions; “what is your biggest challenge”, “why is that challenge so significant for you”, “how have you addressed this so far”, “when are you expecting a result” etc. Questions that cannot be answered with a simple yes or no!

This initial stage is all about getting the client talking. Once they are talking, their issues will become clear and then you can start to think about demonstrating how you can address the actual challenges that they are facing!

Hopefully at the same time, your competitor will dive in and start setting out their credentials and their approach to solving the client’s problem – quite probably not the right problem at all!

 

Then demonstrate your credentials

Once the client’s problem is clear to you, now is the time to set out why you are the answer to their prayers! This is a critical step – after this the client will decide who he is appointing to look after his affairs!

First of all, you can demonstrate your professional approach easily and effectively by walking your client through your planning and advice approach. This will give the client comfort that you are a professional with a robust approach, helping to build that all-important trust. I believe that this is best delivered using a short presentation on an iPad or similar device.

Case studies (anonymous) are another effective way to demonstrate your credentials. They allow you to showcase innovative approaches that you might have used in the past. They also demonstrate your experience in dealing with challenges similar to that posed by the prospective client.

Finally testimonials are a great endorsement of your capabilities. I always encourage financial advisers to seek permission to use the full name of the person giving the testimonial, as it gives it credibility – does “John T, Dublin 6” really exist?

Hopefully your competitor has just been having a chat with the prospect, saying how good they are but not really backing it up at all…

 

Practice – it’s not easy!

These last two areas of questioning the prospect effectively and then demonstrating your credentials are not easy. Road test them on your staff, friends and family. Get people to critically appraise your approach. Like all similar tasks, it’s going to take a few goes before you get it spot on. The last thing you want is to be trying it out for the first time on the best prospect you’ve had in a long time!

 

Start delivering value long before your pitch

This point should probably have been made at the start but I kept it to the end as not all advisers are in a position to deliver it at the moment. Providing ongoing content to clients is so important, deepening the relationship, demonstrating expertise and adding value. This might be in the form of an email newsletter or other such communication. If you do this, add your prospect to the list as soon as the first contact is made (get any necessary permission to do) and start sharing your content with them straightaway.

This will immediately set you apart from your competitor, giving the prospect a taste of what they can expect from you – a valuable, professional, robust approach to all that you do!

At this stage, hopefully you see the other guy’s white flag!

5 elements of a winning client proposition in 2014

I’ve been lucky to spend the last couple of years working with a broad range of financial brokers and planners, and as a result have been fortunate to gain great insights into some really great advice firms operating in the Irish market.

A question I’m sometimes asked is; “What’s different about the winners?” Now there’s no easy answer to that, but there is one theme running through the successful firms and that is a clear client proposition. These firms tend to be clear about their target markets, their ideal clients, what they offer (and don’t offer), what makes them special and how they get paid. And very importantly, they are also very good at articulating this to clients.

The whole area of client propositions is very broad though and can encompass many different elements. So here are 5 activities that I believe will help advice firms to really differentiate themselves from the rest in 2014.

 

No more chats!

Spend some time over Christmas developing a presentation for delivery at your first meeting with prospective clients. If you get a new iPad for Christmas, even better still! Use that to deliver the presentation. Meeting a prospective client and having a chat is fine and maybe not hugely damaging. But it’s hard to make it memorable. However if you have a well-crafted (and short) presentation, that you walk through in an engaging manner, and that includes some provoking questions for your client to ponder later, you’ve a much better chance of leaving a positive impression and getting that prospect coming back for more.

 

Spend time on income and expenditure

One of the unfortunate traits of some of the less successful firms out there is their rush to “get to the money”. While their intentions are noble, in that they want to sort out the investments for their clients, in fact what happens is that the client gets forgotten as the focus is on the money. And once you forget the client, your future with the client is inextricably linked to the performance of the money. Which is difficult if markets go against the client.

The successful firms out there tend to focus more on the client and one way they demonstrate this is through helping clients really examine their income and their spending. And then going through a rigorous process to help them balance the personal books better! They don’t do this in a superficial way, but in a way that is really valued by clients, most of who are very poor at doing this themselves!

 

Build future cashflow planning into your proposition

My prediction for 2014 is that there will be a steep increase in the use of future cashflow planning by financial advisers. Why? Because more and more clients will become aware of the value of it by those financial planners already offering it, and those clients will demand it.

Future cashflow planning completely changes the conversation. It lifts the conversation out of the past and the present and focuses both the adviser and the client on the future objectives of the client. And it gets them really working together on trying to achieve those objectives.

However the real benefit of it to me is the reliance on the annual review happening every year to track progress. Clients demand their reviews – do your clients?

