Author Archives: therealgeorgeray

What’s your firm worth, without you?

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Empty office 2

by George Ray

Over the last few years there have been numerous practice management articles on the subject of succession planning. And, as you may know, few advisers have done much about it. In sessions that I’ve conducted, I’ve asked advisers ‘How many of you have a succession plan?’ Typically, fewer than half of the advisers in the room will raise their hands. Even more telling, when I’ve asked those who actually have a written plan to keep their hands raised, most of the hands go down.  And, when asked to keep their hands up if their written succession plan includes a funding mechanism in place to actually complete the sale or transfer of the business, usually there are no hands left.

Why do so few advisers have a succession plan? Here are some of the most common answers I’ve heard:

  • Too busy building the business currently to deal with it
  • It’s too far into the future to think about now
  • Not sure what the business is worth, or will be worth
  • Haven’t found the right candidate to take over

The first two answers are really just excuses. Succession should always be an objective for a business owner no matter how busy you are or how far into the future it will be before you retire.  We don’t let our clients wait until the last few years before retirement to start planning, so why should we?

In an article in Investment Advisor Magazine’s January 2014 issue titled “Untangling Ownership”, Charles Farrell and Fred Taylor of Northstar Investment Advisors of Denver, CO understand the real issues.  “In order to build any kind of enterprise value, to be worthy of receiving some sort of buyout when you retire, you have to build a business not a practice”, says Farrell, CEO for Northstar.

And this is the issue. Most independent advisers, build a practice that is unique to them.  They market themselves and their own money management philosophy.  Advisers desire to show clients that they are unique in order to attract new business. But this ‘uniqueness’ can backfire on you because when you leave, your business is no longer about you. So, what’s left for your clients after you told them that you are the pied piper?

Farrell goes on to tell us that “Saying you have a practice that’s unique to you, the clients are tied to you, the philosophy’s tied to you; there’s really no way for anyone to buy you out because there’s no way to tell how many of those clients will stay, what sort of revenue you’ll generate, not a year or two out, but really 10 years out”. Why would another adviser want your mice? They must be retrained to follow him. How long will that take? What will it cost him? And, how much effort will be needed?

This is why many succession plans have to include a transition element as well.  The outgoing adviser has to remain on board for a period of time so that he can introduce his mice to the new adviser’s tune. (The transition is also usually necessary because no funding mechanism was put in place early on, so the adviser must accept a note for a portion of the purchase, which doesn’t give him all the cash that he needs to walk away cleanly and fulfill his own retirement plans.)

How do you avoid some of the challenges to succession planning? Unfortunately, it may not be possible for some advisers.  Charles Farrell mentions that many advisers who start their own firms are Type A personalities. “They don’t like to listen to other people. They don’t play well in groups.”  Many independent advisers leave wire houses or larger practices because they want to strike out on their own.  They want to avoid ‘managing people’ and dealing with all of the issues (i.e., hassles) that go along with working (or managing, or owning) a large firm. But, it’s the avoidance of dealing with those very issues that will also prevent you from turning your practice into an ongoing business that will have value after you leave.

If you want your business to have value, you need to build value throughout the life of your business by recruiting associates who will eventually become partners.  You’ll need a program to transfer ownership to those partners to provide incentive for them to remain with the firm (‘their’ firm). You’ll also need to change your thinking when it comes to making the business all about you, Mr. Type A, by creating an offering (including processes, communications, etc.) that will make clients loyal to the firm – rather than just you.

This is no easy task, and cannot be accomplished in the few years before you’re ready to retire. Just like we tell our clients, the sooner you begin, the more likely you’ll be to accomplish your objectives. I reccomend that you read this excellent article at thinkadvisor.com for more insights from a group of advisers who have been successful in creating a business that will be able to transfer value to its advisers when they are ready to depart, while retaining value for their clients who stay on.

So, what’s your firm worth, without you?  Well, that’s really up to you — but not just you.

Putting Empathy on the Map

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Cropped Map

by George Ray

As we get closer to Christmas, we’re naturally thinking about what we’re going to give the people who are on our Christmas list.  We typically go through a process that attempts to help us by asking ourselves “What would my brother like for Christmas?” or “What would my 12-year old nephew want?” To accomplish this (and to come up with the perfect gift), we practice ‘empathy’.  Merriam Webster defines empathy as ‘the action of understanding, being aware of, being sensitive to, and vicariously experiencing the feelings, thoughts, and experience of another of either the past or present without having the feelings, thoughts, and experience fully communicated in an objectively explicit manner’. In other words, when we ask those questions, we try to place ourselves in the mindset of the person who will be receiving our gift.  By doing so, we hope to give them something that they will value, appreciate, or enjoy.

Empathy is an important concept when it comes to your business. As you think about your goals and objectives for the new year, now may be the perfect time to practice empathy with regards to your clients, and prospects.  The idea is to project yourself into your clients’ experience with you, your firm, and staff in order to gain a deeper level of understanding of your client — by placing yourself ‘in their shoes’.

To accomplish this you can use something called an Empathy Map that was developed by David Gray and his visual thinking company, XPLANE. The map is described in his book Gamestorming – A Playbook for Innovators, Rulebreakers, and Changemakers. Its use for businesses is also discussed in Business Model Generation by Alex Osterwalder and Yves Pigneur where it’s referred to as a ‘really simple customer profiler’. Osterwalder says that ‘it allows you to devise a stronger business model, because a customer profile guides the design of better value propositions, more convenient ways to reach customers, and more appropriate Customer Relationships. Ultimately it allows you to better understand what a customer is truly willing to pay for.’

