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Guided Mastery: Helping Your Clients Find (or Re-Discover) Investing Confidence

As you’re scrolling through your daily videos (we all do it), you may come across an Olympic-level skier falling right out of the gate, an accomplished stage actor flubbing his lines or a famous crooner forgetting the words to the National Anthem on live TV. Besides the fact that, for some reason, many of us are unable to stop watching these types of videos, one thing unites each incident: a crisis of confidence.

Confidence is a fickle, erratic thing. It can take years of hard work to gain, and only seconds to lose. In the world of investing, confidence can be one of the most important pieces of the puzzle when it comes to staying on track toward our goals, and yet it doesn’t receive nearly the same amount of coverage as topics like becoming a successful investor.

How do we help our clients go about getting, or re-discovering, the self-assurance we need to get to our goals?

The Root Cause: What Are We Really Afraid Of?

Money remains the single top stressor for Americans. In fact, according to the American Psychological Association, money has been our top concern since 2007, the first year the organization ran the Stress in America survey. It comes as no surprise that money was on the minds of many in late 2007 (and still is) given the market environment during that time.

On October 1, 2007, the S&P 500 closed at a level of 1,549.38, a high at that time. From there, things went steadily downhill, with the index bottoming out at 735.09 on February 1, 2009. This brutal bear market likely took a toll on the confidence of all investors.

David Kelley, international influencer and co-founder of innovative design firm IDEO, believes that a loss of confidence is often comes from our fear of judgment.

In his popular TED Talk “How to Build Your Creative Confidence,” Kelley discusses a situation in his third-grade classroom where his friend Brian was making a horse out of clay. A girl sitting at Brian’s table leaned over and said, “That’s terrible. That doesn’t look anything like a horse.” Brian’s shoulders sank, and he threw the clay back into the bin, never to use it again.

I have a similar story involving struggling with multiplication tables when I was a child, and I still vividly remember how many years it took to feel even remotely confident in anything that requires math (I still ask my wife to double-check tips at restaurants). According to Kelley, these types of stories are common, resulting in many of us growing into adulthood feeling like we’re “not creative,” “not good at math” or “not the investing type.”

Kelley dug deeper into the issue of confidence loss to try to find a solution. He began working with Albert Bandura, a renowned psychologist and innovator in the field of phobias. Specifically, Bandura pioneered a process he terms “guided mastery,” in which, by taking small steps, a person can move from debilitating fear to complete confidence (or “self-efficacy”). To illustrate the “guided mastery” process, Kelley described Bandura’s experiment with ophidiophobia, or the abnormal fear of snakes where Bandura guided a group of people terrified of snakes from refusing to go into a room with a snake to holding the snake in their laps.

If you’ve ever known anyone with a crippling fear of snakes, you can understand how amazing this truly is.

While Kelley’s point is about creative confidence, I believe the process of “guided mastery” has interesting parallels and potential applications to the world of investing.

In many ways—especially for those who are exposed only to the constant stream of negative retirement savings statistics, scare tactics designed to initiate sales conversations and forecasts of another impending financial crisis—investing in the markets can be a truly scary proposition.

If you use the parallel to a phobia, one false move can be enough to make us lose our confidence, possibly for good. Kelley and Bandura show us that, through small steps and minor victories, even the most powerful phobias can be overcome. Here are a few tips to help clients get started.

1.) Recommend Clients Make a List of What They Don’t Know

When it comes to finding a place to start in building investing confidence, it might make sense to have clients start with what they know they don’t know.

By encouraging clients to make a list of the top five or 10 things they know they want or need to know about finance or investing, you have provided them with an all-important foundation. From that list, you can work together to come up with search terms to put into Google or their search engine of choice.

Once they’ve read a few articles and/or watched a few videos, they will be able to check a few of the basic items off their list, and will also begin to understand what type of educational content works best for them. The more they consume, the more they understand what they like and what truly helps them build knowledge and confidence.

The rise of the do-it-yourself culture, powered by video platforms like YouTube, has made learning the basics of almost any skill and/or industry more accessible than ever before. In addition to holding an amazing library of educational content, YouTube is also the second-largest search engine in the world by volume, and thus can provide a great place to start checking items off of their list.

