The following is a guest blog post by Amy Sitnick, Senior Marketing Manager for the SEI Advisor Network and self-described social media addict. Connect with her on LinkedIn or follow her on Twitter. Also – be sure to check out the SEI Advisor Network Facebook page!
Today, I have the honor of doing Practically Speaking’s first video blog (or vlog) post.
Joining me is Amy McIlwain, President of Financial Social Media. We talk about trends in social media – including how you can use LinkedIn groups to grow your business, what content resonates online, and much more.
How are you planning to use social media in 2014?
While most people look forward to this time of year, I have fear and trepidation.It’s not the holiday season that bothers me, I actually look forward to seeing our boys so excited, hearing the music of the season, and smelling cookies baking. What I fear is spending countless hours trying to follow some poorly written, almost incomprehensible instructions on how to put together some toy or gadget. How am I supposed to follow those instructions when the little pictures don’t match what I have in front of me?
When I think about those confusing directions, I picture some fine craftsman who, after creating his/her masterpiece, turns it over to the production teams to be mass produced by others. The craftsman explains how to mass produce the gadget, but does not document the actual steps. Apparently, the production teams think that 75% right is good enough — so at that point, I am left with a few screws and random parts after I “complete” the project at 2:30 a.m. on Christmas Eve.
Sound familiar? Sound like your business? Are you the master craftsman whose processes aren’t followed because you didn’t document them correctly?
Managing relationships smarter
In my experience, many firms are key person (advisor) dependent. Most of the knowledge around client relationships and key processes are in the heads of one or two people, and not documented. That is great if you want job security — but what about your staff, successors, or even a potential buyer? How can you expect your office to run smoothly and clients to remain satisfied if you are the only one that can do it?
As your business and client relationships become more complex, your firm needs to embrace smarter ways to manage them. Please join Raef Lee, Spencer Segal from Actifi, and me on Monday, December 9th for our newest webinar Workflows: The Key Ingredient to a Sustainable and Sellable Advisor Business. We will explore:
- Creating repeatable workflows using your CRM
- Maximizing technology to increase your efficiencies
- Using data to and metrics to identify successes
- Optimizing sales, service, and operations to grow your firm
Think about anyone who may work for or step into your firm. Can you picture them making a seamless transition, or would they be up at 2:30 a.m. the day before an important client meeting, trying to find a way to fit “Tab A” into “Slot B.” If the answer is not seamless, they are in for a long frustrating night.
I hope you join us on Monday. Register Now.
What’s Your New Year’s Resolution…for Your Practice?
Since we’re on the topic of holidays, take a minute and complete our Year-end Advisor Sentiment Quick Poll. We’re interested in finding out what your top five investments will be for your practice in 2014. One lucky advisor who completes the short survey will be eligible to win a $100 Amazon gift card.
Image courtesy of FreeDigitalPhotos.net
Our Practically Speaking blog posts usually go out early on Wednesday and Friday. (In my case, that means scrambling to meet a deadline for editing and compliance the day before.) As Thursday is Thanksgiving, we decided to post a day early and I’ve asked each of our regular SEI contributors to discuss what they are thankful for this year.
You may read this on a slow Wednesday afternoon or when you get back to work on Friday (Monday?), but when you do, know that we were thankful for you, our readers. We appreciate all the comments, words of encouragement, and ideas for this blog. It has truly been an enjoyable experience to connect with you and to make new friends via this blog.
There is so much to be thankful for this year! The family is healthy, our relationships with our friends are becoming stronger, and our faith is deepening. If we turn the gaze professionally, we should be thankful that the US economy is plodding along, and even improving in many aspects. The US stock markets have turned in respectable gains. There were no major implosions… even the government managed to kick the budget can into next year. All in all, a good 2013 for us in the financial services industry! Enjoy it, because you never know what lies ahead.
What am I thankful for? What am I not thankful for is more like it. I am mom to two incredible little boys who are obsessed with fishing, and I have a loving husband who patiently endures all of the adventures that the boys and I partake in. And even more, I love my job. I’m thankful that this year I was able to devote all of my time to social media – helping to launch SEI’s Advisor Network Twitter, Facebook and LinkedIn accounts. I’ve also been fortunate to speak with many advisors about how social media can be used for their practices.