Your use of the Empathy Map should include a visual representation of your ideal customer in the center. Around the customer are six areas that will help you to brainstorm the needs of your customer by ‘empathizing’ with them about their needs and desires. The map helps to get the process out of your head (where it usually stays when thinking about buying Christmas gifts for your family) and onto paper (where it will do you and your staff a lot more good). To help you, I’ve created a map that you can print and use for this exercise.  Empathy Map TBoFA 121113. (You’ll also find other examples by doing an online search.)Empathy Map TBoFA 121113

It’s wise to start with some basic demographic characteristics such as income, marital status, education, portfolio size, etc.  Much of this information can be found with a little digging through your CRM, financial planning software, and asset management reports. After pulling together a basic ‘objective’ profile of your typical client, the true value comes from ‘getting inside his head’ (developing a ‘subjective’ profile).  You’ll then want to ask the six following questions (which can be recorded in each of the six areas on the map):

1.    What does my client see? His environment. What does it look like? Who is around him? Who are his friends? What types of offers is he exposed to?
2.    What does my client say and do? Imagine what he could be telling others. What is his attitude? Are there conflicts between what he says and what he does?
3.    What does my client hear? What does his spouse say? His friends? Who really influences him? Which media channels are influential?
4.    What does my client think and feel? What goes on in his mind? What is really important to him? What are his emotions? What moves him? What keeps him up at night? What are his dreams and aspirations?
5.    What is my client’s pain? Biggest frustrations. What obstacles stand between him and what he wants to achieve? What risks might he fear taking?
6.    What does my client gain? What does he truly want to achieve? How does he measure success? What are strategies that he might use to achieve his objectives?

The goal of producing an Empathy Map is to create a customer viewpoint for continuously questioning your business model assumptions.  Understanding your customers’ needs and desires will enable you to better determine if you have the right Value Proposition for your business. It will help you determine if your customer will be willing to pay you for this value. And, it may help you determine how to better reach new customers who have the needs and mindset that match your Value Proposition. The point is to truly understand and empathize with their situation so you can design and provide a better product or service — as well as create deeper relationships with your clients.

So, what does your client want for Christmas? The same thing we’re all are interested in — your empathy.

Giving Thanks

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Thanks 1

by George Ray

It’s that time of year.  Time to think about and give thanks for all that we have. What do financial advisers have to be thankful for?  So many things. Here are just a few.

Firstly, the upfront costs or investment needed to build an advisory business provides those who possess an entrepreneurial spirit with the opportunity to build a business with much less capital than most other types of small businesses. Even many franchises require tens of thousands of dollars to get up and running.

Advisers have many different ways to structure their businesses, and also determine what products and services they will offer to their clients.  You can even decide what type of clients you want to service by building your business around a niche market (it’s actually quite a wise move).

You can choose from a wide variety of vendors that can become strategic partners – allowing you to gain scale in your business by outsourcing important functions and processes that could be accomplished more cost effectively and efficiently by someone who specializes in performing that service. There are money managers, marketing specialists, practice management consultants, social media experts, IT consultants, web design firms, and on and on. In fact, if there’s something that you need, but don’t want to do yourself, you can likely find someone who will do it for you.

We can be thankful for advancements in technology that are making us more efficient than ever before.  An investment in office technology can save you thousands of hours of work, and can help to lessen the need to expand staff positions. Today’s software programs can perform processes such as monitoring and rebalancing portfolios, and automatically mailing client newsletters. (You do still have to write the newsletter.) (Oh, wait, I’m wrong.  There are people who will write your newsletter for you as well.)

Technology is also enhancing and providing new (and often better) ways to communicate.  Advisers can place Skype calls to meet with clients ‘face-to-face’ without being in the same room, or even in the same city – allowing you to expand your business beyond the local geography. Online webinars can provide opportunities to update your skills and knowledge, and Google Hangouts can  offer a chance to collaborate with associates.

Advisers are also increasing the use of video to tell their story.  More and more adviser web sites are using videos to introduce the adviser in a friendly and nonthreatening way. Some videos are more formal — filmed professionally. Others are using a ‘down-home’ informal and friendly approach that can be very engaging and will resonate better with certain types of clients.

Advisers (much like their clients) are more mobile than ever.  It’s no longer necessary to sit down at your desk to access your client accounts.  Broker-dealers and custodians have recognized the need to provide their advisers with easy access to client information on smart phones and tablets.

And we should certainly give thanks that our regulators and compliance departments have gained some comfort around the use of social media, and lessened our reluctance to use it to build a market presence. More advisers are beginning to see the benefits of using Facebook, Twitter, LinkedIn, Pinterest, and other platforms to build their brand, create conversations, and gain new clients.

By the way, it also doesn’t hurt that we’ve had a stock market (DJIA) that has been generally rising over the past year, as well as the last 5 years, and recently topped 16,000.

Yes, there are many more reasons that we should give thanks, but let’s not forget the most important reason — our clients. Our profession gives us the opportunity to meet so many people.  People who need our help. They come in all shapes and sizes. Some successful. Others struggling. Most care about themselves and their families. Some want to provide charitable help to others.

They’re concerned about lessening the impact of taxes on their income, investments, and estates. They worry about outliving their money, and whether Social Security will be around for them when they retire.  They want to know how to prevent losing the large amount of money that they’ve accumulated in their 401(k) over the many years that they’ve worked, and they’re scared as hell that they will lose something even more valuable after they retire — their sense of self-worth and purpose when they are no longer a nurse, or a baker, or a Vice President.