As you help clients move through their list, I think you will find that you’re able to help them add new questions and topics to a larger list as you go. Not only will they be able to dip their toes into more advanced ideas as they move forward, but they will also be able to connect the original terms they learned with new terms, which will lead to a wider understanding of the topics themselves.

2.) Encourage Clients to Celebrate the Small Things

As you work toward helping clients gain knowledge and build confidence, don’t forget to encourage them to celebrate the small successes along the way. Yes, it’s a cliché, but I believe there’s quite a bit of truth behind the common platitude for a couple of reasons.

First, the road to investing confidence can be long, and focusing solely on the ultimate goal can be overwhelming. While a focus on the finish line is certainly important, adding a few horizon lines along each step of the journey can make the goal seem more achievable. Our brains are actually not wired to hone in on the distant future, so maintaining short-term benchmarks is generally a more effective way of staying on track.

Second, never underestimate the power of positive reinforcement. Because saving and investing success generally happens over the long term, it can be difficult for clients to see how much of an impact their hard work and diligence is making from month to month. Celebrating the fact that they saved 10 percent of their paycheck over a three-month period or that they made it through a whole year without taking any money out of their retirement savings can help them maintain perspective beyond what the numbers are showing over the short term.

3.) Help Your Clients Avoid Dwelling on Their Mistakes

Investing over a lifetime is a marathon, and it’s natural to make mistakes along the way. As you well know from your daily meetings, when investors do make an error or miss an opportunity, it is often magnified by the fact that they are forced to watch constant coverage of the teenage billionaire who went right when they chose to go left. It’s not a great feeling, but few things can hurt our confidence more than attempting to compare our situations to others. It’s certainly easier said than done, but it can pay to take a moment to remind our clients (and help them come to the same conclusion), for the most important things at least, that they are the best judge of their own success.

As it pertains to investing and the financial markets, clients have to give themselves a break when it comes to a tough week or month in the market. I encourage you to help clients take it to the next level and to completely get away from thinking about the markets in terms of “winning and losing.” The potential to win or lose implies a game, and it shouldn’t be a game when it comes to their hard-earned money.

Instead, help clients think of each bump in the road as the next step toward confidence. When I was first starting out and knew very little about investing basics, when I saw or heard something telling me I was behind in some way, I committed to making sure I understood exactly what that meant.

If you can help train your clients to either do the research on their own or come directly to you when they receive an email telling them about a decision they must make right away, see a term they don’t understand or come to a crossroads at which they struggle to make a decision, you can serve as that calming element that makes each mistake or stumble a lesson.

4.) Help Prospects Know That Expert Help Is Available

Each of us has instant access to an unbelievable amount of information on almost every topic imaginable. Like anything else, it’s up to every investor to decide if they want to go it alone, or enlist expert support.

It’s certainly open to interpretation, but in my opinion, the concept of guided mastery can work both ways in the investing world. Whether an investor chooses to work with a financial professional or not, the creation of a plan, the diligence to stick with it and the commitment to build knowledge one step at a time are all important parts of the process. There are, of course, pros and cons to both strategies, and the decision all comes down to each investor’s specific needs, goals, and unique financial situation.

Because the world of investing is so vast and complex, I truly believe financial confidence and even skill require a commitment beyond simply mastering the nuts, bolts and basics. At some point, most investors will reach the point where they can no longer manage their financial landscape on their own. From a prospecting standpoint, this is why creating (or at least sharing educational content) can be so important. When that investor reaches the point of wanting or needing help, I believe they are more likely to go with someone who has already provided them some value along the way.

All else being equal, I believe that, at the very least, investing confidence is something that is attainable for us all. Just as Kelley encourages those who have lost their creative confidence, through a series of small steps and successes, you can be the guide who helps clients work toward a place where they feel they have done what they set out to do, and eventually, take the last step and touch the snake.