And don’t get me started on tomorrow. Did I mention that we get to eat cranberry sauce? Forget the turkey. I’m all about the side dishes!
Inevitably, Brits have a differing view from Americans about Thanksgiving. We don’t have one, and so the concept is alien. The nearest thing is a harvest festival, which doesn’t entail a day off, and so is not enthusiastically celebrated. We are also a curmudgeonly bunch and the idea of two family holidays so close to each other seems like too much of a good thing. And what are you doing to the turkey population? Two big turkey meals in about a month of each other. Is that fair? However, the US has become my home, and I’ve found it to be the land of optimism and entrepreneurs. My family is all American and they have made it clear to me I will be remaining in this country. So I’m thankful for my adopted country and the people that make it so vibrant.
This one is easy for me. I am thankful that I am surrounded by amazing groups of people. For my wife and I, it has been a joy to see the world through the eyes of our boys (ages 7 and 9). I know it is cliché, but every day I am thankful for my family.
I am also surrounded by a great group of co-workers and contacts that I have made in the industry. The IST team and the whole SEI Advisor Network make my job one of the best in the industry. The Practically Speaking blog team, especially Amy, Ann, Kendra, and Diane (who edits everything I do and makes it vastly more readable) (Editor’s note: aw shucks), who put up with my quirks and constant last-minute posts.
Lastly, I am thankful that I am surrounded by all the advisors whom I connect with and meet throughout my travels. I am inspired by what you do and how you are helping clients by educating them, creating plans, and getting them on track to reach their goals.
From all of us at Practically Speaking, have a happy Thanksgiving.
- Getting prospects
- Building awareness
- Communicating your message to your desired target marketplace
Marketing is a plan; sales is a tactic.
For the most part, advisors are good at sales and bad at marketing. For that reason, Jerry Lezynski and I co-hosted a webinar last week called, ”The Marketing Trifecta: Plan. Connect. Commit: Three Keys to Drive Your Marketing Success.”
While webinars are a great way to deliver content, it is not easy to actually connect with the people listening. There were a lot of questions that came through email and via my Twitter account. This seems like a good place to answer them.
1. “What is the appropriate dollar amount or percentage for a marketing expense?”
Before we talk percentages, I think the first thing to do is to change the term “expense” to “investment.” In most firms, marketing is put into the budget as an expense. To me, a marketing investment in your business can reap years of rewards, making it one of the best investments you can make. Next year, invest in yourself!
Choosing the right percentage (or dollar amount) to invest in marketing is going to be a personal decision, but you still should have a benchmark. In 2011, according to the 2012 FAInsight Study of Advisory Firms: Growth by Design, advisors spent just 1.7% of firm revenue on marketing or business development. I think that is unbelievably low! When marketing is done right, it puts prospects in seats, turns prospects into clients and converts an investment into years of income, from planning and investment management fees. For most firms, 5% of revenue should be a good start, but I would use that as a minimum. I know one firm in Southern California that invests 20% of top line revenue into marketing. They are growing by $30-40 million net annually. Think about what you can afford this year and stick to it.
2. “The advisor – Mitch – that was on the call, was really great. Can you tell me the ONE thing that he does that attracts the most business?”
We were fortunate enough to have Mitch Walk on the call with us to explain his marketing program. Mitch explained that he has a marketing system in his office, backed up by a great staff, which allows him to be in front of as many prospects as possible. Mitch uses client appreciation events, golf, and educational workshops as a way to meet with the friends and family of his best clients. What he described was not a single event or type of meeting, but a proactive marketing system that coordinates all of his activities. He has a plan, a budget, and specific assignments for everyone in the office to help execute his marketing agenda.
3. “Great stuff. Is there anything else I should look out for in completing my marketing plan?”