This is the ‘WHY’ behind what we do.  It’s why we battle with the regulators. It’s why we suffer through the negative media stories. It’s why we endure the countless interviews to find the right people to staff our practices. It’s why we come in early. It’s what keeps us up late. It’s because we care. We care about helping people to reach their goals, to fulfill their dreams.  It isn’t easy, but when we are successful, there is no greater reward.  And for that alone, we should give thanks.

Recovering from a Disaster

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Storm cloudsby George Ray

We’ve seen the news reports, the interviews, the photos.  But it’s still hard to comprehend the devastation that took place from Typhoon Haiyan.  Few of us will ever experience this type of disaster on the scale that occurred there.

We feel for the people.  Our hearts are heavy. We send our prayers and make donations of money, food, water, and other essentials to try to help the people of the Philippines. It will take a long time for life there to return to normal – if it ever can.

And although it’s the people that are most important, as a business consultant, I can’t help but think about the thousands upon thousands of small businesses that have had their operations disrupted by the storm — because a disruption of a business hurts many people. Employees may not be paid, or may even lose their jobs.  Vendors and suppliers may lose their customer. Clients of the business may no longer receive the goods and services that were important to them. And, of course, everything that the business owner may have been building for themselves and their families could potentially be lost — maybe forever.

I’ve spoken to many advisers who have experienced disasters – from fires and floods to Katrina and Sandy. Some have disaster recovery plans, and have shared how their plan was helpful to the continuing operation and eventual recovery of their business, but many advisers were either poorly prepared or unprepared. How about your business?

As a practice management consultant, I’ve hosted sessions for advisers on disaster recovery, and thought it timely to share a few ideas here. There is so much that can be done to lessen the effects of a disaster on your business. There isn’t room here to discuss everything, but here are some ideas to get you thinking, and hopefully motivated, to create your own plan.

If your business is going to continue to operate smoothly – maybe even able to operate at all – you need a written plan.  Think about this — every large city, and even most small towns, have disaster plans in place to minimize the effects of disasters like tornadoes, hurricanes, floods, and earthquakes on their citizens.  And, most large businesses have backup plans so that they will have office space and access to computer hardware and files for employees should something happen to cause a disruption in their day-to-day business activities.  You must have a plan as well.  And, it should be stored in several places, so that you can get to it even if you can’t get to your office

Don’t try to do it all by yourself.  There are plenty of resources available online to get you started.  Do a Google search for ‘disaster recovery’.  In the top of the results you’ll find a great site by FEMA, the Federal Emergency Management Agency.  They know a thing or two about disasters.  There are also lots of sites that offer help to small businesses.  Network with other advisers.  Talk to other small business owners in your area. Brainstorm with your employees. Contact your broker/dealer and your vendors (fund companies, software vendors, etc.) to ask how best to work with them in case of a disaster – that could occur on your end, or theirs.

Your employee, client and vendor contact information should be readily available (i.e., a copy should be stored offsite) in case you can’t get to your (or no longer have an) office. (Before storing client information offsite, talk with your broker/dealer and compliance department so that you follow privacy regulations and any internal rules regarding client information.) Do you have multiple ways to contact your employees — through different communications channels? Do you have their personal email addresses, cell phone numbers, even their social networks?  Do you know their family members or close friends, and could you contact your employees through them if necessary? What about your vendors and suppliers?  And, of course, your clients?

By the way, expect employee absences. A disaster may have an effect on your employees.  If key personnel can’t get to the office because they are dealing with the impact of the disaster on their own property or families, you must have redundancy in your operations.  How will responsibilities be delegated to various staff members during a disaster? Cross training employees can allow your business to continue operating smoothly when an employee is sick or on vacation, but it becomes even more important during times of disaster.

I find that few advisers have a written operations manual or appreciate its importance, but having a written manual will help you and your remaining staff to continue to service clients when staff members who normally perform certain tasks aren’t available.  How do you get into the software to initiate a distribution for a client when only Jane has the password — because she’s the one who usually does the distributions?

It may have taken you years to build the infrastructure of your practice, so inventory your systems and have schematics of your infrastructure. How will you recreate your business, if it becomes necessary? Do you have the ‘blueprints’ to put your business back together? How would you go about it?  What would you need? How would you access it?  Where would you start?  What would it cost?

One of the most effective suggestions that I can make to help you recover more quickly from a disaster is to choose an ‘owner’ to direct the recovery. If you are fortunate to have an employee who has strong organizational skills, who is a leader, and is very responsible, then make that person the owner of your recovery.  Having someone in your firm that you can rely upon to take charge of the administrative aspects and details of the recovery can free you to work on big picture strategic initiatives, and give you more time to talk with your clients.

Large cities and town conduct disaster drills to test and refine their plans.  You should also. Conduct a drill with your employees to walk through your plan, the possible scenarios that could occur, and how you will handle them. After the drill, ask your staff questions such as ‘how did this impact our business?’, ‘how did this impact what you do?’, ‘what can we do to accelerate the recovery and get back to normal?’

Throughout your discussions, don’t forget the most important component of your disaster recovery process – your clients.  It’s very important to clearly communicate what’s taken place and keep your clients informed of your progress. An effective recovery plan should allow you to operate in a ‘business as usual’ mode, but, if it’s necessary to make changes in your operations in order to accommodate the conditions, do your best to limit inconveniences to your clients.  Most clients will understand that it may take longer to process requests after a disaster has occurred, but will likely want to know that their assets and investments are ‘safe’.  And, they may want to be reassured that any private information is also secure.

