Archive for August, 2008

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Why Baby Boomers Don’t Save for Retirement—It’s our Fault

Monday, August 11th, 2008

We don’t do what we’re told. It starts at a young age, and we continue to resist doing what others tell us to do. So it’s no wonder baby boomers are sick of being told and continue to resist saving for retirement.

This problem won’t be solved by greater tax incentives. It will also not be solved with more financial education. Financial education assumes ignorance but is there a baby boomer that does not already know they don’t save enough? If you’re committed to educating babay boomers please know that if you educate people, you will never earn more than a school teacher. People don’t need to be educated, they need to be motivated and not 1 in 10 financial advisors know how to do that.

The basic problems we have not solved as financial advisors are:

1. We tell people to save for retirement by having less fun today.
2. We try to have people realize the importance of retirement planning by telling them, yet realization is a self-generated activity (i.e. baby boomers won’t learn by being told).

We can fix both of these problems if we communiate the right message in the right way.

First, let’s stop telling baby boomers to save for retirement at the cost of less fun today. They won’t do it. Rather than taking money from consumption, we need to be smarter, and show boomers these solutions:

a. How to make use of dead equity in their homes—so few people realize that home equity has no return. Their home will appreciate the same amount whether they put the equity to work or not. (Hopefully, you still have clients with home equity)
b. How to reallocate assets for greater returns—most people are under-invested because they don’t watch their investments or have an unstructured plan. As a result, they don’t get the return they should.
c. How to restructure debt for greater cash flow—people have high rate credit card debt and automobile debt rather than low cost deductible mortgage debt. Yet, to a large extent, financial advisors focus on managing assets, not the debt of their clients.

Baby Boomers will be happy to save for retirement if they can do so painlessly—without giving up the BMW and exotic vacation. If you want to get a crowd at a retirement planning seminar, start with the title “How to Plan a Comfortable Retirement without Giving up Your BMW or Exotic Vacation.” Since we have already programmed boomers to believe they won’t have enough and they will need to sacrifice today, we will need to yell the new message that they can still have their fun.

Next, WE need to get it. No matter how much we tell people what to do, they rarely do it. But if they realize what to do and believe it’s their idea, they do it. People have such self-realizations when they need to think for themselves and you can initiate that by asking them questions.

Here’s how that sounds:

Advisor: Bob, what’s your plan for retirement?

Bob: I don’t know…

Advisor: How come you don’t have a plan?

Bob: I already spend too much—where would I get the funds for a retirement plan?

Advisor: I don’t know—what places are possible?

Bob: Sure—I could cut out lots of things, but that’s not what I really want to do.

Advisor: Like what?

Bob: I have a late model BMW. I could drive a Chevy, but who wants that?

Advisor: It sounds like you’ve been pre-programmed to believe that preparing for retirement means you need to sacrifice today. Is that correct?

Bob: Yes, but isn’t that true?

Advisor: No. Let me ask you—do you have any credit card debt or debt on your car?

Bob: Sure I do.

Advisor: If I could hypothetically show you how to save $300 a month on that debt, would you be willing to put that into a retirement fund?

Bob: I won’t have to give up anything?

Advisor: Nothing.

Bob: Yes, please show me.

Notice that in the above dialog, our brilliant financial advisor avoids doing what most advisors do—telling the prospect what action to take. Instead, the advisor only asks questions and the prospect has their own realization.

If we could control our own excessive talking and telling, and teach ourselves to enlighten through our questions, we may just be able to save 78 million people from financial disaster.

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Prospecting the High Net Worth Client

Monday, August 11th, 2008

Prospecting the high net worth prospects, the person with a million dollar portfolio or the one that buys million dollar (or multi million dollar life policies) can require different tactics than prospecting the “mass affluent” market (i.e. those with less than $1 million of investment assets).

I say “can” require different tactics because there are two equal-size wealth markets—the half who have accumulated significant assets but do not think of themselves as rich and those that have similar financial circumstances yet do think of themselves as wealthy.

According to a study by the Spectrem Group, there are 107,023,917 households in the United States. Of that number 3,737,000 have investable assets in excess of $1 million. On a national basis, that means that 3.49% of the households have a million in liquid funds, even though the average would exceed 6% in more affluent communities like Nassau County, San Jose or West Palm Beach.