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Dan Martin is the Director of Marketing for the Financial Planning Association®, the principal professional organization for CERTIFIED FINANCIAL PLANNERTM (CFP®) professionals, educators, financial services professionals and students who seek advancement in a growing, dynamic profession. He is an award-winning author with a diverse financial services industry background in marketing and communications. He earned a journalism degree from the University of Denver and his MBA in marketing from the Daniels College of Business.

 


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4 Steps to Generate Conviction and Build a Connection

In a recent group coaching session, Angela, a new financial adviser, shared a story of meeting with a client and knowing that the client needed renter’s insurance. Although the client saw no value in getting this type of coverage, Angela was adamant about helping him understand the risks he was taking, which far outweighed the costs. Instead of just telling him what she thought, she simply asked him enough questions to get him to come to his own conclusion that it was indeed something of value.

This level of conviction is an admirable pattern that I often see in veteran financial advisers and insurance agents but I rarely see in rookies. The reason is veterans simply have had more client experiences and thus know the value of (and rationale for) their recommendations. In other words, they generate conviction to build a connection.

The following is a brief overview of the steps that you could use to increase your own level of conviction for your products and services.

Step 1: Know Why Clients and Prospects Need Your Products and Services

Angela took a firm stance because she knew without a doubt that her client needed renter’s insurance. She had had other clients who didn’t have it and sadly paid the price when they experienced the loss of their possessions. It is vital to be able to articulate the tangible benefits or the “why” of your recommendations. If you cannot clearly connect the dots for your prospects and clients, they don’t know what they don’t know and could make some significant choices that could have significant consequences.

Step 2: Know the Right Questions to Ask

 When Angela shared her interaction with the group, I noticed she had included one very important detail, that she had asked her client questions rather than just telling him what she would do. The reason this is so important is because people hate to be sold to but they love to buy. To accomplish the aforementioned step, all you have to do is map out key questions to help lead the prospect or client down a path to understanding why they should buy.

Here are some examples of some of the questions that Angela had for her client:

  1. “How much do you think all of your valuables, furniture and many miscellaneous items in the house you rent are worth?”
  2. “Do you have that much money to replace them in case of a fire or flood?”
  3. “Do you know how much renter’s insurance is per month?”
  4. “Do you think spending $6 dollars a month is worth the cost of covering your items should you ever experience their unexpected loss?”

Angela didn’t make much on this policy but that wasn’t a concern, she had the best interest of her client in mind.

Step 3: Know How to Ask for the Order

 If you re-read the last question she asked, it was a closed-ended question that essentially asked for the order. Of course it was worth it for her client to pay $6 a month to cover all the items in his home. That’s a no-brainer! But, what if the cost had been much higher, say tens of thousands of dollars?

If this is the case, you craft as many questions as you need to help them understand the benefits. Next, you ask the questions and let the prospect or client end up making a decision they feel they made without you making it for them. Then, you summarize what they currently have versus the benefits of what you are recommending. Finally, you sum things up with this question, “Are you comfortable with moving forwarding doing [suggested action] based on the benefits of what we just discussed?” If you have led them to a place of clarity and provided plenty of information emphasizing the advantages, it should be a relatively easy to wrap the conversation.

Step 4: Evaluate Your Process

After you are finished with your appointment, it’s important to take time to evaluate your process. You need to know if your conviction was properly communicated to build a connection with them. If not, simply go back to the beginning and work on each of the steps discussed and fine tune them based on what you heard and noted during your discussion.

Why Conviction Builds a Connection

When I congratulated Angela on sticking to her guns, asking questions and letting her client come to his own conclusions, she already had felt good about what she did but the group and myself validating her efforts solidified that.

The reason generating conviction in your recommendations builds a connection with prospects and clients is because you are coming from a place of sincerity, it’s not about getting the sale but putting the client/individual’s needs first.

If you are ready to take your business to the next level, schedule a complimentary 30-minute coaching session with me by emailing Melissa Denham director of client servicing.

Dan Finley
 Daniel C. Finley is the president and co-founder of Advisor Solutions, a business consulting and coaching service dedicated to helping advisers build a better business.