Having a well-constructed, written disaster recovery plan that has been thoroughly prepared and effectively communicated to everyone who may be involved in the recovery of your business may help you to continue to operate during a challenging time, and get ‘back to business’ much sooner.

The Client Experience Matters

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mints on the pillowby George Ray

“The financial planning experience is a combination of a dental exam, math class, and marriage therapy” according to Dr. David Lazenby, speaking at a recent FPA Retreat conference. No wonder advisers have difficulty attracting new clients and getting referrals.  What couple wants to go through that kind of experience – annually? And, why would you recommend it to your friends or family?

There is no doubt that we could must improve not only the delivery of our services, but more importantly the perception of value and the client experience.  These days we are no longer competing solely with other financial advisers or advisory firms, but with companies like Amazon, Zappos, Nordstrom, and Apple. Companies who have learned how to provide their customers with memorable (even ‘remark-able’) client experiences whenever an interaction takes place. Companies who our clients love and wish we could emulate with the experiences that we provide.

Investment Advisor Nov 2013I just finished reading Michael Kitces’ article titled ‘What if Financial Planning Was More Like Build-A-Bear?’ in the November 2013 edition of Investment Advisor magazine (you should also be following his Nerd’s Eye View blog). If you have children, and have a Build-A-Bear store in a mall near you, the experience is probably familiar (my daughter had her 9th birthday party at one with her friends). As Michael describes in his article, the company takes ‘a product long since commoditized’ (teddy bears) and turns the process from ‘a few minutes at a cash register or website into a multi-hour interactive experience’ for you and your child. The child has a ‘much deeper buy-in’ because he or she is building a ‘new friend’, and Mom and Dad end up spending twice as much money to get the ‘same commoditized product’ (Yes, this is true, Michael).

Wait a minute. Did you get that? Let me say those two phrases again – ‘much deeper buy-in’ from the client and ‘willing to pay twice as much’. What adviser doesn’t want clients who are fully ‘bought-in’ to him and his firm, and willing to pay more for the client experience he provides — if indeed there is superior value?

So, what could we do to enhance the client experience? The Investment Advisor article suggests that changing the experience to be more interactive for the clients will create stronger relationships which will lead to more referrals. People need help with basics like organization, so we could assist them by sorting through their statements and prospectuses to help them decide what to keep and what to discard (although I’ve seen few advisers who are willing to do this), but we could go even further.

I’ve always told advisers that there is a big difference between data and information. That difference is primarily one of perspective – who’s looking at it. Data is raw. It may be organized, but it’s still just data. Until it is converted into relevant and useful information for the user (by placing into the proper context), it offers little value. As an example, advisers will often simply take a report from a money manager or fund company and pass it along to their client. In most cases the report was written for the adviser (not for the client) and has very little value to the client.  The fund company may have taken data and converted it to useful information for THEIR client (i.e., the adviser), but now the adviser must take what is data (from his client’s perspective) and turn it into useful information for HIS client.  This is where value is derived.

Mr. Kitces also says that delivering a financial plan to a client as a ‘giant tome, even though we collectively acknowledge that virtually no one reads them’ is not an ideal experience for the client either. Ideally, showing the client the results and recommendations through a live presentation using interactive software may be much more effective. The good news is that more and more advisers are starting to use iPads and large flat screens in their conference rooms to attempt to provide a more graphical and flexible solution for client discussions. The bad news is that we are still in need of more improvements to financial planning software before it becomes easy for most advisers to use it to interactively deliver that great client experience. As I mentioned above, financial planning software typically takes client data and uses it to prepare useful information for the adviser, but software companies need to work harder to help the adviser translate and organize the client’s data back into useful and relevant information for the client. (Companies like Dr. Lazenby’s ScenarioNow and firms like eMoney appear to be working toward this goal.)

I also love Michael’s suggestion to use mind maps to illustrate a client’s situation. I’ve frequently used mind mapping and electronic tools like Mindjet’s Mind Manager software to map out difficult concepts that I’m trying to understand. John Bowen of CEG Worldwide (and his co-authors Patricia Abram and Jonathan Powell) do a nice job of showing how mind mapping could be used to create a ’Total Client Profile’ in his book ‘Breaking Through – Building a World-Class Wealth Management Business’ (page 53). Imagine if the map could be interactive – allowing the adviser and his client to navigate through it during their planning meeting — and make changes, and see the consequences, as they review it.

And something else that I believe needs to be incorporated into the client experience is the use of data visualization.  We see these types of graphics used often to organize and summarize big data into visual information that can be more easily digested. I believe that it will become easier for financial advisers to produce this style of visual graphics that will be useful in client meetings. You can see examples at Visual.ly

Michael says ‘People will pay a lot more to an experience-based business that charges them for the feelings they get from engaging than they will to a business that sells stuff or charges for services rendered.’ I agree. Please read the valuable insights he offers in his Investment Advisor article, and look for ways that you can improve the client experience for your clients today.  Ask your financial planning software provider to incorporate more interactive tools and features into their software.  Watch for new tools coming from companies outside of our industry and consider how they could be used to improve the client experience. It matters.

Find Your Piece of the Sky

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vapourTrail wideby George Ray

The voice on the other end of the phone said, “Here’s my problem, George. I have so much business that I don’t know what to do. Can you help me?”

In my time as a practice management consultant, I’ve talked with many financial advisers about various issues and challenges to their businesses, but this was certainly the most unusual call that I’d ever received.  My initial reaction was that it was a prank. I was being ‘punked’.