Absolutely. Marketing is about getting your brand out there. It is about letting people know who you are and what you do. Marketing can help you get people in the door, but the challenge then is making sure you can back up your words. Think about any marketing plan and add the fundamentals of what you do. If the brand does not fit with the delivery, it will be a disaster. As you begin to develop your plan, ask yourself:
- Am I authentic? Can I really follow through with what I am promising in the discussion? Will my existing clients agree that what I am saying is true?
- Am I natural? Essentially, you are marketing yourself (as well as your business). It has to fit with who you are. Do your marketing plan and activities put you in a position that does not feel natural to you? If so, your prospects will pick up on it right away
- Am I consistent? From first contact to after the prospect becomes a client, consistency is very important. Does your marketing effort support your delivery (all the way down to the statements)? If there is a disconnect somewhere along the line, the client will feel like there was a “bait and switch” pulled on them. Make sure your message and delivery are consistent.
Marketing toolkit now available
Marketing takes time, but it also takes a plan and a little discipline. If you weren’t on the webinar, register to watch the replay – you’ll also get a marketing activity calendar to get you started.
2013 is essentially over, as it relates to new business. It is time to start planning for 2014, and the best time to start is right now.
The following is a guest blog post by John Frownfelter, Managing Director of Investment Solutions for the SEI Advisor Network. He is responsible for developing a suite of investment solutions for use by independent financial advisors and their clients across the country. Connect with him on LinkedIn now or follow him on Twitter.
Diversification defined at its most basic level is the idea that combining multiple asset classes (Large Cap Equity, Small Cap Equity, International Equity, Core Fixed Income, High Yield Bond) into a portfolio based on the return and risk characteristics of those asset classes and, more importantly, how those asset classes react to one another over time (correlation). One of the most widely cited — and easily the most quoted — study was co-authored by SEI’s own Gilbert Beebower and the study remains the cornerstone of our investment philosophy still today.
In 1986, Gil Beebower, Gary Brinson, and Randolph Hood co-authored the paper “Determinants of Portfolio Performance,” which weighted the importance of security selection (stock picking), market timing (asset class choice) and investment policy (asset allocation) on the returns of 91 pension plans over the course of 10 years (1974-1983). The findings clearly showed that asset allocation dominated security selection and market timing, explaining 93.6% of variation in a plans’ return. Beebower, Brinson, and Brian Singer recreated in the study in 1991 for a 10 year period (1978-1987), where asset allocation proved responsible for 91.5% of return variation, similar results to the previous study.
Beebower’s study has been cited in the investment philosophies of many companies, as proof that it’s the selection of a mixture of assets, not individual investments, which investors should focus upon.
Diversification takes a hit; but why?
So if diversification is the only “free” lunch in this fickle industry, why are we questioning it today? The fact is, diversification works over time, not every time. And, as it just so happens, 2013 has been a very difficult year for diversification. Why is that?
- Domestic stocks are exhibiting strong positive performance
- Fixed Income is in a challenging environment, with rates being at an all-time low and speculated to rise
- Commodities and inflation related assets are performing poorly, because inflation does not seem to be on the horizon
Basically, this means that one asset class is driving the market. Concentrated portfolios can and often do outperform their diversified counterparts. The chart below plots the year-to-date performance of a number of asset classes versus the S&P 500 as of September 30, 2013. It demonstrates the power of a single asset class to challenge the tenants of diversification.
The answer seems easy: just buy the asset class that will perform the best next year! Let’s not be fooled; market timing is difficult, if not impossible, to execute successfully. This chart (courtesy of JP Morgan) providing asset class returns for the last 10 years. As you can see, it is anybody’s guess to what asset class will lead the pack in any given year. This reinforces why diversification is so important.
In a recent SEI commentary, When Diversification “Fails,” and Why We Still Believe, Devin Cassels states, “Investment success is all about finding the best opportunities, blending them to create efficient portfolios and remaining invested long term. Holding an attractive long-term portfolio, however, is not always easy over shorter time frames. For investors enviously comparing their portfolios to the S&P 500 Index, 2013 is one of those short-term periods.”
