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New Idea? Try a Reality Check

Planners and advisers often ask about ideas they heard from another adviser, a conference speaker or something they read about in an industry publication.

These ideas generally relate to some type of marketing concept or client event. “Do you think this would work for me?” they ask. A good way to conduct a reality check is to ask yourself these four questions:

1.) What are you trying to accomplish? Every activity, communication or process that you put into place should have a clear purpose related to the vision you have for the practice you are building. Ask yourself whether this idea will move you closer to your vision for your ideal practice. If it does, it may be worth considering. If not, look for something else that will.

2.) What would this communicate to your clients or prospective clients? One of my core principles is to examine every decision from the perspective or viewpoint of your clients. Would this idea or concept enhance the value you bring to them in terms of your planning or advice? Would it step up your level of service to them? Would it enhance their perception of you as a professional?

3.) Is this the best way to accomplish what you are trying to do? Think about what you are trying to achieve and then consider all the ways that goal could be accomplished. Many times, we will hear about an idea, but don’t stop to consider alternative approaches that could be more effective and at a lower cost.

4.) How will you define success? It is amazing how frequently planners and advisers will implement new ideas, even marketing strategies, with no idea how to measure the results relative to the time and resources spent. Obviously, some results are easier to measure than others, but you should never undertake a new strategy or activity without clearly defining for yourself exactly what success would look like.

By taking the time to ask yourself these questions about any new concept you are considering, you are much more likely to pursue the strategies that make the most sense for you and your practice, and most importantly, for your clients.

susan-kornegaySusan Kornegay, CFP®
Consultant/Coach
Pathfinder Strategic Solutions 
Knoxville, Tenn.

 

Editor’s Note: Read more of Kornegay’s blog posts at the Pathfinder Strategic Solutions “Perspectives” blog. 


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The Reality of Creating a Record-Setting Year

Do you believe that achieving a record production year in your business happens by chance or by design? If you said design, you are right. However, while most advisers start off a new year with big dreams, few finish reaching them. The reality of creating a record-setting year is more than just great intentions and luck, you need thorough and consistently used systems.

As a rookie financial adviser more than 20-plus years ago, I struggled my first year. During my second year things were a bit better because I gathered three times the assets but I was still in no position to stop eating ramen noodles. It wasn’t until my third year that I made a commitment (and a plan) to create my success. As a result, I tripled my income from the previous year. I then repeated the process the following year and was able to double my income following the exact same system. I’m telling you this not to impress you but rather to impress upon you that you cannot leave success up to chance.

The following is a brief outline of how you too can plan for your success with a little upfront work:

Create an Unwavering Commitment

It was a simple statement to myself— “I’m never going below $10,000 gross per month this year,”—that led me down a path to changing my belief system that I could actually do it. I used this same strategy years later but doubled the number and hit a personal record high production in month five out of the first six months of the year. Why? Merely because I choose to believe that it was possible. Remember, the more you believe in your own potential the higher the probability that you will hit your goals.

Daily Discipline of Prospecting

Part of that unwavering commitment was to start every day prospecting. This may seem like a no-brainer but it’s not easy unless you do one important thing, learn to enjoy doing it. It might sound crazy but if you make a game out of how many dials, contacts and appointments you do while prospecting, it can actually become a lot of fun.

A Systematic Way of Selling

Although hope is a good thing, it’s not the best strategy for sales success. Instead, you need a systematic way of selling so that you can duplicate every step of the way, from the initial contact to closing the sale. In my third year, I also learned from a top producer how to cross-sell to my client base. This opened my eyes to how to gather additional assets and commissions but more importantly to increasing my value to my client base.

A Detailed Tracking System

In order to keep the momentum of activity and results going it was important for me to create a great tracking system that was simple enough to fill out during the day but effective enough to keep a tally and tell me if I was going to achieve my monthly goals. I created a daily score card that tracked my contacts, presentations, orders asked for and gross commissions. Next, I created a sales pipeline of prospects and clients so I knew how many people and how much potential business was possible. Finally, I tracked daily gross production and knew exactly if I was above or below my goals at any given time. When you make tracking a priority you get excited to achieve more.

A Strong Reward

At the end of my third year I was shocked at the amount of success I had achieved by greatly surpassing my goals. Looking back at it now, it’s not about the numbers it’s about all of the other things that are obtained when you surpass what you believe you are capable of, confidence, pride and increased self-esteem to name a few. However, that’s not to say that you shouldn’t have a strong reward system. In fact, I went from eating ramen noodles the previous year to buying my first house! When you have a strong reward system you have an extra added incentive to achieve your goals.