“OK. Very funny. Which wholesaler put you up to this?” I said to the adviser.

“What? No, I’m serious” he said.

“OK, then tell me about your problem.”

“Well, I spent many years as an airline pilot for one of the big airlines.  Flew all over the world, and really enjoyed my job, but I was always interested in the financial markets, investing, and the economy. I managed my own money, and did pretty well.  I decided that when I retired from flying for a living that I was going to be a financial adviser, and that’s what I did. I became a CFP and an RIA and have my own firm now. And, I’ve become known as the ‘financial adviser for airline pilots”.

“That would not seem easy to do” I said. “I imagine those guys are pretty tough to cold call. (Lame attempt at humor.) How do you market to them?”

“Well, that’s the thing. I don’t. I started off working with some of the guys that I flew with. Because I really understand them and understand the company’s benefits, they’ve been giving me tons of referrals. Pilots in the cockpit on a long flight get to know each other.  We spend a lot of time talking while flying. We start out complaining about the company, then our ex-wives, and eventually the conversation turns to where we want to retire and what we want to do.  By the end of the flight, my client has the other pilot convinced that I’m the only guy that he should be talking to. The other pilot gets off the plane and immediately calls me to ask if I can manage his money.”

“Well, that makes sense. You’ve got a real affinity with that group. You were one of them.”

“Sure, but here’s the real problem.  Financial advisers usually have most of their clients located within 20 or 30 miles from their office. My clients are literally all over the world. I work with pilots in Singapore, London, Mexico City, and Auckland.  My business has grown to become a global firm, but it’s just me and my assistant right now.  I wanted to keep this simple. I’m actually supposed to be retired. But this has been so successful that I’ve got to get some help to decide which way to go. That’s the reason for my call. Do I refuse to take on new clients, or should I start growing my firm?”

I have to admit that I tell this story almost weekly. It’s usually because I’m trying to help an adviser to see the value of choosing and building business in a specific niche market.  (I work to connect advisers with Federal employees.) But finding the right niche isn’t the biggest challenge for most advisers.  It’s convincing them in the value of having a niche in the first place.  Most advisers are afraid to choose a niche because they are worried that they will be limiting the amount of business that they could do.

An adviser: “But, George, if I limit myself to working with only one group of people, I could be missing out on lots of other potential business. That’s not what they taught us at adviser camp.”

Me: “What I’m saying is that if you focus your business on a niche then you won’t be scrambling to find clients within 30 miles of your office. They could actually be seeking you out from around the world – just like the former pilot.”

Another adviser: “But, George, I’ve never been an airline pilot, so I don’t think pilots will want to work with me.”

Me: “OK. So, you were listening (at least he caught the part about the pilots), but you need to understand the lesson in my story. Find a group that you have an affinity with.

An adviser may find a ‘natural’ niche based upon an affinity with a particular group. For example, a former teacher will likely find it easier to relate to and work with teachers.  An adviser who worked for a large employer in his city may find his niche in working with employees of his former company. People feel comfortable working with someone when they have something in common – like the pilot and his pals. A natural niche may be based on geography, common philosophies, race, religion, or a job.  Niches are well-defined groups of people with something in common. Products (e.g., annuities or mutual funds) are not a niche.  Women are not a niche (too broad a category). And stop telling me that your niche is ‘people with money’. That’s not a niche either.

Still another adviser: “But, George, I don’t have a natural niche. So, what can I do?”

An adviser who has difficulty finding a natural niche can still develop one by gaining a body of knowledge that may be unique or specialized.  In other words, if you learn more about your subject than anyone else (by becoming an expert), people in need of your expertise will flock to you for your help.  An example of this in the financial services industry is Ed Slott. Simply Google his name and you’ll find his website – irahelp.com.  His name has become synonymous with IRAs, and he has built a large (and certainly profitable) business on being the best person to contact on Individual Retirement Account questions – whether you’re an adviser needing training, or a consumer watching one of his television shows on a PBS station.

But what about the financial adviser to airline pilots? Well, we had a good conversation about direction and strategy. He just needed help with setting the coordinates on his compass for his next destination. You see most advisers believe that the sky is the limit, but it’s pretty big and mostly empty up there. Unless, like the former pilot, you’ve managed to find the ‘right’ piece of the sky — your sky.

No Dinner for You

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Dinner has endedby George Ray

I like real life case studies. Let me share one with you.

Last week I spoke to 134 Federal employees in Wichita, KS in a large auditorium at Wichita State University. A financial adviser from Kansas worked closely with the Wichita Federal Executive Association (WFEA) to bring this together. The program consisted of an employee benefits briefing for Civil Service Retirement System (CSRS) employees in the morning, and a program for Federal Employees Retirement System (FERS) employees in the afternoon. Many employees brought their spouses along with them, and drove up to three hours from locations around the state in order to attend. (And, to their credit, none grumbled about the government shutdown.)

When I talk with financial advisers about the opportunities to help Federal employees, I often recommend that hosting an employee benefits program similar to this one offers an ideal occasion to meet people who need their help. The association in this particular area only hosts these programs every two years.  During that time there is a large vacuum of questions that builds and is looking for escape.  We were able to help release that vacuum with the information that we provided.

The comments we received on our evaluation form from the attendees were very favorable, but many would have preferred more time to ask questions about their individual benefits and circumstances.  Those who had additional questions added their contact information to the evaluation form, and about one third of them want to meet with the adviser in the coming weeks (and possibly many more in the future, as he builds his presence in this market).