Strategies for prospecting the down-home wealthy

The first half of the high net worth market comprises the “millionaire” next door as described by Dr. Tom Stanley, “The real American millionaire is John Doe, age 57, who has been married for 32 years to the same woman, owns a highly productive small or medium-sized business, has two children, and works 10-14 hours a day, six days a week.” You can picture this guy—a real “Sam Walton type,” driving his older pick up truck and sill living in the same 3 bedroom 2 bath home even though his net worth is $5 million. These people have created their wealth by starting businesses or investing in real estate and still behave like “salt of the earth” people.

This fellow responds to the same type of marketing as the buyer from the mass affluent market: general seminars, direct mail and advertising. There is nothing different you need to do to reach these folks if you are already prospecting the middle market. In fact, there is little you can do to isolate these folks as they live in middle-income neighborhoods and they are inconspicuous as they don’t buy luxury cars or rent the presidents suite when taking a cruise. Because multi-millionaires are fewer in number, a seminar that attracts 50 people will only have 3-5 attendees that are multi-millionaires from the high net worth segment.

This group is heavily populated by real estate owners and small business owners. Therefore, one way to isolate these folks is to obtain a list of residential rental property owners or commercial property owners and of business owners with fewer than 50 employees. (Any list broker can help you). Not only can you contact them individually, there may be property-owner associations or business owner associations that can become a prospecting platform (for talks or getting published in their magazine).

Mass marketing techniques, however, will not work on the other high net worth group, the Armani-suit wearing crowd. These people do not respond to the same tactics that work with the mass affluent and need to be met through introduction, social or professional circles. They live in rich neighborhoods, drive late model luxury cars, belong to ”the club” and may be immersed in their self-importance.

Strategies for prospecting the wealthy

You meet them on their turf. Dick Heckman joined the best country club in Palm Springs, played golf 3 times a week at 2 pm and met wealthy business owners and retired and large shareholders of major companies. Never having more than 62 clients, he became one of the wealthiest financial producers in the US.

Each year, when the opera in your city has the annual gala, you buy a table for $2500 and bring your best clients (a nice treat for them). You will get noticed. The following week, if you are not called to volunteer on one of the opera committees, make the call and volunteer yourself. The committee will be populated with usually wealthy older patrons of the arts. You make friends, get invited to heir parties and leverage each contact to the next.

You dominate an industry. One planner I know has realized that franchise owners are wealthy folks. So he found out that they had a local association at which he could give a talk. He called each franchise owner individually and set a time to meet. He did not call them to get immediate business, but rather called them with a soft sell approach, “I understand you are a successful franchise owner. I am building a financial planning firm that assists franchise owners. Could I interview you about the greatest challenges that franchise owners face?” He has written an article on pension plans, for their newsletter, specifically addressing the franchise owner situation.

You focus on money in motion. Money is in motion during the following events:
Death—do you prospect estate attorneys?
Employment termination—one successful advisor contacted an outplacement firm. He offered his 2-hour class, “How to manage your money between jobs” to the outplacement firm’s clients—executives that had been laid off. These executives need to rollover some hefty 401k balances—who do you think gets hired?
Sale of a business—do you prospect business brokers?
Sale of Real Estate—do you prospect commercial real estate brokers?

You develop a specialty that wealthy people seek. A financial advisor, in order to fill a room with wealthy real estate owners, secured a list of people that owned at least $1 million of real estate. He sent a seminar invitation entitled “Estate Planning for Owners of Residential Income Property.” He had 58 millionaires in the room.

You cultivate relationships with people that can introduce you to their wealthy clients. These are called host-beneficiary relationships. You find a host that has relationships you want and you become the beneficiary of those relationships. Think beyond CPAs and attorneys.

What about the owner of the Mercedes dealership? Might he be interested in inviting his best clients to lunch and a talk (by you) on “Maximizing the Tax Benefits from Business Use of Luxury Cars, Boats and Vacation Properties.” Would the commercial real estate broker like to have you write a booklet or give a talk to his prospects, “How to Use a Capital Gains Elimination Trust to Avoid Capital Gains Taxes?” (I always start a discussion of charitable remainder trusts calling them “capital gains eliminations trusts” so that people listen before they prejudge). What other hosts can you think of that have wealthy clients where you can be the beneficiary?

What do the wealthy want?

Seventy percent of high net worth Americans feel that preserving wealth is their most important goal, according to a survey released by the Lincoln Financial Group of Philadelphia. Right behind preserving wealth was avoiding excessive taxes, listed by 59% of the affluent group as a “very important” goal. In fact, avoiding excessive taxes was ranked higher than accumulating additional wealth. Yet, surprisingly, less than a third of the affluent said that they feel that they have adequately protected their assets from excessive taxes, according to the survey.