 


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How Meditation Could Help Your Clients

Habits your clients have developed around money have most likely been with them for decades. One study from Cambridge University found that people develop money habits by the age of 7.

It might be beneficial to your clients to recommend meditation to tackle their bad money habits—whether it’s overspending online, living beyond their means to keep up with their neighbors, or continually financially supporting an adult child.

“When you just think about money, it’s all psychologically based,” said Michael Liersch, head of behavioral finance at Merrill Lynch Wealth Management, in a March 2017 article on TheStreet.com “To really be authentic about it, the whole premise of money is emotionally based in essence. Removing emotion from investment decision-making is just a false premise to begin with.”

Just as mindfulness and meditation can help a person who is trying to lose weight, it can also help somebody who may be trying to overcome negative money habits. One study from Harvard University found that mindfulness meditation actually increases the amount of gray matter in the brain’s frontal cortex, which aids in memory and decision-making.

The New York Times reported that a different study from the same researchers found areas of the brain that deal with emotional regulation, learning, focus, and perspective were all thickened after just eight weeks of meditation.

“The payoff s that come from establishing a meditation practice are well worth the time invested,” Leisa Peterson, business strategist and money coach, wrote in a 2015 Huffington Post article. “When you become more mindful about money, you learn a great deal about yourself and also your ability to be creative and intentional, rather than reactionary,” Peterson wrote.

Peterson recommends guided meditation apps to get your clients started. Meditation to overcome negative money habits seems to have worked for some people.

Rebecca Velasquez told LearnVest in 2016 she was able to find financial clarity and save $25,000 by being more mindful. “Meditation requires guidance and support as well as a willingness to take it on every single day,” Velasquez said. “Once that willingness is there, it opens up a whole world of possibilities and revelations, which may end up benefiting your well-being—financial health included.

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Ana Trujillo Limón is associate editor of the Journal of Financial Planning and the editor of the FPA Practice Management Blog. Email her at alimon@onefpa.org. Follow her on Twitter at @AnaT_Edits.


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These Tips Can Help Advisers Attract—and Keep—High Net Worth Clients

By Robert Powell, MarketWatch.com

For many advisers, high net worth individuals or households — those with more than $1 million in investible assets — are a kind of Holy Grail.

The reasons are clear. HWNIs, which represent just 0.7 percent of the world’s adult population but own 45.2 percent of the wealth, are good for business. They’re highly profitable and loyal, according to Rebecca Li-Huang, a wealth adviser at HSBC, who wrote a chapter in the June 2017 book Financial Behavior: Players, Services, Products, and Markets.

Consider: An adviser can earn one-half of 1 percent of assets under management on a $10 million account, say $50,000 a year. By contrast, the very same adviser would earn only $1,000 a year on a $100,000 account. For financial advisers, the attraction should be obvious.

But there’s more to the story, and advisers should get to know the psychology of HNWIs before taking them on as clients. Just like regular folks, Li-Huang wrote, they are prone to behavioral biases and judgment errors, not perfectly rational, utility-maximizing, unemotional homo economicus.

In short, wrote Li-Huang, they are humans. And in the U.S., according to Li-Huang, they often share a particular way of thinking about what they want from their money that financial advisers should consider when trying to serve them.

American HNWIs like to direct their investment according to their personal beliefs and values, and they play a large role in public life through philanthropy and politics, according to Li-Huang. And many want to leave a legacy by giving back to society while generating a financial return on their investments.

“The holistic returns on cultural, environmental, social, and political causes are gaining importance in wealth management,” wrote Li-Huang. “The trend toward helping HNWIs address their personal aspirations and social-impact needs is part of a broader wealth management industry transition toward giving holistic wealth advice.”

Focus on goals while mitigating stress

How can advisers do that? For starters, according to Li-Huang, advisers can focus on goals-based financial planning, holistic wealth management, and services that address investments, lending, tax and estate planning, insurance, philanthropy, and succession planning.