Old Dogs CAN Learn New Tricks

2016-02-28_finleyBy now you might be saying to yourself, “You can’t teach an old dog new tricks.” If so, just know that isn’t reality. In fact, in my book 101 Advisor Solutions: A Financial Advisor’s Guide to Strategies that Educate, Motivate and Inspire, I tell a true story about my client Gale Z., who after 25 years was forced to realize that she was barely hitting the corporate minimum production standards at the end of a year. We applied the aforementioned strategies and by the end of the first quarter she was the top producer in her region. She exceeded her numbers by reaching 66 percent of the previous year’s production goals.

If you read this article and need help creating a record-setting year, email Melissa Denham, director of client servicing, to schedule a free complimentary consultation.

Dan Finley

 

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

 


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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


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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.


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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.


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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.


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Become a Gen-Savvy Financial Planner

Cam Marston.jpg2017 FPA Retreat Speaker Cam Marston

Any business situation today—from hiring new employees to bringing on new clients—will likely involve at least two different generations, and sometimes three or four. If you feel out of touch with generations different than your own and are perhaps hesitant to work with them, Cam Marston offers this advice: understand your own generational biases first, then have empathy for others.

Marston, a leading expert on generational change and author of The Gen-Savvy Financial Advisor, is teaching people of various generations—matures, baby boomers, Gen-Xers, and millennials—how to understand each other and work together.

Marston will present at FPA Retreat, April 24–27 outside Atlanta, Ga. Register for Retreat here. Below is an excerpt of a February 2016 Journal 10 Questions interview with Cam Marston. See the original article here.

1.) What are some things financial advisers should know about successfully working with millennial clients?

First, most of them are asset poor right now; they simply don’t have a lot of resources. Second, they are very attuned to their parents. The millennials and their parents have a tight connection. A generalization is that they will listen to one another, which is an opportunity for a warm lead from baby boomer parents. Third, when you introduce yourself, put content on your website, or in any sort of promotional moment you get, you need to focus on the client and how they’ll change and benefit from working with you.

Fourth, millennials are easiest to work with in groups. They tend to like to be in groups of two, and three, and four. When calling on them or holding events, you want to make sure they come in pairs or in threes because they will much more likely show up than an individual who doesn’t know anyone at the event. So schedule opportunities for small groups of millennials to gather and hear your proposal or your information.

2.) What about Gen X clients?

The apex consumer in Generation X today is the Generation X female. And when she is a mother of a young child, her decision-making and referral authority is unparalleled. Our society has given mothers of young children the ability to tell people what to do, what to buy, and where to shop in a way we’ve never seen before. So if I’m an adviser and I’m engaging a Generation X female with young children, I must treat her very, very well, because her ability to refer people to me is enormous.

Secondly, if she is married with young children, she is more often than not the CFO of her household. As much as the husband may act like he is the decision-maker, when the two of them are alone, she will determine whether I get the business or not, and she still has the power to refer. So when I’m dealing with Generation X, I’m keeping a keen eye out for the influence of the Generation X female. And my prediction is the millennial female will be exactly the same with a power of 10.

Know that the Generation-Xer is a “stalker.” Before ever meeting you in a business environment, they will have gone online and done a good bit of research on you. So to prepare for doing business with a Generation-Xer, make sure your online first impression is sparkling and squeaky clean.

3.) What are some things that financial advisers should know about successfully working with baby boomer clients?

A distinction needs to be made between leading and trailing baby boomers.

Leading baby boomers, born 1946 to 1955, are the oldest portion of the baby boomers. Population-wise, they’re a smaller segment of the boomers, but their attitude is unique in that we appeal to the older baby boomers with messages of: you’ve worked hard, you’ve paid your dues, you deserve the fruits of your labor. The systems of the nation, Social Security, etc., were set up to reward you for the hard work you’ve done; let’s help you enjoy that through retirement planning.the-gen-savvy-planner

The younger baby boomers, born 1956 to 1964, are the more populous section of the generation. The great recession of 2008 hit them hard. They are of the age that many of their children should have been getting a toehold in their careers when 2008 came around, but due to the economy those younger boomers had to continue to supplement some of their children’s needs.

Bottom line, those younger boomers wear a brave face, but inside they are horrified at their retirement prospects. They haven’t saved enough. Their defined benefit plans have been frozen, eliminated, or were never offered to them. They’ve not taken advantage of the 401(k) plan—they realize in hindsight—the way they should have.

The adviser needs to go to the trailing baby boomers and give them a message of hope. Not a message of entitlement, or you deserve it, or you’ve worked hard, but a message of hope that is timely and personalized, which is: “There is still time to get you to this goal. We can create a plan that matches your need.”

Schulaka Carly_resizedCarly Schulaka
Editor
Journal of Financial Planning
Denver, CO