“In addition to finding the most appropriate ways to blend known assets into attractive portfolios for clients, investment professionals should also search for new opportunities to further diversify and improve their offerings. Remember that at one point, well-known asset classes like high-yield debt and emerging-market equities were uncommon investments. Although holding new exposures can create deviations from traditional portfolios in the short term, diversifying investments can significantly improve an investor’s long-term experience.”
Remembering the work, and the man
The work of Gil Beebower, who was associated with SEI from 1975 until his death on October 25, identified that asset allocation is the key component to investor success, changing the face of the investment industry. There will be times when we want to abandon diversification in the face of single asset class returns, but we need to be vigilant in the face of discontent and maintain a well-rounded asset allocation.
Thank you, Gil Beebower, for your contribution to the industry and SEI, you will be missed.
– Malcolm Muggeridge, British satirist and author
A few weeks ago, I traveled with a new colleague, someone who hasn’t really traveled for business before. I started to regale him with my travel history. In the last 20+ years, I have been in 49 of the 50 states (not Wyoming, in case you were wondering), spent over 1,280 nights in one single hotel chain, and been in every major airport in the country. As you would expect, I was in my full glory entertaining my co-worker (travel hostage) with all my war stories.
He may have been throwing me a bone, or maybe he was really interested in the conversation — either way, he asked me to give him my top tip for making travel life easier. To which I responded, “Easy — plan your exit strategy.”
What I meant was that at the end of a long trip, all you want to do is get home. If there are delays or you are running late, you don’t want to be in unfamiliar surroundings, looking to find the rental car facility, the gate, or getting lost driving. You want the trip home to be as smooth as possible, so you can relax and arrive stress-free. I think the analogy works for an advisory business, as well.
Now, later, long-term
I’ve asked these questions many times on this blog, but they are worth repeating. When is the last time you asked yourself:
- What am I doing this for?
- What will business look like in 5 or 10 years?
- What is my exit strategy?
The last question is really one of the more complex issues facing advisory firms today. In fact, I think it will be become a bigger and bigger issue as those “baby boomer” advisors start to think about slowing down, selling, or transitioning there business in the next 5-10 years. Unfortunately, most don’t have a plan.
Slowing vs. stopping
A good friend of mine is an advisor on the west coast. He started off as a wholesaler many years ago, but left to become a junior planner in an established RIA firm, with the idea that he would become the succession plan for the owner. The plan worked perfectly over the last 10 years, until the senior advisor announced his intention to “slow down.” The advisor decided that he was going to assign all but 5-10 of his best clients to my friend, he was going to focus on doing “research” and become “of counsel” to the firm. The advisor was going to travel more, enjoy his kids and grandkids and give back to the community, while still maintaining an office, a salary, profit sharing and the other perks of the ownership.
Fast forward three years, and the firm is a mess. My friend had his client load double, the staff is constantly waiting for decisions from the oft-vacationing owner, and no one in the firm has had time to execute a marketing or growth strategy. Revenue, margins and morale are all down, and they are limping into 2014 with no prospects for a better year.
Now by no means am I suggesting that the owner has not earned the right to slow down or to enjoy the benefits the firm he created. I do, however, question the plan (if there ever was a real one). Does he realize that by not letting go, that the value and integrity of the business is now in jeopardy? By not having a clear cut exit plan, the business is losing value (and revenue) every day. What do you think the business will look like in the next 3 or 4 years when he actually may want to sell? In fact, what is keeping my friend and the staff from leaving today — and could the firm last without them?
Advisor, know thyself
As you are doing your 2014 planning (and you should be doing that planning now), take a minute to think about the 10-year or the 15-year plan. Ask yourself:
- Do I see myself ever giving up the business?
- Am I the kind of person that needs an office to go to or feels the need to be a part of the business forever?
- Will I (or can I) let go?
- How will my decisions affect the business when it comes to compensation, ownership, morale and client satisfaction?
When you think about your business, do you have an exit plan so you have a stress-free trip home?
Image courtesy of FreeDigitalPhotos.net
Last month, Amazon.com notified its customers that after a decade of offering free shipping on orders over $25, it is upping the minimum to $35. See this recent article.