The number one income-consuming category among the affluent is income taxes. Yet financial advisors have done a poor job in developing ways to help the high net worth crowd. Many do not have expertise in the more powerful income tax saving vehicles:
412i plans
VEBAs
Private insurance companies (see
Defined benefit plans
This is the type of expertise to develop.

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Looking For Gross in All the Wrong Places–Misplaced Focus on Financial Education

Monday, August 11th, 2008

Incredible as it may sound, most financial advisors or other sales professionals
do not understand the business they are in. Here’s my evidence.

Have you noticed that many financial advisors enroll in the CFP(r) program, the CFA program or other programs to improve their knowledge of the finance arena? When they have time, they read books like “One Up on Wall Street” or “Stocks for the Long Run” or other books about gaining some mastery in the market. While all of this education is useful (and your competence is essential), devoting large amounts of effort and time to improving your financial knowledge won’t significantly increase your business. Most financial advisors know most of what they need in order to serve most clients well (if they don’t they shouldn’t be in the business). I’m not saying that technical competence is not important but technical competence should be a given and is a misplaced focus of business growth.

The critical aspect of our business is managing clients, not managing portfolios. The person who told you that financial advising was about managing investments played a cruel joke on you. That college advisor who urged you to major in finance to best prepare for financial advising was off the mark. You would have been far better off with a degree in psychology or communications. Because the determinant of your success is your facility in managing clients and their expectations (psychology) and powerfully attracting new clients through seminars, mail, advertising, etc. (communication) and enrolling them in their vision (sales). In a moment I will define what I mean by psychology and communication.

Now that I’ve brightened your day with the notion you’re efforts have been misplaced, how can you change focus? Rather than spending time with any more finance books or pursuing finance credentials, divert that effort to the arena of psychology and communication. For our purposes, let’s define psychology as the investigation of what makes people buy. You won’t find this topic covered in college. You will find this topic covered in a number of sales classes and books on sales. Yet the number of financial advisors and other professionals who sell and have been through formal sales training is incredibly small (formal sales training is not the training received at securities firms). So, either enroll in the Dale Carnegie Sales training, Sandler Institute or other formal sales class in your town or get a copy of “Spin Selling” and the “Spin Selling Fieldbook.” Either of these endeavors will provide a very significant increase in your ability and success in opening new accounts.

As to communication, they also do not teach in college the type of communication you want to master. You need to write letters that make people call, to write ads that make the phone ring and to write mail pieces that fill your mail box with response cards. Thus, you need a quick education in writing copy. You can get it from any of these books (the more you study, the better):

The Ultimate Sales Letter by Dan Kennedy
Cash Copy by Jeffery Lant
Words That Bring You Riches by Ted Nicholas

The content of these books will violate everything you know about using English but the application will get you results. You will learn to communicate in a manner so that more prospects come to you.

If you’re skeptical about my recommendations, let me share the following with you.

I know a very well educated and well trained financial advisor (advanced business degrees) who knows a LOT about the financial markets. Yet the most significant element in his becoming a million-dollar producer was the sales training he took at the beginning of my career. He realized he knew nothing about selling and that having lots of knowledge about financial markets would not pay his bills. The sales training taught him to have effective sales conversations, which he learned were very different than a typical conversation.

Here’s another example. Do you know someone in the business and you feel that you know three times what they know about managing portfolios? Yet their gross commissions and fees are three times what you earn? That’s likely because he is a better communicator than you. That person has mastered the sales conversation and mastered the communication of prospecting.

Put those finance books on the back shelf and devote your professional improvement to those areas that will quickly impact your business growth.

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Work less Hours, Earn 50% More

Friday, August 8th, 2008
Here’s what they teach at Harvard Business School—focus, focus, focus. Notice that every great company of today (Intel, Cisco, Microsoft, Sun, Oracle, Home Depot) does only one thing and does it really well. If you deviate from this principle, your business will only be a fraction of what it could be. A recent study by Cerrulli Associates found that 75% of financial advisors offer the same products and services and are indistinguishable from one another. Those that carve out a niche earn 50% more.

