Leave a comment

A Client’s Evolution

It’s no secret that advisers want to have a client base made up of loyal clients. However, most advisers may not take the time to fully understand why some clients are one-time customers while others are lifetime advocates.

Let’s take a brief look at what I call “the client’s evolution”—an evolution that we all have with our clients to some degree—so that you can better comprehend how you can build client relationships that last a life time.

The Customer

More than 20 years ago, I began building my business by following some simple advice from my branch manager: Find a good double tax-free municipal bond and tell everyone you can about it.”

As an eager rookie I did just that and soon I was opening up new accounts with what I thought would be “forever” clients. Unfortunately, I soon realized that many of those clients were simply one-time customers—people who had decided to buy a product. They were trying to find the best-yielding bonds and it didn’t matter who they were buying from. Some of those individuals bought additional bonds but for the most part I was one of several advisers they were working with and my value was merely a function of how well my product was doing at the time.

If you have several “customers” working with you and you would like to forge stronger relationships with them, you must find a way to show your value to them. One of the best ways to do this is to stop being a product pusher and start being a problem solver by getting to know them. Once you do, you can find their needs and fill them.

The Client

As my practice grew, I decided to take a different approach and offer prospects a complete plan to help them achieve their financial goals. This opened the door to creating solid connections from the start because I was able to identify specific needs that the prospect had and share with them how my products and services could be their solutions. I was no longer pushing any specific product but rather solving their financial concerns. As a result, these types of people became clients.

If you have customers you’d like to turn into clients and get to know even better, it’s time to get to know them on a more personal level.

The Friend

After a number of years, I noticed that some of my clients had turned into close friends. Just as any friendship evolves with communication and respect, so can an adviser/agent/client relationship.

I never started out to form friendships with my clients, but friendships occurred naturally over time after I showed genuine interest in their lives. They were no longer just clients to me, but friends who I wanted to help—not only with their financial goals but in any way that I could.

The Advocate

At some point in my career, I realized that a select group of clients whom I had formed friendships with had an interest in my success. I had developed a level of professional and personal trust with them and they were absolutely convinced that I was not only capable of helping with their financial advisory needs, but that I truly had their best interests at heart.

That’s when I realized that I had what I now called “advocates” or clients who willingly wanted to help me succeed by introducing me to their friends and family. In addition, some of these people shared their own experiences in business and suggested marketing, staffing and even branding strategies to help me.

Why Clients Evolve

I’m sure by now you might relate to having clients of every stage that I mentioned. The secret to evolve your client base is to evolve as an adviser yourself and be involved with your prospects and clients from the very start.

If you are ready to evolve your practice, schedule a complimentary 30-minute coaching session with me by emailing Melissa Denham, director of client servicing.

Dan Finley

 

Daniel C. Finley
President
Advisor Solutions
St. Paul, Minn.


Leave a comment

To Instantly Connect with Your Prospects, Use The Magic Question

After learning this single question, your initial meetings with prospects will never be the same.

This question will help you instantly connect, differentiate yourself, and pre-qualify your prospects within the first few minutes of the meeting.

Once you see the effect it can have, you’ll most likely make it a mandatory part of every first meeting with a prospect.

Why Is This Question So Effective?
I first learned about the Magic Question from the business coach, Dan Sullivan. He wrote an entire book (titled The Dan Sullivan Question) on this question and why it works. After reading the book, I tweaked the question slightly so that it would make sense for financial advisers to ask their prospects.

At first, you may be a little hesitant to ask the question because it’s so different. And you can be pretty sure that they’ve never been asked this by their financial adviser before. Once you start using it, it will become clear how quickly you can connect with complete strangers over the phone.

The great thing about the question is that everyone can answer it—but they are required to think before they do. This is an important part of the process because you want to make sure you’re working with people who care about their finances and want to put the proper effort and thought into planning their future.

You may notice that about one out of 20 people do not answer the question. Either their brain cannot function in a way to think futuristically or they simply do not want to answer. This is actually a great thing because the people who don’t answer the question or don’t give authentic answers are probably not the right fit. They are the kinds of people you can disqualify right away before wasting any more time.

There are three reasons why this question works:

1.) It’s about them. About what they want. The results they are looking to achieve.

2.) It brings clarity. To where they want to go. To what’s most important to them. To how they define success. As you know, It’s hard for some people to specify their goals. This question makes it easy.