For a firm that spends $1.8 billion on shipping, I guess it was time to revisit their pricing model and review the cost of the service. While I don’t think the announcement will stop the almost weekly trip to our house by the UPS truck, it did get me thinking about pricing, benefits and the cost of doing business in an advisory practice. For example:
- What work should you do before a prospect says yes and turns into a client?
- How much should you reveal about your proposed planning and/or investment processes before the client commits?
- Have you reviewed your pricing and costs in the last 10 years?
Time is money – or is it?
As I have said in the past, I believe what an advisor really sells more than anything else is their time. We only have so many hours in the day, and how we choose to allocate that time is incredibly important. Our time is our intellectual property, and in some cases, we have to give away some of our time to work with a prospect to show how valuable the mutual relationship can be. But how much do you give?
Over the years, I have heard about all sorts of ways to transition a prospect into a client. What I typically hear is a pitch on investment products in the “My portfolio would have done better than yours” mindset. Of course, the with the hindsight of what the market actually did and access to tools like Morningstar to pick funds in a rear view mirror, it is easy to create a portfolio of winning funds that would outperform anyone.
I have also seen many advisors create a fairly comprehensive financial plan, showing all sorts of analysis and projections, giving the confidence in their future. The plan is “thrown in” as a low-cost or free service, in the hopes that the advisor will get to win the assets. Recently, I met with a firm that did just that. They spend hours manually creating a financial and retirement plan for a prospect. They dove into the prospect’s cash flow, looked at titling and did a beneficiary review; they even did a full estate review. This firm spent countless hours organizing and creating a full blown plan for the prospect, only to have the prospect say a firm “Maybe.”
The prospect loved the plan but wasn’t ready to commit to transferring the assets. The firm’s business model was that they charged so little for the plan, that unless the client moved a significant chunk of assets over, they lost money. I find it interesting that what the client valued most is treated as freebie and what they would have been charged for was the commodity. The firm gave away its most important asset — its time.
Map value to costs
As we start looking to 2014, many of us are starting to rough out a business or marketing plan. The typical plan takes a look at what you did in 2013 and puts together some ideas and projections around growth and revenue. This year, why not take some time to look at your pricing? Ask yourself:
- What does it cost me to create a plan (investment or financial)?
- Am I being compensated for my intellectual capital?
- What do my prospects (and clients) value and how am I pricing my services?
I think the last question is the most important. If you need help, do a client survey or ask your advisory board. What I think you will hear is that there is a disconnect between your pricing and what they value. I think you will hear that they value your time, attention, and being face-to-face with you when discussing goals and the future. They probably don’t value your rebalancing of the portfolios, or your ability to scan the universe of mutual funds and ETFs.
Where the rubber meets the road
So what do you “show” prospects who you meet if you don’t do a full financial plan for them, or create the winning sample portfolio? Show them you — the real you.
- Meet them first in a non-threatening location, a place that doesn’t scream “I’m going to sell you.” If it has to be at your office, meet in the conference room.
- Talk to them about what they want out of the relationship, what their issues are today and what they are worried about in the future.
- Ask them to share experiences with other financial providers (good and bad), so you can learn from that.
- Understand your value proposition and make sure they hear it.
- Offer to do a review of their plan and their investments. The key is to provide observations, not answers. Your job is to make them feel comfortable and confident. Your job is not to provide all the answers, until they become a client.
Take a look at your business plan for 2014. Have you reviewed your pricing? Are you giving away too much?
Image courtesy of FreeDigitalPhotos.net
The following is the second guest blog post in a two-part series by Tyler D. Nunnally, a specialist in behavioral finance and risk tolerance. (See Part 1) He is a marketing consultant to FinaMetrica and Founder and CEO of Upside RISK, a behavioral finance consultancy. For a free 30-day trial of FinaMetrica, visit www.riskprofiling.com/trial.
How do I align risk tolerance with the right asset allocation?
I realize that many advisors have a difficult time coming to grips with this issue, because I hear that question a lot. The objective of this guest blog is to help answer that question, in the hope that it will make your job a little easier.
