Let’s face it. Fees can be a difficult subject for us to discuss with our clients. This is especially so if we aren’t communicating our value. I learned this lesson the hard way.
Before I became a financial advisor I was a business consultant. Being a consultant was easy for me and I was good at it. I began the client engagement with a conversation, listened carefully to what was important and asked the right questions.
I shared a few strategies in the context of a healthy discussion, received their feedback, and only then designed a plan. I made specific planning recommendations and brought in experts only after we were all in agreement about what was needed and why it mattered. This process maximized client value because the client helped identify the building blocks that provided the foundation for the solution. There was no need to rush the implementation phase until the client had ownership in the solutions that were being recommended.
When I was recruited by a wire house in 2002, my training was very different. Out went the listening and questions. Out went the conversation and plan. And in came the products and performance charts. Not surprisingly, my value in the client’s eyes simultaneously diminished. The relationship suddenly was about the short-term results of the various investments I put them in. When the markets declined, I found myself having to justify my fee more and more often. No fun.
When I left the wire house world in 2009 and went independent , I discovered a different culture. It was here I found the resources to develop a more consultative approach. My renewed interest in a values-oriented process with planning at its core was rekindled
However, I still had a few challenges to overcome. In order to communicate my value beyond short-term performance, I needed to take a holistic view of my clients’ financial life while engaging them in an impactful conversation. But even then I was not getting the results I needed. Here’s why:
- I needed to create a step that was a precursor to planning. The CFP™ curriculum recommends that client engagement begins with identifying specific services to be provided by the planner. This works fine when the planning process begins; however it does little to help the advisor, the client or the prospect properly prepare for a successful planning engagement.
- In order to provide the input that the planning software required to produce a plan, I had to gather enormous amounts of information—so much data that my meeting was more like an interrogation than a conversation.
- The clients and prospects had little ownership in the plan. Other than responding to the numbers, there was little opportunity for clients or prospects to express the personal side of their financial life.
- The complexities of the planning software necessitated a one- to two-week waiting period while it was being built, which made the follow-up meeting difficult. The prospect would simply forget most of what was discussed during the first meeting and more often than not, the meeting ended with the clients saying “I’ll think about it.” And so the planning process dragged on.
I needed a different way to engage with my clients and prospects. And this required a mind shift.
I realized my process needed to:
- Be simple
- Be interactive
- Be visually- based
- Provide automatic documentation
- Provide a way for a couple to express individual views
- Provide a smooth and consistent transition to the financial plan
I also realized the ideal process needed to be like a game that’s visual and interactive. It would organize the player’s financial life into easily identifiable units such as values, cash, taxes and giving. Using a game-like design, I began to help my clients and prospects make better money decisions in three rounds:
- Organize all aspects of their financial life, making it easy for them to prioritize
- Help them understand what was working with their personal values and what the consequences would be if they took no action
- Help them decide by giving me immediate feedback on my recommendations.
I adapted my financial planning software to correspond to this entire process for effective quarterly and year-end conversations and reviews.
Every advisor looks at certain metrics such as AUM and GDC . While those numbers are important and have been increasing for me, these numbers are dwarfed by a more important metric; I will call it the “happiness metric.”
Happy clients = Happy Advisor.
According to research, only 66%1 of people are happy with their jobs. Building a prosperous business, raising a family, contributing to your community and time to enjoy life reflect my own personal values. This is my current experience. It wasn’t always that way.
Early in my career, there was anxiety before discovery meetings. I was worried that I would be asked a technical question I couldn’t answer. I felt it, and I know the prospect felt it, too. Taking phone calls from nervous clients during market declines remained a challenge until I had a mindshift.
Help my clients articulate what they value most, and make sure their financial life is in sync. In fact, I no longer think “discovery.” I think “curiosity.” I look forward to engaging prospects and clients in a conversation. Since money affects every part of our life, everyone has a story to tell. We simply have to listen.
I know my process works because my clients who are engaged in this process don’t leave. In fact, some of them have even told me that they know they could reduce their financial advisor fees by changing advisors but they don’t because I help them align their values with their financial life.
Advisors who communicate their value by pitching performance returns run the risk of client departures during bear markets.
Advisor value is communicated by action—action that helps the client make more confident decisions and feel better about their financial life. At the end of the day, clients will remember less of what you say and remember more how you make them feel. Price is a problem only in the absence of value.
Jaimie Blackman is President of BH Wealth Management in New York City and founder of MoneyCapsules® , a process for advisors to help clients organize & understand their financial life for better money decisions -moneycapsules.com.