With goals-based planning, wrote Li-Huang, success is measured by how clients are progressing toward their personalized goals rather than against a benchmark index such as the S&P 500 stock index. (Publicly traded securities don’t necessarily contribute that much to a HNWI’s wealth, notes Li-Huang, as just one in eight millionaires say equities were an important factor in their economic success.)

Still, she argues, HNWIs do need to invest in diversified markets and use tax-efficient strategies. And advisers can add value by “mitigating psychological costs, such as reducing anxiety rather than improving investment performance” and by focusing on financial planning and advice on savings and asset allocation.

Li-Huang cited research that suggests that investors don’t necessarily want the best risk-adjusted returns but, rather, the best returns they can achieve for the level of stress they have to experience, or what some call anxiety-adjusted returns.

In the cast of HNWIs, they tend to practice something called “emotional inoculation.” They outsource the part of the investment decision-making that induces stress, according to Li-Huang.

HNWIs are especially looking to their wealth manager for help with philanthropy. They are looking for “support and advice, such as setting goals and defining their personal role in their areas of interest, identifying and structuring investments, and measuring outcomes of their social impact efforts,” she wrote.

Given that advisers need to provide their HNWI clients with tax and philanthropy specialists.

In advisers they trust

When HNWIs consider selecting an adviser, they tend to focus more on honesty and trustworthiness than past investment performance or standard professional credentials, according to Li-Huang.

That’s not to say that professional credentials and competence don’t matter — they do — but, rather, that they are not sufficient in and of themselves, according to Li-Huang.

HNWIs — who tend to have less time and resources for due diligence than typical clients of financial advisers — use something called “trust heuristics” when searching for an adviser with whom to work.

In other words, they’re even more likely to assume that the category leaders are among the best in a highly regulated world even as they hold advisers referred by family members, friends and acquaintances in high regard, according to Li-Huang.

Consequently, perhaps, HNWIs tend to trust their advisers much more than less wealthy retail investor trust their financial advisers.

So, what is trust to a HNWI? According to Li-Huang, HNWis trust advisers who show signs that they’re acting in the client’s best interest, reach out proactively, charge reasonable fees, deliver mistake-free work — and admit when they’re wrong.

In many ways, attracting and retaining HNWIs isn’t much different that getting and keeping what are called “mass affluent” clients, who have with assets of less than $1 million. But the differences are worth noting, because the stakes are higher, and a bit of extra knowledge can pay off.

This story first ran on July 21, 2017. Reprinted with permission.

Related Links from MarketWatch:

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Interest, Curiosity and the Client Education Conundrum

I had the opportunity to attend a day-long session with Brené Brown last year, and among the many powerful takeaways from her talk was my first introduction to a fascinating study from Amanda Markey and George Lowenstein on interest and curiosity. I’m somewhat embarrassed to admit that, before reading through the research, I didn’t realize there was a fundamental difference between interest and curiosity.

It turns out that, if you agree with Lowenstein and Markey’s conclusions, there is actually a significant difference between the two, and that the distinction can have a powerful impact not only on how we view and implement the pursuit of knowledge for ourselves, but for clients as well.

Lowenstein and Markey said: “We define interest as a psychological state that involves a desire to become engaged in an activity or know more, in general, about a subject. If an individual is interested in pottery, for example, that person may want to sit down and throw pots, or that person may want to know more about the technique, the materials, and the history. Curiosity, in contrast, only arises when a specific knowledge gap occurs, such as, ‘What is the difference between high and low fire pottery?’ Thus, curiosity and interest differ by their objects of desire (specific knowledge vs. general knowledge/activity engagement).”

In other words, to be truly curious about something, you must have a certain level of knowledge about the subject—enough to ask a particular question or questions. For an example, let’s take a look at my initial interpretation of the results of Jackson National’s 2017 Investor Education Survey. Jackson generally runs the survey annually, and releases useful data on investor knowledge and confidence in the U.S.

The key findings from the survey highlight a gap between perceived financial knowledge and confidence (nearly 60 percent of all respondents stated that they did not have the confidence to make appropriate investing decisions) and U.S. investors’ interest level in building their knowledge and confidence (nearly 70 percent of respondents said they are very or somewhat interested in furthering their financial/investing education).