 

Develop powerful review meetings

Again, another observation… Lots of financial brokers and planners have recognised the importance of a compelling client proposition and are furiously working on developing a compelling one at the point of sale with the client. However relatively few are working on developing a compelling review proposition, to deliver to their client year in and year out. And most of these brokers are attempting to justify a trail commission basis!

If you want to receive an ongoing payment from your client every year into the future, you’ll need to develop a review proposition that the client values and that they demand actually happens every year. This is achievable – there are many clients out there who experience a truly valuable review service and these clients happily pay ongoing fees as they recognise the value they are receiving in the review meetings.

Do your clients demand their reviews with you? Do they feel the meetings are worth more than the ever-growing trail commission that you are receiving? If not, you’re at real risk of losing these clients in the future, just as they become very valuable to you.

 

Think engagement

It is so important to engage your clients on an ongoing basis, outside of your sales and review meetings. You need to stay in their minds through gently adding value throughout the year, so that when an unexpected financial challenge or opportunity arises for them, you are their first port of call.

Yes it’s hard work and takes a lot of time. If you don’t have the time or the inclination to do it, pay someone else to do it for you. If you don’t, someone else will begin to engage your clients and leapfrog you as a financial expert worth talking to.

If you make these changes to your client proposition, I can pretty much guarantee that they will have a material impact on your business. You’ll value your own proposition more and as a result, your confidence will increase, enabling you to communicate your value better. And your clients will love it!

Very best wishes in developing your proposition in 2014! If you have any comments in relation to my suggestions, please leave them below.

Why don’t my new clients realise how good I am?

I was working with a financial adviser recently (let’s call him Jim for the purpose of this article) who asked me that exact question. He was incredibly frustrated. While acknowledging that he’s not perfect (show me someone who is!), Jim articulated to me that he gives excellent advice to clients, that he works really hard on their behalf and that he is very competitive in his charging structures. And I fully believe that he was painting a realistic picture. The problem is that Jim’s new clients don’t seem to realise the value that he’s bringing to them. They appear a bit under-whelmed at the end of the initial advice process.

To help Jim, we worked through his sales process and I gave him a few pointers as to how I felt he could engage his new clients better. Jim was happy for me to share some of the points we discussed, which I’ve done below with a few more besides to help you better demonstrate and communicate your value to clients at the outset of your relationship with them. On another day, I’ll set out how you continue this going forward to really cement your relationship with your clients.

 

Have a well thought out process and explain it to the client.

Jim showed me his agenda for his first meeting with a new client. It all made a lot of sense. However when pushed by me to role play the meeting, we discovered that the agenda was actually just a bit of a crutch and the meeting bore very little resemblance to the agenda.

When we unpicked this, it became clear that Jim had been using the agenda for years, partly in the belief that it demonstrated professionalism. It definitely can do, if you follow it. If you don’t follow it or even worse if it doesn’t really make sense, then it will achieve very little.

As you may know from previous posts, I’m a firm believer in spending a lot of time developing out your sales process and then building an engaging presentation to communicate It to clients. This builds trust, it demonstrates professionalism and should set out a roadmap that you and the client will actually follow.

 

Two ears and one mouth

Yep, we all know this one but it is surprising how often it gets forgotten. Jim was dying to get “stuck in” on the client’s behalf. So he was diving into the factfind as quickly as possible to learn all he could so that he could then advise. I firmly believe that this is a mistake. Now is the time to get the client talking. Why are they in front of you? What do they want to achieve? I’m not talking about growing their assets by 6% p.a. or building up a fund of €x. Instead what are their life ambitions, their real goals? What do they want to be able to do in the future?

When they paint these pictures for you, then you can start putting numbers against them. And help them identify what they have to do to achieve them. It might seem a bit “touchy-feely” at the start but trust me, it will feel very real to the client, as these are the dreams they are thinking about every day.

So it’s time to sit back and listen. There’s plenty of time for the factfind after this!

 

Don’t forget the everyday stuff

No matter what you call yourself; a financial broker, a planner an adviser – at the end of the day you are trying to improve the financial future of your clients. Jim does this in a very thorough fashion. He completed a very rigorous factfind, he analyses his clients’ risk appetite and tolerance and puts a huge amount of effort and innovative thinking into his recommendations. He adds real value in the product solutions that he recommends. And puts no time into the more mundane area of everyday budgeting and cashflow management…

I work with a financial adviser myself on my own affairs. He provides me with excellent advice; identifying objectives, risk advice, financial planning, cashflow planning & product choice. Ask my wife Louise (that is her real name!) why is he so good, and she will talk of the attention he has paid to our everyday income and expenditure. In her eyes the real stuff, the factors that we can control.

This can get lost in the rush to “get to the money”, helping the client to grow their wealth through the big decisions of investment strategy and product choice.

Apart from the other valuable support we get, focusing on the small stuff results in Louise making sure we never miss our review meetings with our adviser. This is also a very important factor in being happy to pay his fee every year.