I continue to see advisers who try to attract new clients with expensive evening dinners at a nice restaurant (Maggiano’s and Ruth’s Chris are particular favorites) and a general program on financial planning or estate planning.  These agendas are a ‘dime a dozen’ and require large expensive mailings to attract fewer than 20 people.  The message is usually designed to scare the attendees into meeting with the adviser, and can be heavy on the sales pitch.  Advisers are typically disappointed with the results, but continue to offer these programs because of the lack of a better idea.  They could take a lesson from this adviser who

  • Has decided on a niche market for his practice (working with employees of the nation’s largest employer).
  • Worked with an organization to host the program and invite their members, (in this case, the WFEA) rather than blindly sending mass mailings.
  • Didn’t need to buy anyone dinner at a nice restaurant to motivate them to attend (we provided communications materials to the organization’s members to explain the benefits of attending).
  • Contracted with a firm that has developed and successfully presented these types of programs regularly, and specifically for his market (my company).
  • Wasn’t afraid to bring in an outside expert to professionally present the information (I believe that was me).
  • Provided useful, relevant, and objective information which was designed to really help the attendees, rather than to mislead or scare them.
  • Offered to follow up with only those who actually requested his help.

As a result of his efforts, it wasn’t necessary for this adviser to spend thousands of dollars on mass mailing of invitations. In fact, he may actually RECEIVE invitations to present similar programs from the Federal agencies whose employees couldn’t attend (after hearing about the program from their colleagues). This case study is an excellent example of a successful niche marketing program.

Do you want to attract someone to your seminar? First, decide exactly who you want to attend. Then, develop a program that is unique and targeted to that particular audience. And, enlist the help of an interested organization who may also benefit by helping you to sponsor or host the program. Maybe it’s time to finally stop those boring, cookie-cutter financial planning dinners and try something new. Sorry, Maggiano’s.

Re-Positioning

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by George Ray

In my last post we talked about building a positioning statement using as three-step approach (go here if you missed it) that starts a conversation with a potential prospect.  When suggesting that financial advisers use this approach, I often get two big questions that are valid, and should be addressed.  The first question deals with why I recommend the three-step approach specifically for financial advisers, and the second question is concerned with the fear of closing off the conversation by offering only one specific problem that you can solve.  Let’s take a look at each of these questions.

Question One: An adviser said, “George, why should I say to someone ‘You know how most people have this problem? Well, what I do to solve it is this.  And, the reason I do that is because they will feel like this after I’ve helped them.’ That seems like an awfully long and hard way to answer the question ‘So, what do you do?’. Why couldn’t I just say that I’m a financial adviser, a financial planner, or a wealth manager?”

You’re assuming that most people know what a financial adviser or financial planner really is, and what he actually does.  But, get 20 financial advisers together in a room and ask them about the services that they provide to their clients.  Ask them to describe their businesses.  You’ll likely get twenty different answers.  So, if we can’t agree on what we do and how we do it, why would we expect anyone else to understand our jobs?  That’s why describing a problem, the solution to the problem, and the emotion that results can be an ideal solution.  It focuses the discussion where you want it to go, and helps to explain what you do as an adviser (not what all other advisers do). However, this method really works best when you have a job that isn’t well understood (like a financial planner), or may have a lot of variation to it  (like a financial planner).  It doesn’t work so well for a person who has a job that we know well.  Here’s an example that shows how silly this could be:

Me: So, what do you do?

Guy: Well, you know how when people’s houses catch on fire they need to put it out?

Me: Yes?!

Guy: Well, what I do is drive up in a big red truck with a hose and a ladder and put it out.

Me: Oh?!

Guy: Because when I do people feel much safer and happier.

Me: So, you’re a fireman??

Guy: Yes.

Me: Jeez, why didn’t you just say that? I know what a fireman is. Do you think I’m a moron?

This is a ridiculous conversation.  We have a  pretty good idea of the fireman’s job, so this really isn’t necessary.  Yes, he could have just told me that he was a fireman. But when the job and its duties aren’t as clear (or if you want to clarify them), then the three-step method can help you do that.

Question Two: “George, I don’t like this method because I may introduce a problem that I can solve, but what if the person that I’m talking to doesn’t actually have that problem? Isn’t that the end of the conversation?”. For example:

Guy: So, what do you do?

Me: ‘You know how most small business owners are so busy running their company that they have little time to spend managing their investments?

Guy: ‘Gee, no I don’t. I’m not a small business owner.’

That’s OK, it isn’t end of the conversation. It would have been better to ask ‘So, what do you do?’ to him first, which would help you to decide which problem that you want to tell him that you solve, but In this situation, one of three scenarios is likely to follow:

1.     Firstly, he may disqualify himself for you. OK, so he isn’t a small business owner, and that’s you’re target market, so you’ve just eliminated him as a prospect.  Keep talking if you like — you can relax and have an interesting conversation about another subject that isn’t all about you. Or, if you’re really on a mission to find new business, then move on to someone else.

2.     Secondly, he may ask you for an exception.  “I’m not a small business owner, but I could really use some help with my rather large investment portfolio.  Would you be willing to help me?” Since he doesn’t fit your target, it’s your call on whether you want to make an exception. “Well, I usually just work with business owners, but when you say large, exactly how large is it?”

3.     And lastly, he may offer you a substitute.  “I’m not a small business owner, but my uncle is.  You should really talk to him.” Ask him why, and if he’ll also introduce the two of you.