Initially, I looked at this gap as a black-and-white opportunity—if we (the financial services industry) can count on a certain level of interest, we just need to help people find the right resources or help to start educating themselves, right? Then, when they reach the point at which they’re ready for expert help and an adviser relationship, they will take the next step.

Based on the Markey and Lowenstein research, I think the answer is more complicated than that. What we’re talking about is the classic Catch-22 scenario, and it applies directly to both how investors educate themselves and how advisers educate clients. The research suggests that, if investors don’t have the financial knowledge to make appropriate investing decisions, unless they force themselves to understand the basics, they can never be curious enough to answer the fundamental questions about preparing financially for life. In other words, a rudimentary understanding of finance is required for investors (or clients, if they are already in your care) to be curious enough to seek further knowledge.

Thus, while interest remains the baseline (without interest, we are pretty much out of luck), the financial services industry in general and financial planners in particular must take a more active role in convincing clients to take that crucial step toward activating curiosity and the quest for deeper knowledge. As a financial planner, you are likely the primary source for your clients’ financial education, and data from the aforementioned Jackson survey supports that many investors working with financial planners rely solely on their planner when it comes to the sharing of financial knowledge. This is a crucial function of the planner-client relationship, but I believe the Markey and Lowenstein research shows us that it can be a double-edged sword in that too much reliance on the planner may actually reduce clients’ personal interest in or curiosity about financial topics over the long term.

Of course, that’s not to say financial planners should stop offering financial education support to clients. Quite the opposite. But I do think it’s important for planners to make sure that investors are not separating themselves from the pursuit of financial knowledge when they enter into the planning relationship. Planners may need to take on the responsibility of not only providing clients with the proverbial fish, but teaching them how (and why) to fish as well. So, the question becomes, where do we begin?

I wish I could provide a perfect formula on how to motivate clients to master the basics and activate their curiosity, but unfortunately there isn’t a “magic bullet” here. We are all so different when it comes to our current level of knowledge, how we motivate ourselves and even how we perceive what constitutes “the basics,” that to cast a single net designed for universal application would be beyond foolish.

To provide a semi-prescriptive starting point, however, we can look to the Lowenstein and Markey research, which said that the intensity of curiosity depends on importance, surprise and salience.

Importance

To satisfy the first criterion, we need to make clients’ curiosity about financial and investing topics personal so that they will feel important to them. For example, when your clients have children, crafting a will and testament or putting away money for higher education can become an urgent and tangible issue. When an issue becomes directly applicable to our lives, we inherently become more curious.

As a financial planner, you are already adept at tying financial concepts and strategies to a clients’ situation, but the fundamentally fluid nature of “importance” in the context of curiosity is a valuable reminder that a concept or strategy a client had little interest in can suddenly become a focus as a result of a life transition. This knowledge may allow you to pre-empt questions from clients about certain concepts with relevant content, further building the relationship, or provide a useful framework for your prospecting strategy.

Surprise

For surprise, human beings rely on our current understanding of the way things are and use curiosity to test the accuracy of our knowledge. When our frame of reference is broken with new information, we are more likely to dig deeper for even more revelatory insight. Or, as Lowenstein puts it, “the accumulation of knowledge tends to beget the desire for further knowledge.” As mentioned, the element of surprise makes the case for frequently sharing interesting and engaging content with clients in an attempt to spark further interest in a topical area or the world of financial knowledge as a whole.

I think the importance of surprise in sparking curiosity also serves as a good reminder to avoid marketing for marketing’s sake. Instead of sending out something your clients or prospects have already seen or a story they’ve already heard because you are running up against your newsletter deadline, it might make sense to search for or create a new angle on an old story, or to survey your clients on their most burning questions and attempt to answer those in a post. From a blogging perspective, Google always favors quality over quantity, and your readers certainly do too.

Salience

Finally, salience is the degree to which your environment highlights a particular information gap. According to Lowenstein, salience will tend to be high when a question is asked explicitly, and may be “even higher if there is another identifiable and proximate individual who knows the answer.” While not everyone needs or wants expert help when it comes to financial and investing discussions, the importance of salience in enhancing curiosity is an oft-overlooked component of the value of a financial planner.