Part I of my guest blog “Why Risk Tolerance is Critical to Your Practice” discussed the impact that emotions have on client relationships. I used an analogy of my broken rib to illustrate the importance of serving your clients’ emotional needs – and not just their financial ones. I am pleased to report that my broken rib has now completely healed. The only regret is that I can no longer use it as an excuse to get out of doing household chores or explain away my struggling golf game.
Being both willing and able
In accordance with new FINRA Rule 2111, a suitable asset allocation is one that accounts for a client’s willingness and ability to take risk. That is easier said than done, because these two factors are often at odds. This is where making a clear distinction between willing and able to take a risk is of the utmost importance.
When a client is willing to take a risk, it means that they are emotionally comfortable with it. The willingness to take risks is an aspect of a client’s behavior which, in turn, is determined by their risk tolerance. Being able to take risk, though, is a different story, because it is predicated by the client’s financial circumstances. In order to achieve their investment objectives, the client must take the appropriate amount of risk required to fulfill their goals, and they must also have a sufficient capacity for loss (i.e., risk capacity) in the event that things do not go according to plan.
Distinguishing a client’s willingness to take risk from their ability to do is vital, because it is where key trade-off decisions are made. Communicating the trade-offs can be difficult, because it typically involves discussions around risk and return. Likewise, getting the message across is tricky because risk means different things to different people.
Tools and visual aids are a good way to overcome these difficulties. They allow you to better frame the risks, so that your clients can more fully “see” the trade-offs that must be made. An example of this an innovative tool called Gap Analysis that was developed by FinaMetrica.
It works like this: Suppose that you have a client named Stephen, whose risk tolerance score is 50. His current portfolio consists of 50% growth assets, but he requires the expected returns from a target portfolio that consists of 70% growth assets in order to reach his investment goals. You want to determine if he would emotionally comfortable (i.e., risk tolerance) with the target portfolio.
As shown in the Figure 1, the horizontal graphic represents the percentage of growth assets on a scale from 0% to 100%. With a risk tolerance score of 50, a target portfolio consisting of 70% growth assets would be outside of Stephen’s “comfort zone” (as indicated in green, ranging from 39% – 58% growth assets). Consequently, tough trade-off decisions must be made. Stephen would have to be willing to take more risk than he is comfortable with, lower his expectations or invest more – or, more likely, a combination of these. The Gap Analysis enables you to better communicate the trade-offs to Stephen, so that you can help him arrive at the optimal decision based on his unique circumstances.
The trade-off decisions become more complex when a spouse or partner is added to the mix. The Gap Analysis shown in Figure 2 allows you to compare couples. In this case, Stephen’s spouse, Jean, has a higher risk tolerance that he does. She has a risk tolerance score of 60. Subsequently, the 70% growth assets target portfolio falls within her “comfort zone,” but not his. This means that compromises are likely in order and the tool allows you to better communicate those trade-offs.
Aligning risk tolerance with the right asset allocation is an art and a science, because of the trade-off decisions that must be made. By getting it right, you can help your clients cope better with the emotional swings that are an inherent part of the investment journey. This will improve your client relationships which, in turn, lead to higher retention rates and better referrals to help continually grow your practice.
I hope this information has been of benefit to you. I would like thank John Anderson and the great team at SEI for inviting me to pen this two-part guest blog series.
For more information, contact Tyler D. Nunnally: (404) 320-6047, firstname.lastname@example.org.
ABOUT THE AUTHOR
Tyler D. Nunnally serves as a marketing consultant to FinaMetrica in the United States. A specialist in behavioral finance and risk tolerance, Nunnally is Founder and CEO of Upside RISK, a behavioral finance consultancy.Earlier in his career, he was with Oxford Risk Research and Analysis, Ltd., a spin-off consultancy of Oxford University, formed to bring behavioral finance and risk-behavior academic research to the corporate environment. Nunnally was responsible for the commercialization of the company’s intellectual property. He holds a Bachelor’s degree from the University of Georgia and a Master’s degree in International Business from the University of St. Andrews in Scotland.