So, don’t be afraid to build your positioning statement by using this three-step method, and use it consistently when you meet someone who asks ‘So, what do you do?’  You’ll have a better opportunity to explain what it is that you actually do, and how you help people.  Even if it doesn’t land you a new prospect with the guy or gal you’re talking to, you may find that it will still lead you to new business.

Position Yourself for Success

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chess positioning

by George Ray

Have you ever had an opportunity to introduce yourself to a potential client (maybe the big one that you’ve been waiting for years to land)  — and blown it?

I’ve talked previously about the importance of having a value proposition that resonates with your customer segments. But before you even have the chance to explain all the value that you could offer this potential client in your new relationship, you must position yourself to have a meaningful conversation with him.  Your positioning statement (the modern version of the old elevator speech) is essential.  Without one, you may never get to the point of being able to show your value.

In workshops that I’ve conducted with advisers on this subject, its unfortunate how many advisers believe that they have a great positioning statement, but don’t.  In reality, most are poorly formed and/or poorly executed. I even had one adviser, during a role play, begin by asking how much money I make.  When I told him that he doesn’t have the right to ask that question to someone he’d just met, he was flummoxed. (I’ve always wanted to use that word in a blog post.)

Poor positioning statements are filled with jargon like “I’m a fiduciary” (What’s that? Sounds boring. I’ve got to go now.) or contain irrelevant information like “I have a Series 7 and Series 63”.  (Who cares? Can you help me figure out how much I need to retire?). Poor positioning statements are dangerous – they can kill the start of almost any conversation.

I’ve heard lots of excuses reasons that an adviser can’t (or won’t) build a solid positioning statement. They say ‘George, you just can’t condense how great I am and all that I do into 30 seconds.’  (I say watch any Apple commercial on TV.  They know how to do it.) I’ve also heard ‘I don’t want to sound canned or phony with a rehearsed elevator speech.” (When well-rehearsed, you will sound natural.  Think about actors in a play.  They know their lines and how best to deliver them BECAUSE they are well-rehearsed.) Another version of this is ‘I may need different versions depending upon who I’m talking to, so I just play it by ear.’ (The best jazz musicians can ‘play it by ear’ because they have mastered the melody, chords, and rhythm of a song.  That allows them to easily improvise. You need to master your basic positioning statement before you’re good enough to start improving.)

The real problem, which needs to be tackled first, leads us back to the value proposition.  A great positioning statement forces advisers to identify and articulate their value.  You must first have a clear value proposition.  That’s hard.  It takes work. It requires knowing who your customers are and what they want (which could lead us into a discussion on another adviser challenge – creating an ideal client profile.)

So, what’s the solution? Firstly, understand that your positioning statement and value proposition are very different.  The positioning statement has only one purpose — to open up a conversation with someone you’ve just met who at some point likely says ‘So, what do you do?’  How you answer that question will determine whether he will permit you to continue.  You’ve only got about 8 seconds to get his interest (i.e., the attention span of the average adult) and you should probably know that there is a woman in a slinky red dress at the bar that he can see behind you over your shoulder – so you may only have about 4 seconds.

The best way I’ve found to create an effective positioning statement is by combining these three building blocks. If done correctly, you will accomplish your goal of opening a conversation with someone. (After that, it’s up to you where you want to take it.)  To start . .

1. Provide an example of a problem that most of your clients encounter. You can do this (after the ‘So, what do you do?) by starting with “You know how . . . “ and then use an example of a problem that you can solve. For example, ‘you know how people have trouble saving money for retirement’ or ‘you know how people can’t figure out how much they’ll need to send their kids to college’. More common and broader problems can be used when you don’t know much about who you’re talking to, but if you’re at a cocktail party with a roomful of executives from Big Local Company, Inc. then improvise (you well-rehearsed jazzman, you) by saying ‘you know how executives with stock option plans can’t decide when they should exercise their options’. (As the stock option-rich executive shakes his head and says ‘Yes, I certainly do’.)   And, then . .

2. Explain how you solve that problem. You can do this by starting with ‘Well, what I do is . . . ‘ and then tell him exactly what you do to help someone with that problem.  So, let’s carry through our last example — ‘You know how executives with stock option plans can’t decide when they should exercise their options?’ “Why, yes, I certainly do because I have that problem.” ‘Well, what I do is create customized models for my clients that illustrate all of the possible scenarios to give us the best information to make a decision on when to execute those options.’ “Wow. That’s exactly what I need. Are you accepting new clients?” Isn’t that a much better positioning statement? It got you into a meaningful conversation (and he also lost track of the slinky red dress). But you can’t stop there. Next . .

3. Tell him why this is important to him. Don’t just tell him that you can solve the problem. You must finish with emotion. Finish with the feeling that he will get when you have solved the problem for him. Tell him WHY you do what you do.  “I do this BECAUSE making these important decisions on how best to exercise stock options relieves my clients of the stress of having too many of their eggs in one basket, and often we can even find a little extra for them to treat their family to a great vacation”. “Where have you been all my life? Please help me. I want to feel like that too.”

I’ve found that using these three building blocks can be the most effective way to create a positioning statement that will open conversations.  Here, let’s see if it works.  You know how financial advisers often have trouble introducing themselves to new potential clients? Well, what I do is provide them with the building blocks to build an effective positioning statement. Because when I do, they’re able to gain many new clients and build a more successful practice by simply knowing how to effectively answer the question ‘So, what do you do?

What if YOU Created the Disruption?

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Newton Cradle Crop 2

by George Ray

(Damn. This one’s a bit long. Better grab a cup of coffee.  Or maybe Instapaper.)

