Tag Archives: Financial adviser

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.

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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.

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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shell_game

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.

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.

Are You a Pain Reliever?

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by George Ray

I was recently stung by a bee in my backyard (one of the most painful places on the body to be stung). I’ve been taking some pain relievers to lessen the discomfort, and it got me thinking about how financial advisers can provide pain relief to their clients.  In fact, I believe that there are two primary ways that we provide value to our clients — by creating gains and relieving pains.

In my last post, we briefly looked at the need for financial advisers to continue to innovate and adapt their business models in order to avoid being disrupted — or wind up like Blockbuster, Kodak, or Blackberry (maybe soon). I’m a big advocate of completing an annual SWOT analysis (and have lead adviser workshops on the subject) so that advisers can examine their current strengths, weaknesses, opportunities, and threats (SWOTs).  This can be one of the most effective ways to build (and update) your business plan for the coming year (if done correctly). And although the SWOT analysis can be effective, I believe that we now have a need (because changes are occurring so rapidly) to actually take a step back even further by re-examining our business models much more frequently.

One of the key business model building blocks is your value proposition.  It must describe how your firm’s products and services create value for your clients. If you can’t clearly show a potential or existing client how you can create value for him, you really have no business talking to the client. Most advisers think about creating value by creating gains for the client (and I’m not just talking about investment gains). We often suggest that we provide better service (although we have difficulty defining what that means exactly). We might focus on the array of solutions that we have available. Or how long we’ve been in business. Or how many credentials we have after our names.

But your value proposition isn’t about you.  It should be focused on your clients. And your clients often have pains — financial pains. You can differentiate your business from other advisers by letting clients know that you can be a pain reliever. In fact, here are some questions to ask yourself about the pain relief ability of your value proposition:

  • Can you make your customers feel better by killing frustrations or annoyances that give them a headache?
  • Can you fix an underperforming solution from a competitor by offering better performance, higher quality, or new features?
  • Can you relieve the pain of difficulties and challenges that your customers encounter by making things easier or helping them get things done?
  • Can you help your clients sleep better by diminishing their concerns or eliminating worries about their finances?
  • Can you limit or eliminate the conditions that develop from common mistakes that clients often make?
  • Can you break down barriers that are keeping your client from adopting better solutions?

Take some time to think about your ability to be a pain reliever for your clients. Consider all of the things that you do to help them to improve their financial wellness, and help them avoid getting stung in the backyard.  It really hurts.

What Gets Referrals? It’s Not Always Obvious.

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I love this article by Katherine Vessenes of Vestment Advisors titled “What Gets Referrals? Exceptional Service” recently published at ThinkAdvisor. The article is full of excellent ideas that her firm has implemented to gain more referrals. But, what I really liked is that right up front she says “Our system of getting referrals from our existing clients is counter-intuitive. We don’t ask for referrals at all. We just provide awesome service—it has worked great for us.” Katherine mentions that her firm does things for her clients that “are obvious to the client and things that are not so obvious”.

Although she divided them up a bit differently (‘obvious vs. ‘not so obvious’) than I did in my recent post (You Can Get Referrals. Just Don’t Ask for Them.), I think you’ll agree that it’s important to help clients understand what it is that you do for them (exactly), how and why you do it better than anyone else, and how it is helping them to reach their goals.  This should be obvious.  Although sometimes it’s obvious to us, but not as obvious to our clients – which is why it may take some extra effort.

I believe that the ‘not so obvious’ tasks (she calls them ‘covert’) need to be made more obvious to the client if we are to get credit for them.  In fact, making those task more obvious might even make them ‘remarkable’ for the client. Here’s an example —

Katherine’s first suggestion is ‘Make things easy’ for your client. It’s a great idea. The father-in-law in her example had already made the suggestion to move a 403(b) plan to an IRA. She agreed and offered to help. It’s interesting that what she did was actually ‘remarkable’ to the client, although it seemed ‘obvious’ to her. The reason it was actually remarkable to the client was because it was previously hard (i.e., Dad told son-in-law what to do, but never followed through to help). When she got everyone together on the phone and made the transfer happen for the client, it created a remarkable experience for the client (she made it very easy with a simple phone call).  I can just hear this client at a dinner party say to someone “Well, yes, my father-in-law is a financial adviser, but (although my wife won’t like me to say this) I would recommend Katherine. She’s made everything so easy for us and provides outstanding personal service.  She just picks up the phone and makes magic happen.”

I’d suggest looking at each of her ideas and consider what she did that helped the client understand the benefits of working with her and her firm, and consider when she also did something that the client felt was remarkable.  Then, decide which of her suggestions you can put into place in your own practice. As always, share your thoughts in the comments.

Welcome to the Business of Financial Advice

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Welcome to The Business of Financial Advice. As a veteran of the financial services industry, my intention is to share and comment on current news and issues that affect the management of a financial adviser’s practice. I hope that financial advisers will find some valuable thoughts, ideas, and insights on the complex business of providing financial advice to clients.

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