3.) It encourages them. One of the fastest ways to influence someone is to encourage their dreams. They are opening up to you about what’s most important and you are their ready to stand next to them and show them how it’s possible. People are attracted to those who encourage them in what’s most important in their life.

The 4-Part Magic Question
The first part of the question is the most important. That’s the one you will ask to instantly connect with someone. The following three are not necessary but they can be great to follow-ups to delve deeper into what they’re are looking for.

Here is the magic, four-part question:

If we were meeting three years from today, and you were looking back over those three years, what has to have happened in your financial life for you to feel happy with your progress?

  • What are the biggest challenges you will have to face in order to achieve that progress?
  • What are the biggest opportunities that you would need to focus on to achieve those things?
  • What role would you like an adviser to play during those three years?

Give the magic question a try during your next initial meeting with a prospect. After you do, I’d love to hear how it went. Email me at dave@streamlinemypractice.com to share your results.

dave-zoller

 

Dave Zoller
Financial Adviser
Streamline My Practice
Warrenville, IL


1 Comment

The 3Cs to Enhance Your Negotiation Skills

A new calendar year represents a fresh beginning and an opportunity to think anew about the adviser-client relationship. Financial advisers know that their annual planning conversations with clients may need to address sensitive topics related to the changing regulatory environment, particularly as we near the proposed timing for implementation of the Department of Labor’s Final Rule. These issues will certainly be on the agenda if you are transitioning to a fee-for-service model.

But the ability to engage clients in potentially difficult discussions is always key to building a successful business.

Central to these discussions is the ability to negotiate—a skill I have spent years cultivating through personal successes and failures, and through teaching thousands of business leaders and professionals at the University of Pennsylvania’s Wharton School. I consulted on a Janus Labs program, titled the Science of Negotiations, to prepare advisers to have better planning meetings. The core tenets of the program, and negotiating generally, are what we call the three Cs: commitment, candor and credibility.

Commitment: We know that as a financial adviser, your commitment is to serve as a trusted counselor to your clients. Working in a client’s best interest isn’t something new that rules require—it’s what you’ve always done. You need to convey this commitment clearly and consistently in order to build and maintain the kind of trust that allows for open dialogue. By reminding clients of your commitment to them, and connecting your actions to that commitment, the value of your relationship and services should always be top of mind for them. This way you can raise sensitive issues when the client can hear and process them fully, not simply because a deadline requires it of you.

Candor: We’re big proponents of the “radical candor” used at Silicon Valley companies like Facebook and Google. For advisers, this means demonstrating that you care personally about each client, while also directly addressing how DOL-related changes will affect them. Be a straight talker. Don’t beat around the bush: be clear that this is a difficult subject but the new services you offer are commensurate with what the client needs. Telling clients about the products and services you are not recommending is also important. Transparency is key. When you reveal information that’s not necessarily in your best interest, but is clearly in the best interest of the client, you build trust.

Credibility: Openly and willingly revealing information about products and fees increases your credibility, and research shows that credibility is the single most important asset of effective negotiators. Your credibility rests on expertise, competence and trustworthiness. It means that: 1) you bring your clients valuable knowledge and insights; 2) you apply your expertise to their benefit with skill and diligence; and 3) you consistently use your expertise and competence to create long-term value as a trustworthy counselor.

Strong negotiation skills will help you communicate more effectively in all your interactions. Demonstrating that you are credible, candid and committed will put you in a position to better navigate the sensitive topics that are inherent to financial advice, including fees and regulatory concerns. And this is a good time to start strengthening those skills, as you begin scheduling the conversations that will guide your client relationships throughout the new year.

For more information on how to use The Science of Negotiations for meaningful conversations with your clients, please contact your Janus Director or visit www.janus.com.

G. Richard Shell

 

G. Richard Shell
Legal studies and Business Ethics Professor
University of Pennsylvania’s Wharton School
Philadelphia, Pa.


Leave a comment

Helping Your Clients Face Their College-Financing Fears—Part 2

In part one of this two-blog series, we established that higher education is frighteningly expensive. But with a proper plan in hand, you and your clients will be better prepared to tackle college tuition bills in an organized and financially sound way.

Recently, I explored the factors that affect financial aid eligibility. In this post, I’ll provide some tax smart tips to help your clients maximize their tax benefits. (Our new research, Tackling the tuition bill, has all the details on both topics.)

While it may seem intuitive to first tap into the qualified education savings accounts when the bills come, there are a few things your clients need to consider before doing so.

