On Becoming a Trusted Financial Advisor

“You can get everything in life you want if you just help enough people get what they want” – Zig Ziglar, “Secrets of Closing the Sale”, 1984

What type of trusted financial advisor should you be? There is a lot of discussion in our industry around this topic. Russ Allan Prince an expert on the private wealth industry, president of the market research and consulting firm, Prince & Associates, has conducted a considerable amount of research on this topic. Among other things he found that most people want their broker to be a “wealth advisor”.

One of his studies found that investors will give more of their assets and will refer four times more people to the advisor who takes a more holistic approach to his/her practice versus the “product peddler” who takes a more narrow view of a client’s financial picture. The advisor who asks about the client’s hopes and dreams for the future and develops a strong working relationship with that client will reap the rewards on a number of fronts. The Prince survey showed that once you make this holistic connection with your member/clients and prospective member/clients you will discover member assets that you did not know existed. As a result, your member becomes more successful in their financial life, you reap the financial and psychic rewards and the credit union retains a happy member who brings in additional assets, takes advantage of other credit union products and services and refers friends and acquaintances to you and the credit union. Sound far fetched? Read the quote above again.

Let’s look more closely at the Prince survey. 4,106 brokers participated in the survey. The brokers fell into three distinct styles of managing their practice:

Wealth Manager – comprehensive holistic approach to managing their clients’ financial lives including the assets as well as the liabilities of their clients; a planning orientation to solving financial problems.

Product Specialist – in this model the broker focuses on a product niche i.e. managed accounts, fixed income, etc.

Investment Generalist – brokers provide a wide range of products to solve client financial problems. They do not use a comprehensive financial planning approach.

65.5% of the brokers surveyed fell into the investment generalist category. The next largest segment is the product specialist, 22%. The smallest group was the wealth manager (12.3%). The survey found that the brokers who took a more holistic approach to their business enjoyed the greatest increase in year over year revenue for their financial planning practice. Why? The “wealth manager” takes a comprehensive planning approach to their financial proactive and creates integrated, customized solutions for their clients. They leverage client relationships, cross-selling and providing products and services not tied to the markets. The more products and services you can offer, the less affected you will be when there is a market downturn because you will have an array of products to offer such as insurance or estate planning. In addition, the deeper your relationship with your clients, the more opportunities will develop to help those clients.

By comparison, the investment generalist and the product specialist typically do not fare as well as the wealth manager year in and year out. Typically a product they specialize in will fall out of favor due to market or regulatory conditions and their production revenue falls accordingly. In addition, they have not deepened their client relationships so consequently they do not uncover the opportunities to help their clients in other ways as does the wealth manager.

How do we become a wealth manager? Certainly having the resources necessary to help your clients is critical whether it is financial planning software, estate planning resources, or a CFP designation (or other education opportunities), it takes a commitment to expand your comfort zone and your practice. It also takes a commitment to get to know your clients. Are you asking the right questions? When was the last time you asked your clients or prospective clients the following questions?

  1. If you could relive one vacation, which one would it be? Why?
  2. Who influenced you most about your views on money?
  3. What are three checks you would like to write in retirement?
  4. On a scale of 0 to 10 how much confidence do you have in your investment plan?
  5. What’s going on in your life right now that could impact your financial future?

Our members typically will not volunteer the answers to these questions unless we become a trusted financial advisor and deepen our relationships by asking the right questions and getting the answers that will allow us to solve our members’ financial problems. Only then will we become true “wealth managers” to our member clients.

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SME Managerial Incompetence and the Pitfalls to Avoid

Have you ever asked yourself why most businesses fail? In the UK on average two thirds of all businesses fail within 3 years. This is a horrifying statistic. Most business failures tend to blame everyone else but themselves for their misfortune, as Robert Craven, a personal favourite and marketing expert, and a leading authority on business advice to the UK SME sector says. Independent UK research in recent years points to two key factors: poor marketing and a failure in financial management. Criticism of managerial incompetence suggests to me a weakness in the SME management decision-making process, and follow through – the action-taking on any decisions made. What action can you take as a business owner when sales plummet, or profits crumble, and the pressure is on? A common consensus amongst management consultants, business mentors and business coaches is that the temptation to bury the head in the sand is so strong in many SMEs cannot make that shift. So what can we do to avoid these management pitfalls?

Proposals made by leading experts have suggested that SMEs need an ‘early warning system’. Is this like a fire drill, a ‘what to do in the case of fire’? This seems logical, and the balanced scorecard (Kaplan) is an excellent system for SMEs to monitor their business performance. The concept was developed and expanded in the US, in the late 1980’s and early 1990’s, and provides a single management report which offers management an up-to-date position of business performance at any one time, based on key performance indicators (KPIs). Lots of UK Corporate companies implemented this system with good effect, most notably the Halifax in its meteoric rise in the 1990’s, leading to its merger with the Bank of Scotland (HBOS). The scorecard can be sued to track any aspect of the business from money generating activities (daily revenue, transaction value per customer, volume of new customers, value of refunds and returns, customer complaints) to other critical success factors like productivity (lead times, unit costs, waste, unit volumes) internal business processes, human resources (staff attendance, even staff morale), finance (creditors, debtors, fuel costs) etc.

The most important thing is that the scorecard is designed by management themselves and reports on the key performance indicators they have chosen. Microsoft has now attempted to incorporate the scorecard style into its own financial package for SMEs. Even a one or two man operation would certainly benefit from a financial specialist helping set up the system at the beginning or at review time. Where is a good place to source top quality but reasonably priced financial expertise? Your local Regional Development Agency (RDA) has a register and new services like Business Service Finder. Marketing, I have heard it said is the least understood but most important skill in business. Since it is impossible to have all management skills and expertise ‘in-house’ in an SME it pays dividends to outsource the work. In facts most business owners fail to delegate to their cost (more managerial incompetence). Business planning and implementation of strategy are such key activities that expertise is extremely useful, and the payback is many times the initial investment.

I have personally held discussions with business leaders who seem to think marketing refers merely to the colour of categories in their brochure, yet they manage a sizeable business. One of the best definitions of marketing comes again from Robert Craven, who wisely commented: “Marketing is the battle for the mind of the consumer, not a battle of the product”. He doesn’t mention the colour of a brochure or the colour of a product small item, and let’s never forget the principal reasons for business failure.

A good marketing specialist would aim to empower management to follow through on the direction they set off in, and to introduce efficient systems to stay on track. To ignore the internet today is commercial suicide (please refer to my EzineArticle “3 key aspects of a business website… “). ECommerce and the capability to generate revenue from the internet is a critical success factor (CRS). In this recent global downturn there is no knowing how long it will last and what effect it will have on your industry sector and your business. Acquiring new customers is a continuous process, going hand-in-hand with performance improvement. The internet is sustaining most businesses surviving at the moment. The time is now to review how well your eCommerce and eMarketing strategy is performing, and it is best to consult an external specialist consultant to help you take an objective viewpoint, and to consider the best options and solutions.

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