Start with the triangle above and build your business from any corner. Many financial advisors think that focus means selecting a target market. That’s only one way to succeed—by selecting a group of homogeneous prospects (e.g. people over age 60 who are retired who live in zip codes 94556, 94559 and 94563, prospects with stock options from technology companies, owners of business with revenues less than $5 million).
You can also build your business around being a product specialist. Let’s say you are a wizard at selecting utility stocks. You can succeed very well with such a product specialty or you could succeed with a marketing specialty. Maybe you have a skill at developing direct mail. Maybe you have a skill at giving seminars. Start at one point on the triangle and then build your business around that to get focus.
Let’s say you want to do seminars as your sole marketing technique and build your business around that. That will dictate that you can only do business with people who will come to seminars. People in their 40s and corporate executives are too busy. So, you must focus on retirees and small business owners because that’s who you can get to come to seminars. Notice that these types of prospects will then dictate the products and services you offer. You would not offer investments in stock options for these two groups but you would offer estate planning. Because you choose to build your business by marketing with seminars, your business must be with local prospects. People must be close enough to you to attend a seminar (therefore, you will not be doing business with prospects who live more than 20-30 miles away).
Seminars lead to face-to-face appointments so you will either need a nice office near your prospects or be ready to go to their homes and offices. This also a need for a nice wardrobe.
Notice that the initial choice upon which you build your business dictates everything else, such as office location, how you dress, the types of people you prospect. The truly successful business builds everything around the initial choice. Its amazing how many financial advisors have an incongruous business where the pieces don’t fit together.
Let’s take another example. Assume your business is insurance solutions for business owners (key man insurance, deferred comp, disability). Clearly, you have identified both your products and your target market in one shot. However, you’ll get even more traction and expand your business faster if you specialize in specific business owners, e.g. those with business revenues of $5 million to $15 million or those business owners with a manufacturing business or a supplier to a manufacturing business. By adding more focus, you can get more referrals from owners who know each other (birds of a feather flock together), you get much clearer about the needs of a homogeneous market and in a short period, you position yourself as a specialist.
Focusing entails turning away business. For example, when your business owner client asks if you can help his son with his 401k choices, you say no, and promptly refer him to a colleague that works with employees.
Here’s an example from one advisor’s business. His target market is seniors. Therefore, he markets with seminars because seniors like to meet people face-to-face in a non-intimidating venue. Here’s what he says, “I manage a lot of blue chip stocks, sell annuities and provide estate planning—the services that seniors want. My office is close to where they live. I prospect in only THREE zip codes with a high senior population and my office is right in the middle. I’m in an elevator building so they don’t need to walk up stairs. My building has parking because they come to see me. My business name is Senior Resources. I wear light colored shirts and dark ties (same as they do). Notice that everything I do is built around my initial focus for my business.”
By dealing with one type of client, a narrow set of products and services, you become much more efficient, you work fewer hours and you get the benefits of higher income that accrue to a specialist. You build a better referral network of homogeneous prospects and you gain insight into your market that other advisors do not gain.
Before you turn your attention to finding a better prospecting system or hiring a new assistant to increase business, first consider that lack of focus is the source of less-than-desired economic success. When your business is unfocused and you take any client with a few bucks to invest, you can never build a business of value.
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Cold Calling — The Worst Way to Prospect

Thursday, August 7th, 2008

Some financial advisors and insurance agents use prospecting methods that produce the wrong prospects. I define a wrong prospect as someone who is not really interested, not qualified or hard to deal with. In essence, someone who wastes your precious time and if they do become a client, they consume so much of your time that you wish they weren’t a client.

You generate these types of annuity prospects by using unfocused mass marketing models. For example, if you cold call a list of people over age 65 attempting to obtain annuity leads, you are generating the wrong prospects. You have no idea if these people are interested or qualified. So you waste a lot of time cold calling and then meeting people who are not qualified or interested. Wouldn’t it be smarter if you only met with the interested qualified annuity buyers?

If you have been cold calling, please face the truth–cold calling is a substitution of your labor for capital. In other words, you got into the financial services business undercapitalized (you came in with no money to invest) so instead, you trade your time for capital. This is purely insane. You cannot grow a business without capital. Did Microsoft? Did Intel? You must not devalue your time or you will settle into that rut and struggle your entire career, always cold calling. If you work for a large firm, they are happy to have you do this as they pay you commissions. Having you waste your time is okay with them.

The central focus in efficient prospecting is this: you offer something of value to masses so that the few people who are interested identify themselves. Then, you only talk to the interested and qualified prospects. There’s not problem if you want to use the phone for prospecting, but get a $10/hour telemarketer to do it, not you! Then, when the telemarketer makes 100 calls and finally finds one interested person, you get on the phone and close the appointment or make the sale. If you want to be closing sales all day, get 5 telemarketers.