FinaMetrica specializes in risk tolerance and risk-related matters. The FinaMetrica risk profiling system is based on a psychometric test of personal financial risk tolerance. Psychometrics, a blend of psychology and statistics, is the scientific discipline for testing attributes such as risk tolerance. Psychometrics provides international standards for the development of tests and for evaluating the qualities of developed test. Numerous academic studies have employed the FinaMetrica test and/or FinaMetrica data. The system enables advisers to make valid and reliable assessments of their clients’ risk tolerance, incorporate those assessments into the financial planning process, and explain risk meaningfully. More information: www.riskprofiling.com.
The opinions and views expressed herein are those of the author and SEI bears no responsibility for their accuracy. Neither the author nor FinaMetrica is affiliated with SEI or its subsidiaries.
Years ago, many advisory firms were coached that to keep getting bigger they needed to set (and enforce) minimum account sizes for their perspective clients. The thinking was that there are only so many hours in the day and by working with clients that fall below the advisors’ minimum, the client was taking away from profitability of the firm.
Advisors were also encouraged to reassess their minimums each year and cull the bottom 10% of their client list to make room for only those who had enough wealth to fit your minimums. Template letters were written, scripts were practiced and, unfortunately, lots of clients were told their money was not good enough anymore.
Even today, I still hear people in the marketplace say you can “get bigger by getting smaller” simply by just upping your minimums and working with fewer but wealthier clients. In my mind, that philosophy may do some real harm to the future of your practice.
Plan for today – and the future
If you have been reading my blog or heard me speak recently, you know that one of my major passions is the future of your advisory practice. It amazes me that in a profession that focuses on planning for clients (investment, retirement, estate planning etc.), advisors do a very poor job of planning for their own businesses. When I get asked about coaching, most of the questions are about sales and marketing, rather than running a business and/or business planning. In larger firms, many have a lead advisor handle all aspects of running the firm alongside his/her practice, instead of hiring professional management. Planning for the future of your business comes after everything else, which is usually never.
There’s no better time than the present for advisors to ask themselves these questions:
- What happens to the firm when I am no longer in it?
- Is there value in my firm without me?
- With the average age of financial services business owners like me being 57, what will my firm look when I am ready to slow down, retire or sell?
Blood is thicker than the advisor relationship
One of the disturbing trends that I see in research now are the studies that show the likelihood that an account will transfer away from an advisor after the death of the person who “owned” the relationship. I think the numbers are something like 70% that the surviving spouse will transfer out within a year, and more like 90% at the passing of both parents. Many advisors don’t have a real relationship with the spouse (typically the wife), not to mention the kids, so it is no wonder that the account transfers away.
So let’s fast forward about 10 years. By taking the advice of the “coaches,” advisors are working with a smaller book of wealthier clients. Those advisors are seeing that many of their “baby boom” clients have reached full retirement stage and are beginning to live on the assets and are now in the draw-down stage of their financial lives. Unfortunately, many of those clients will pass, and the remainder of their assets will transfer away with the surviving spouse or the kids – who never had a relationship with the advisor as they couldn’t meet the minimums. Not a pretty picture when you think of the value of their practice 10 years from now, is it?
Don’t change the minimum, change the service model
One of the biggest arguments for raising minimums is that an advisor can work less and be more profitable. In my opinion, that assumes that the advisor provides the same service for all clients. Why make that assumption? To have a successful “no minimum” strategy, I think it make sense to tier your service model, especially when dealing with the kids and grandkids of your best clients.
When looking at servicing your clients’ next gen, consider:
- A flat fee for advisory services, which is more appealing to younger clients who are just getting started
- Looking to your platform provider or favorite TAMP for investment models. Not every client needs a fully customized investment portfolio managed by your internal team of expensive talent.
- Creating a single template for all “small account” annual meetings and conducting them via WebEx or Skype.
- Hiring or training a younger advisor who can specialize in things like cash flow or 529 planning (his is what they want to talk about)
- Creating a segmented list of the younger kids and grandkids, and sending content that is appropriate for them. In other words, don’t send them your usual estate or long term care newsletters.