Educate your Clients on Potential Tax Breaks Before They Tap 529 Accounts
Consider the AOTC for the parent, or the child. Don’t rush to deplete the 529 account in the first year, as there may be some beneficial tax credits available each year. For example, the American Opportunity Tax Credit (AOTC) is available to taxpayers who meet income eligibility requirements.

The credit amounts to the first $2,000 spent on qualified education expenses and 25 percent of the next $2,000, for a total of $2,500. Funds counted toward this credit must come from current parental income or parental-owned assets held in taxable accounts. In other words, they cannot be funds from qualified savings plans, such as 529 plans. This tax credit can be taken each year in which qualified education expenses are incurred for a maximum of four years per student. With a total benefit of $10,000 over the student’s educational career, it may be smart for eligible parents to first take advantage of this credit before spending from 529 accounts.

Note that if the parents’ income exceeds the AOTC limits, but the child is reporting income for that tax year, the child may have the option to claim the AOTC. This would require the child to file as an independent, rather than as a dependent the parent’s tax return. Although this is possible, there may be other financial implications in doing so. The AOTC is refundable up to $1,000.

See if your clients qualify for the LLC or other deductions. Some taxpayers, such as those who have exhausted the AOTC, may qualify for the Lifetime Learning Credit (LLC). This credit is worth up to $2,000 for expenses related to tuition and other qualified expenses for students enrolled at an eligible financial institution (note that for the 2016 tax year, the Lifetime Learning Credit is worth 20 percent of the first $10,000 of qualified college expenses. The LLC is not refundable). The credit can be used each tax year and applies to undergraduate and graduate school, as well as programs geared toward professional degrees or expanding job skills.

If they do not qualify for the AOTC or the LLC, the Tuition and Fees Deduction may be another option. For the 2016 tax year, this deduction can total up to a $4,000 reduction in income. Note that only one tax credit or deduction (AOTC, LLC, or Tuition and Fees Deduction) may be claimed per tax year. Keep in mind that IRS Publication 970 is a good source for more information on education tax credits and deductions. The figure below provides a brief summary of the most basic information.

vanguard-picture-1-jpg

Tax benefits may ease both tuition and tax bills.

Be Mindful of Tax-Sensitive Withdrawals
Aside from the potential tax benefits that can be received from paying for college expenses out of pocket, there are tax implications to be aware of when your clients are withdrawing from retirement accounts and taxable savings accounts to pay for college. Withdrawals from parent-owned and student-owned tax-deferred retirement accounts (such as traditional IRA and 401(k) accounts) are taxed as ordinary income. Note that withdrawals that meet the criteria of qualified education expenses are not subject to the 10 percent penalty tax. Withdrawals from parent-owned and student-owned Roth IRAs, on the other hand, can be taken tax free as long as the distribution is composed of the contributions made into the account on an after-tax basis. Withdrawals that represent earnings will be taxed as ordinary income. Note that Roth withdrawals in excess of contributions are not subject to the 10 percent penalty tax if used for qualified education expenses.

As you’re aware, care should be taken when selling assets from taxable accounts, whether parent-owned or student-owned. Realized gains will be subject to capital gains tax, but they may be offset with realized losses elsewhere.

Although the challenges of paying for college expenses may seem overwhelming to your clients, proper planning is critical to a successful outcome. Remember that bottle of smelling salts I suggested keeping at your desk in part 1 of this series? Put it away! Remember that balancing financial aid and grant considerations with tax-efficient spending strategies is a good way to help your clients start facing their college financing fears.

maria-bruno

 

Maria Bruno, CFP®
Senior Investment Analyst
Vanguard Investment Strategy Group
Philadelphia, Pa.

 

Editor’s note: This post originally appeared on the Vanguard Advisor Blog. See also Part I of the series. The author gives a special thanks to her colleagues Jonathan Kahler and Jenna McNamee for their research contributions.


1 Comment

Helping Your Clients Face Their College-Financing Fears—Part 1

Higher education is expensive—frighteningly expensive. For most parents, providing for their children’s college education is second only to retirement as their largest investment goal. But even with diligent saving, the first tuition bill may be a shock to your clients, so you may want to keep a jar of smelling salts on your desk just in case.

How can you help your clients face this fear head-on? It’s all about creating a solid plan. With a proper plan in hand, you and your clients will be better prepared to tackle college tuition bills in an organized and financially sound way. Sallie Mae recently published research titled “How America Pays for College 2016,” that reported families are paying less out of pocket for college as they take advantage of scholarships and grants. The report noted that scholarships and grants funded 34 percent of college costs in the 2015-2016 school year, up from 30 percent the prior school year.