We’ve been talking about the disruptive changes that could occur to an adviser’s business model and where they might originate (for a review, see this post). I’ve suggested that every business should be concerned about disruption, provided some examples, and said that financial adviser practices are not immune.  But let’s turn from the negative idea of disruption to the positive side —- INNOVATION.  Can you proactively innovate in your practice to stay ahead of the potential disruption that is inevitably on the horizon?  And, (now ‘free your mind’ as Morpheus told Neo in the Matrix), could the innovation that you put in place in your own practice actually become some other adviser’s disruption? (and, just as Neo reacted, it’s OK to say ‘Whoa’). Rather than waiting around to have your business disrupted by someone else, what if it was you who proactively innovated — and created the disruption? Hadn’t thought of that, had you?

Ideas for business model innovation can come from almost anywhere, but there are primarily four hubs (or epicenters) that can be a source for business model innovation. Each of these hubs can serve as a starting point for major changes to your business model and have the potential to create powerful changes in your practice.  Let’s take a quick look at each of these four hubs:

1. Resource-driven hub

Innovations that are resource-driven usually originate from within your organization’s existing infrastructure, but could include products and services that you get from your key partners.

For example, Microsoft used its extensive software development resources to drive the innovation of its successful gaming platform, the Xbox.  This gaming/entertainment machine wasn’t originally in their business plan, but they realized that they could use their existing key resources (programmers, hardware designers, manufacturing partners, etc.) to open up a new market for their business.

With a bit of brainstorming with your team, are there any resources that you have developed that could be utilized in a different way to provide a product or service that could be of value to your existing clients — something that your competitors aren’t offering? And, more importantly, could you use those resources or key partners to help you open up a new market for your business (much like Microsoft did with the Xbox)?

2. Offer-driven hub

Your offer is your value proposition.  You can certainly innovate by changing your value proposition, but it will create changes to other components of your business model.

As an example, we saw in our own industry years ago the rise of no-load mutual funds. Some fund companies changed their offer by telling consumers that they didn’t need an adviser, and should do it themselves.  We can argue how successful they’ve been and what this has done for (or to) clients, but it certainly created disruption in my practice back in the 1980’s.  This new offer by some fund companies increased their revenue streams (i.e., they no longer had to pay commissions to an adviser), but may have added to their cost structure (i.e. they had to pay to advertise directly to the consumer and now hire their own service staff). This offer-driven innovation certainly placed these fund companies in a different space in the marketplace.

Today, there is talk of online robots (Michael Kitces says cyborgs) that use artificial intelligence to replace advisers by offering financial advice at a lower cost to consumers (e.g., Betterment and Wealthfront). You may not be frightened by this, and even laugh it off as something that will only take hold at the lower end of the market (i.e., for consumers with lower incomes and smaller investment portfolios), but back when you owned all of those big record albums wouldn’t you have laughed if Steve Jobs came from the future to tell you that one day you could have ‘a thousand songs in your pocket’?

3. Customer-driven hub

Have you ever seen a pop-up box on a website that is offering you a chance to connect directly to a live chat with a salesperson who can answer your questions?  Have you ever shared a comment about something you purchased or about your meal at a restaurant? If so, you’re seeing the result of customer-driven innovation. Customers want to easily find someone to help them get answers (hence the rise of the pop-up chat box) and also have a way to share their comments about their experience directly with the business, or with its other customers. So, are you reacting to your clients’ needs by implementing innovative solutions in your practice that provide increased convenience, better information, or faster access to you and your staff? What are your clients telling you that they need? Are you really listening?  And (here comes the ‘Whoa’ again), why not try to listen to what your competitor’s clients are saying? If he’s not listening, and you are, your customer-driven innovation may bring you some new clients – his, actually.

4. Finance-driven hub

Changes to your business model that are driven by finances can have a significant impact on your revenue streams, and many of the other business model building blocks as well.

We’ve all heard of the razor vs. razor blade analogy.  The company forgoes the revenue stream and potential profit that it may get from selling the razor by giving it away for free — in order to make higher margins selling the blades.  Printer companies do this also – the price of the printer is relatively low upfront, but the long-term ownership costs can be high because of the price of the ink cartridges.

We’ve seen advisers who forgo a potential revenue stream by giving away a financial plan for free in order to get the product sales that may need to be implemented as a result of the recommendations in the plan.  (We’re assuming that this is a real plan, and not just a disguised sales piece.) But there are also fee-only advisers who forgo the revenue from product sales completely. Their value proposition (i.e., offer) is much different from the adviser who gives away the plan for free.  They’ve decided that they can build a revenue stream that won’t fluctuate as wildly with changes in the market or a lack of sales. And, as a result their customer segments are likely much different from the sales person.  They work with different key partners than the salesperson.  And, the other building blocks of their business model (distribution channels, customer relationships, key activities, and cost structures) are also affected.

Innovation originating from the finance-driven hub can be the toughest for your business to take.  We’ve all seen stories about the adviser who decides to switch ‘cold-turkey’ from a commissions-based business to a fee-only practice.  He’s developing a brand new revenue stream while completely giving up his existing revenue sources.  This may be noble, but it’s very difficult to manage and to survive.

So what should you do now? Well, consider these four hubs of business model innovation as you look for ways to innovate in your practice. Each of them could provide starting points and direction for innovation. I suggested a rather bold move – innovate proactively to cause disruption rather than passively waiting to be disrupted.  Your innovations may not come to you easily.  You’ll need to continually watch for ideas and search for opportunities. But, if you’re not comfortable with this, you could always just take the blue pill instead of the red one, Neo.