- Offer small account IRA rollovers for them to consolidate their assets with you, as they are changing jobs often
- Encouraging your clients to send their kids (and grandkids) to you. They will appreciate that you are interested in the whole family.
When the unfortunate happens to your clients, you don’t want to be introducing yourself and your services to their kids. It’s better to have an existing relationship so you can help them in the future.
If a consultant says that you should have a minimum, that may be great advice for today, but what does that do for your future? If you look at your service model, can you get bigger by getting bigger?
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The following is a guest blog post by Amy Sitnick, Senior Marketing Manager for the SEI Advisor Network and self-described social media addict. Connect with her on LinkedIn or follow her on Twitter. Also – be sure to check out the SEI Advisor Network Facebook page!
It seemed appropriate to me to address Twitter on Halloween. After all, I’ve covered LinkedIn best practices, as well as Facebook recently on the blog, but noticeably absent has been Twitter. And that’s because it seems like everyone is afraid of it (or the butt of jokes – have you seen “Hashtag” from Jimmy Fallon?)
Well, today I tell you why you shouldn’t be afraid and how Twitter can be useful to you.
So, what the heck is Twitter anyway?
Good question. Courtesy of Wikipedia: Twitter is an online social networking and microblogging service that enables users to send and read “tweets,” which are text messages limited to 140 characters.
In plain English, Amy McIlwain of Financial Social Media uses the analogy that Twitter is like a “cocktail party,” and that’s true. You can mix and mingle with anyone – meaning individuals, companies, publications, and more. And unlike Facebook or LinkedIn, you don’t need to be “friends” or “connected” to the companies or individuals to interact with them.
Twitter may also seem a little intimidating because it has its own unique terminology – tweets, retweets, hashtags, etc. It’s all defined for you right here.
But without trying it out, Twitter may continue to spook you. My suggestion is to create a personal profile for yourself and just play with it. Learn the lingo by following companies and brands that interest you. You don’t have to tweet a thing; just “listen” and see what conversations are taking place – that’s the first step in getting started with any social media platform.
Here’s a great article that features “Five Tips to Help You Fall in Love with Twitter.”
Email overload? Try Twitter.
So why use Twitter? I’m always hearing from advisors that they get too much email (I feel the same way, by the way). Chances are, the very same trade publications, news sources, and companies that send you email updates use Twitter. That means, if you download the Twitter app to your mobile phone or tablet, or access it from a browser on your computer, you can go there to get your news, rather than junking up your email box (a junky email account keeps me up at night).
Here are the Twitter accounts of a few publications that you might want to follow on Twitter:
And then there are investment companies. Look up the providers that you work with in the Twitter search box and then follow their profiles. And of course, we invite you to “follow” SEI:
• SEI Advisor Network – @SEIAdvisors
• John Frownfelter, Investments – @SEIJohnF
• John Anderson, Practice Management - @SEIJohnA
• Raef Lee, Technology – @SEIRaefL
• Amy Sitnick, Social Media /Marketing – @SEIAmyS
And just for fun, here are some other brands that have been deemed best brands to follow that might provide some entertaining and newsworthy updates.
Organizing Your Twitter feed into lists
Once you start following more and more accounts, you’ll want to organize them in a meaningful way to help you keep track of them. You can do that by using Twitter lists. By doing so, if you only want to hear news from financial planning associations or sports teams or celebrity news – hey, I won’t judge you, this is your personal Twitter account – you can put them into individual lists and only view that type of news. It’s like a “filter” and lately, this has been one of my favorite Twitter features.
Are Advisors Using Twitter?
I’ve suggested in this article that you get started first using Twitter by setting up a personal account. However, some advisors are using Twitter quite successfully to connect with clients and prospects. Stephanie Sammons of Wired Advisor offers advisors tips on using social media for business, including this article on building a professional profile – the absolute first step in using Twitter for business.
I hope that this article took some of the fear out of Twitter. In a future post, I’ll offer additional best practices for setting up your Twitter profile. And if you are an active Twitter user, I’d love to hear your experiences – why you think it’s useful and if you’re using it for personal or business purposes.
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