That someone, somewhere knows the answer to our question is not of great value to us (and can actually decrease curiosity). But if that person is sitting across the table from us, with the added bonus of understanding the most intimate portions of our financial lives, the level of salience increases significantly. As it’s not always easy to find new ways to represent your value as a planner, research on the power of salience could come in handy.

As mentioned, there is certainly not one right way to go about educating clients, and many of you already have an excellent formula that works for you and your practice. That said, my greatest takeaway from Markey and Lowenstein’s wonderful research is the reminder to challenge everything, even the things we think we know best. I think your curious mind will thank you.

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Dan Martin is the director of marketing for the Financial Planning Association®, the principal professional organization for CERTIFIED FINANCIAL PLANNER (CFP®) professionals, educators, financial services professionals and students who seek advancement in a growing, dynamic profession. He is an award-winning author with a diverse financial services industry background in marketing and communications. He earned a journalism degree from the University of Denver and his MBA in marketing from the Daniels College of Business.


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3 Levels of Trust and Why They Matter

In this year—2017—there is a “crisis of trust.”

So says the 2017 Edelman Trust Barometer, an annual global trust survey. Not since the study began tracking trust among the global population have they found such a broad decline in trust in all four key institutions—business, government, non-governmental organizations and media.

The 2016 survey noted that financial services are the least trusted industry of any they surveyed.

With the fall of trust, the majority of respondents now don’t believe that the system is working for them. In this climate, people’s societal and economic concerns turn into fears, spurring the rise of populist actions which have played out across the globe.

Such is the importance of forging trust among your clients. When it comes to trust there are three levels and advisers should know each one in order to be more trustworthy in the eyes of your clients.

As the chair of financial and legal innovation at ForbesBooks, and as a former financial coach, I’ve spent a lot of time focusing on the issue of trust. Trust is the foundation of the financial adviser–client relationship. We all know that. It’s particularly crucial when somebody is in a vulnerable position and with family and health, finances are among the most vulnerable areas we have.

Trust is a powerful intangible asset, defined differently by each client. Allen Harris, CEO of Berkshire Money Management, Inc., said that when it comes to the adviser-client relationship, trust is sometimes a too-easily-earned commodity. Clients want to trust their adviser and sometimes do so unquestioningly.

“Unfortunately, financial advisers don’t have to do much to earn that initial trust,” Harris said in a recent interview. “The client needs help and believes that someone with a shingle has their best interest at heart.”

study by the Wharton School looked at three levels of trust between advisers and clients. The first is trust in knowhow. Investors are looking for someone whose competence inspires trust. This first level addresses the question, “Do you know what you’re doing?”

“Many people find advisers by way of referral, so they feel they can trust the adviser because someone else trusts them,” Harris told us in a recent interview. “But why did that first person trust the adviser? Maybe the adviser did something to earn that trust, but maybe not. Clients get lucky a lot, because most every adviser is a good person who means to do good. But like in any profession, that’s not always true. So the client rationalizes trust by a gut feeling, a referral or a slick brochure.”

The second level is trust in ethical conduct. This level addresses the question, “Do I trust you not to steal money from me?”

“If you are trying to protect from embezzlement, that’s easy,” Harris said. “You want a public held, highly regulated, closely scrutinized custodian of your assets. Then the client always has the access to and the ability to view their money.”

If the client is trying to protect herself from malpractice, one big problem is that the SEC and FINRA do not allow investment performance to be a consideration in complaints against an adviser. Don’t get me wrong—investment performance isn’t the thing that should be a deciding factor, but it should be a benchmark to be sure clients make money when the market goes up but also that the adviser is proactive in protecting the portfolios during down times. That’s the type of referral you really want.

The third level of trust is trust in empathetic skills. This level addresses the question, “Do you care about me?” There is no formula for this one. CNBC sites a study released by the CFA Institute which shows that so-called soft skills—typically things such as relationship-building and interpersonal communication—will be more important than technical skills in the coming years.