Vanguard’s new research, Tackling the tuition bill, provides a practical framework to help you develop a plan with your clients. In this post, I’ll explore the factors that affect financial aid eligibility. (In Part 2 of this series, I’ll provide tips on how to help your clients maximize federal tax perks while also considering how to spend tax-efficiently from assets earmarked for college.)

As you know, household assets and income affect financial aid eligibility, but these sources are not treated equally, based on whether they come from the student or the parents. The graphic below summarizes the key points—income matters more than assets, and student income matters more than parental income.

2017-02-14_vanguard-pic-1

The potential impact of student and parental income and assets on financial aid.

So what does this mean? Obviously, individual circumstances will vary, but here’s a savvy strategy to pitch to your clients:

  • Spend the student’s assets first.Because student assets affect aid eligibility more than parental assets (oddly enough, 529s owned by dependent children are considered parental assets), it can make sense to spend student assets before spending from a 529 plan. Such an approach gives 529 savings more time to compound tax-free. And by spending the more heavily penalized assets early, students increase their aid eligibility in later years, when inflation may boost tuition costs.
  • Tell the grandparents to hold off.Gifts from grandparents and others are considered student income, which has the greatest impact on your student’s financial aid eligibility. As a result, consider tapping those grandparent-owned 529s in the later years of college, when they will no longer be reported or considered in financial aid evaluations.
  • Don’t drain the 529 right away.Parent-owned assets, including 529 plan accounts, have more limited impact on aid eligibility. Unless a client plans to pay for the entire degree with 529 savings, it can make sense to spend from this account strategically over the course of a student’s college career. The account can benefit from continued tax-free growth. A client may also be able to time 529 withdrawals to create opportunities for additional aid or benefits.

I realize there’s a lot for you and your clients to think about; but with a bit of knowledge of the rules and some planning, the tuition bills can be tamed. Look for part 2 of this series, in which I’ll share some tax-savvy tips for tackling tuition.

maria-bruno

Maria Bruno, CFP®
Senior Investment Analyst
Vanguard Investment Strategy Group
Philadelphia, Pa.

Editor’s note: This post originally appeared on the Vanguard Advisor Blog. The author also gives a special thanks to her colleagues Jonathan Kahler and Jenna McNamee for their research contributions.


Leave a comment

Creating a Childlike Curiosity

We have all heard the saying, “Curiosity killed the cat,” that implies it is better to mind your own business. However, as advisers/agents do we truly believe that that is the best course of action to make a connection?

I think it’s safe to say that most of us think we ask a lot of questions. Unfortunately, I’ve found that many of the questions that we ask are merely designed to uncover facts and not to truly understand the prospect or client’s situation and how they feel about it.

Young children have a genuine and innate curiosity when they want to get to know someone and they seem to have no problem asking a multitude of questions. Let’s take a look at how this type of curiosity can benefit you and your prospects/clients.

Gives you time to think. During one of my group coaching critic sessions, in which we role-play with our group members as if they were on the phone with prospects, I noticed that one adviser used what I call a “curiosity question.” It was, “That’s interesting could you tell me more about that?” This was in response to a prospect who gave him an objection about how he didn’t like to use certain investment products and thus wasn’t interested in setting up a meeting. After using his curiosity question, his prospect relaxed, opened up and ended up telling a story about his investment experience. This gave the adviser more time to think about what direction he wanted to turn the conversation.

Uncovers important information. The prospect revealed some interesting information about his concerns regarding a financial adviser he had worked with because years ago that adviser put him into a product that he perceived as expensive and it had lost him money when he was told that it was safe. As a result, he felt that he was misled and that consequently all advisers would mislead him. This helped my adviser client truly understand that his prospect’s real objection was trust and not about a specific product at all.

Shows that you care. After listening to the real objection about trust, the adviser acknowledged what he had heard by summarizing how it must have made the prospect feel. “That sounds frustrating, was it,” he posed. The prospect quickly shared with him how frustrated he was and the adviser in turn showed he cared by being even more curious and asking, “Why is that? Why do you think some advisers don’t take the time to fully explain their recommendations?”

Creates a connection. By now the adviser was creating a connection because he was open to getting to know the prospect and the prospect was connecting because he felt that he was being heard.