 

Cutting down trees

Jim then showed me his reports. Well written, no typos and good grammar throughout. The problem is no-one will ever read them. They are just too long. As a result the clients don’t realise the thought that went into them, they assume there’s just a load of padding.

Get the key points up front in the report for the client. Try to get it on one page, certainly a maximum of two. All the discretionary reading should sit behind this in appendices. Some clients will read them, some won’t. But at least now they’ll all read the important stuff. 

Twenty page documents do not justify higher fees.

Work out what’s important

Usually a financial plan will result in multiple recommendations. This is where the client can get in a spin. Help them out of it, show them what is important in the short, medium and long term. What are the “must do” items and what can wait? Help them to prioritise their spending, their time and their attention, as they will struggle to do this themselves. They will value your experience and help in this regard.

This is of course by no means an exhaustive list of how to demonstrate value, instead they are just a few thoughts on how you can connect better with your clients at the outset of your relationship with them. Any views are welcome below!

What can Google Analytics tell Financial Advisers?

Online marketing tools have changed the game in relation to marketing by financial advisers. These tools offer a number of benefits; immediacy, better targeting, cost effectiveness and fantastic insights through the analytics available.

 

Most advisers are pretty clear about these advantages, however many still run online marketing campaigns without really leveraging the power of the analytics available. Now there’s no doubt that Google Analytics is a bit of a monster, there’s a huge amount of data available, to the point of it being a bit overwhelming! So here are some of the most useful measures available to you, to help you really maximise the potential of your online campaigns.

 

Some basic trends

The following measures can give you a good sense overall as to whether recent marketing activities are working or not, when you look at the trends over the period of the campaign and compare them to previous periods.

 

  • Number of visits: This gives you a good sense of whether your activities are increasing traffic to the site or not. The number of page views is another measure of this.
  • Number of visitors: Are your activities driving lots of visitors, or are the same people tending to return on multiple occasions.
  • New v Returning Visitors: Are you attracting high numbers of new visitors to your site for the first time, or are you mainly only attracting existing users back? This might suggest your marketing efforts are not reaching new audiences and need to be reviewed.
  • Pages per visit: Once people are landing on your site, are they having a good poke around (as you want them to do), or are they leaving quickly?
  • Time spent on site: Similar to the last one – is your content actually engaging the user to spend time reading the content or are they leaving quickly?
  • Bounce Rate: The big baddie… are people leaving the site from the page they entered without bothering to check out any other content?
  • Number of views on devices: This is becoming more and more important. Where are people viewing your website and as the number of views increase on phones and tablets, how does you site appear on these devices?

 

Once you get a handle on these, you’ll start to get a sense of whether your efforts are moving in the right direction or not. And then you can start to get into some really useful analytics…

 

Where visitors are coming from

The acquisition section gives you great insights into the sources of your traffic. Are most people arriving directly by typing in your URL, is your website address memorable? Or are they searching for your site in Google and if so, what keywords are they searching for to end up on your site? Once you know the keywords that people are searching, you can make sure that they are included in your website content and in any blogs that you write.

 

If your traffic is coming from social media, you can drill down and see which channels are delivering traffic. Is it the post that you are sharing on LinkedIn or is it your Twitter feed that’s driving your traffic?

 

And then when they get there…

The Behaviour section in your analytics gives you great insights into what people are actually doing when they land on your site. Apart from some of the trends mentioned earlier, there are other really useful insights to be gained in this section.

 

You can identify which pages people are entering your site on. This will help you analyse the traction your blog posts are achieving (or not). You can also see which are the most frequently viewed pages; this will give you a sense of the areas of main interest to the readers. Of course when you then overlay the time spent on each page and from where people are exiting the site, you start to get a real sense of where content is strong and where it is weak. You can then ensure that you have crystal clear “Calls to Action” on these high performing pages, giving you the best chance of turning these readers into enquirers and hopefully customers!

 

You can then run the reports across multiple dimensions for some really useful insights – find out where your traffic is coming from and also where it is landing. This might demonstrate the success of your blog for example, and the channels through which people are finding your content.

 

You can also set goals for your site – for example how many people are signing up for your newsletter or are downloading your brochure, and keep track of your progress against these goals.

 

Check out the spikes

The spikes in activity, either in visitor numbers or page views can be very revealing. When you dig into these, you will usually find that a marketing activity or other event is behind these spikes. This can give you really useful direction for future marketing activities – a campaign that you are thinking of running, where to attract future traffic to the site or the type of content to be writing. At a minimum, it may well give you some confidence that your existing approach is the correct one!

 

These are just some of the insights that can be gained from Google Analytics. I’d suggest you go in and poke around; you’ll be amazed at the valuable information that can be gained!

 

Are there any other particular analytics that you find useful? If so, let us know through the comments below.