These attributes—a proven track record, an ethical reputation and sincere empathy—inspire trust on all three levels. For financial advisers, trust is not simply a nice thing to have, but a critical strategic asset.

Harper Tucker
Harper Tucker is the chair of Financial and Legal Innovation Practice and vice-president of Authority Marketing, a leading the author acquisition process for ForbesBooks and Advantage Media Group


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5 Signs It’s Time to Move On from a Prospect

Have you ever had a high net worth prospect who seemed semi-interested in working with you but you just couldn’t quite get them off the fence? You’ve called several times; maybe you’ve even met with them and offered recommendations, but something is holding them back from taking that final step to becoming a client. Then, your prospecting efforts become unreturned voicemails or vague replies to your emails. If this sounds familiar, maybe it’s time to acknowledge the signs and realize it’s time to move on.

Following is a brief overview of what I tell my clients to look for and how to know when to let go.

Sign No. 1: A Family Member in the Business

Most experienced advisers and agents know that when a prospect says, “I have a brother in-law in the business but I’d be interested in hearing what you have to say,” it probably means that they don’t completely trust their relative, however it doesn’t guarantee that they’d change anything. Instead, they most likely will consider your recommendations, talk it over with their relative and still not end up working with you. The reason is because relatives are just too awkward to walk away from when it comes to business dealings.

If you run across this type of prospect, qualify them right away by saying something like this, “If we identify some need for changes in your portfolio, are you in a position to do business with me?” This will help you identify how serious they are about working with you.

Sign No. 2: Wanting to Split their Business

Some prospects may like your recommendations but not want to sever ties with their current adviser or agent. The reason is simple, it’s because they are familiar and have established trust with that person. They don’t know you but they might consider working with you on a trial basis.

Unfortunately, many times they are doing this with the caveat that they can compare results and then let go of the adviser/agent that doesn’t do as well for them. If this scenario is offered—working with you to “see what happens”—it’s important for you to reply like this, “I’m sorry but the clients I work with need to provide reasonable time for my process and recommendations to come to fruition.” When you stand by your value, you may lose a prospect now and again but you maintain your self-respect. As a result, you also build a better client base.

Sign No. 3: They Took Your Recommendations and Bought Online

Years ago, I had a prospect take several of my recommendations and purchase them in an online account. He felt there was nothing wrong with it since it saved him money. I on the other hand believe that if the relationship starts off on the wrong foot, it will end up remaining that way. This type of prospect is merely showing you that they don’t value your services. If this happens, you need to be ready to walk away.

Sign No. 4: You are Chasing a Ghost

At some point, you will have a prospect that needs to “think about it” or “review things.” When you follow-up they may not return your calls. The reason is because they didn’t see the value in your recommendations in the first place.

There may have been a concern or objection that you didn’t address. If this happens, simply leave a message like this, “Hi ______, this is _______ with _______. I have a quick question that only you can answer. Could you please call me when you hear this? My number is _________.” This is what I refer to as the “curiosity message.” If they aren’t curious enough to call you back, they really aren’t interested in doing business with you. If they do call, you need to ask them something directly like, “Are you still interested in (insert three benefits here).” If they are, then set another appointment with them to do the paperwork.

Sign No. 5: You Just Don’t Like the Prospect

If you find yourself dreading any type of communication with a specific prospect (email, phone call or appointments) then you certainly do not want to work with them. No matter how much business you think they can provide, inform them that you might not be an appropriate fit and they could be better served by someone who could provide more of what they are looking for.

Why Watching for Warning Signs is Important

This is not an easy business but when you make a conscious choice to work with people who want to work with you, you can make things much easier on yourself. That’s why it is so important to watch for warning signs that it’s time to move on from a prospect. Life is too short to chase those who don’t see your value.

If you are ready to take your business to the next level, schedule a complimentary 30-minute coaching session with me by emailing Melissa Denham, director of client servicing.

Dan Finley
 Daniel C. Finley is the president and co-founder of Advisor Solutions, a business consulting and coaching service dedicated to helping advisers build a better business.