After a lengthy conversation the adviser inquired, “I’m kind of curious, if we met and I did give you a second opinion on the investments you own, would you be open to speaking with a couple of my clients to hear what type of experience they have had working with me? It’s free and maybe it would help you see that all advisers are not alike.” It didn’t take long for the prospect to simply reply, “Yes, I would like that.”

Why Childlike Curiosity Works
It’s no secret that people want to be heard. The reason that childlike curiosity works is because when you truly exude through your choice of words and tone that you care, prospects are more open to telling you a lot more about themselves. Everyone has a story, so get genuinely curious and find out what it is.

If you are ready to learn this and other valuable techniques for connecting with prospects and clients, email Melissa Denham, director of client servicing, to schedule a complimentary 30-minute coaching session.

Dan FinleyDaniel C. Finley
President
Advisor Solutions
St. Paul, Minn.


Leave a comment

Winning the Inner Game of Business

Successful team athletes know that they face two opponents in every game: the other team and an inner opponent—the little voice in their head. Similarly, successful financial advisers know that most sales are won from the inside out, as growing a business is really about having a strong mental skillset to create and then maintain steady successes.

Joe, a financial adviser with 15 years of experience, is a current coaching client of mine. When he initially contacted me to discuss his challenges I quickly realized that this was a man whose inner opponent was clearly defeating him. So I explained that the solution was to increase his mental skillset for winning his Inner Game of Business. Once he could master that, he would be back at the top of his game. Let’s take a look at how he (and you) can make a comeback.

I was curious to know more about Joe and the evolution of his business to get a better idea of his situation, so I simply asked him to share what happened during the first five-year period of his career.

He explained to me that in his first five years he was consistently having record years. As a result, he loved the business and had a positive attitude toward his future. He went on to say that his business plateaued from years six through 10 and he later realized that it was because he was comfortable and complacent. Unfortunately, that resulted in a decrease in his business each year for the past several years until he found himself doubting whether he should continue on or move into another career field altogether.

I commented that typically when a professional athlete is in a mental slump they don’t throw in the towel but instead they may seek out a sports psychologist who would work with them on what’s known as a performance pyramid, which has three levels to sharpen metal skillsets. Below are three tips to win against your inner opponent.

1.) Increase your basic mental skillsets: Sometimes the hardest thing for anyone to do to make a comeback is to accept that they need to get back to the basics. In other words, a professional football player doesn’t want to be told how to hold a football properly. Similarly, advisers in a slump don’t want to be told to change their attitude toward prospecting.

However, the first level of the performance pyramid is about rebuilding a strong mental foundation by focusing on essential mental skillsets such as having a positive attitude, finding motivation, setting goals, establishing accountability, making a commitment and increasing communication. Joe needed to get back to the basics in order to get his head back in the game. So we clearly defined what successful outcomes would look like for each of the aforementioned mental skillsets and then we went to work on putting a plan into action.

2.) Increase your preparatory skills: It didn’t take long for Joe to start feeling better about himself. I decided we needed to go to the next level by sharpening his preparatory skills, the mental skillsets that athletes use immediately before they perform. Examples of that would be a professional golfer taking practice swings or a professional basketball player taking easy shots. The two most important activities at this tier are positive self-talk and mental imagery. For a financial adviser, that may include telling yourself you will get the new client and mentally picturing the prospect signing the paperwork.

Joe quickly embraced the process but was admittedly amazed at how taking five minutes before a meeting with a prospect made him feel much more confident.

3.) Increase your performance skills: The third level of the performance pyramid focuses on what an athlete (or in Joe’s case an adviser) does during the big game. Joe’s “big game” happened when he had a second meeting with a million-dollar referral. To help him close I explained that there are three ways to increase performance skills: focus on managing anxiety, emotions and concentration. In order for Joe to accomplish this, I knew he needed to not only prepare for the appointment but to role play every step of it so that he was conditioned to successfully close!

The Final Score
Joe went into the meeting with a new level of confidence. He was focused, calm and genuinely excited to help the prospect. He asked the right types of questions, made a great connection and effortlessly closed.

The next time you step onto your business playing field, be sure to tap your inner game by preparing for it and sharpening your mental skillsets. That way you are on the road heading toward victory.

If this blog post has resonated with you and you are struggling with your inner opponent, take the next step and email me at dan@advisorsolutionsinc.com to discuss what to change first.

Dan FinleyDaniel C. Finley
President
Advisor Solutions
St. Paul, Minn.