Here’s another alternative. Rather than cold call, send a well written mailer (more on writing great direct mail in another article). Even if you get a 1% response to 1,000 mailed, that’s 10 interested annuity leads who took action. When you call them, you qualify them and eliminate half. You get five appointments. These are the same five appointments you would have gotten with the cold calling, but look how much easier this was. Instead of talking with 1,000 people, you talked to 10 people. Instead of meeting with 10 people, you met with five. You saved maybe 25 hours of your time and spent $500 on postage and mailing. (In other words, had you cold called, you valued your time at $20 an hour for the mailing cost you saved–is that all you’re worth?).

Or what if you ran an advertisement in the local senior magazine “Annuity Owner Mistakes” You then have a few annuity leads to call who are interested and motivated. You have saved your time and limited the annuity prospects you deal with to those who take initiative. These are the types of people you want as clients. You do not want people who must always be convinced, which is the type of prospect that is generated with unfocused, mass marketing.

Or what about inserting a flyer in the daily newspaper for your next annuity seminar “How to Reduce Retirement Income Taxes.” In our tests, 20,000 inserted flyers (for about $1,000) generates about 50 annuity prospects to an annuity seminar. You give a presentation to 50 motivated people at one time and then have individual appointments. Annuity seminars make super efficient and super effective use of your time (you are speaking to motivated annuity prospects).

If you’re tired of prospecting, feel burned out and feel that good prospects are scarce, shift your prospecting methods to have qualified prospects contact you and renew your career.

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How to Get Prospects to Sell Themselves

Wednesday, August 6th, 2008

How would you like to control your prospect’s thoughts?

You can control their thoughts and have your prospects to see solutions for themselves with appropriate questions. And you’ll make more sales. Before you learn how to do that, would you take two seconds and think about how your mother looked the last time you saw her?

With this simple question, I can make you form a mental picture. I can control your thoughts and that illustrates the power of questions as a mind control tool. You can consistently direct your prospect’s mental activity in the same way and have him reach the right conclusions on his own. This technique works only when the solution is in the prospect’s best interest so it won’t work as a manipulative process.

In a minute, I’ll show you an example. But first, consider the benefits:

• No more convincing or persuading
• No more objections (people can’t object to their own solutions)
• No more resistance to your recommendations

Let’s take an example of an insurance agent selling long term care insurance. Assume the insurance agent has already completed basic fact finding questions and has decided that long term care insurance would be beneficial and important for the prospect. Here’s how to get your prospect to see that solution himself:

Agent: What are your plans when your health changes?

Prospect: What do you mean?

Agent: You know that as people age their health declines. So as you age, what are your plans when your health changes?

Prospect: I never really thought about that seriously. I have good health insurance and I assume that’s adequate preparation.

Agent: Health insurance of course provides for you when you have an illness that they can cure in a few days in the hospital, but what happens if your health changes such that you can’t go shopping, you can’t take care of the house and you can’t walk up stairs?

Prospect: Well I certainly don’t want my children to have to take care of me

Agent: So what solutions do you think are available to you?

Prospect: I’m not really sure. I know people go to nursing homes but I could barely afford that

Agent: What other solutions do you think are available to you?

Prospect: There’s insurance, isn’t there?

Agent: Do you think you should consider that is one of the alternatives?

Prospect: Yes, but I don’t know anything about and I’m sure it’s expensive and I couldn’t afford it.

Agent: How much do you think it costs?

Prospect: Jeez, I have no idea, what, maybe $500 a month?

Agent: What if you could get insurance to allow you to stay in your home and have help come and assist you and could get that for $250 a month–would that seem to be reasonable solution?

Prospect: Is that really available?

Agent: If it were, would you want to know about it?

Prospect: Sure. I don’t want my children to take care of me and if I can’t take care of myself, what other choice do I have?

Agent: How would you pay for that?

Prospect: I have some investments from which I don’t take all the income.

Agent: For example?

Prospect: I have an annuity and I reinvest and I also have a mutual fund that I reinvest.

Agent: How much a month are you reinvesting?

Prospect: It’s over $1000 a month.

Agent: So if the insurance turned out to be a good solution, you know you can pay for it?

Prospect:—yes, if it’s about $250 a month

In the above conversation, the insurance agent did nothing but ask questions and the sale is about complete. Most salespeople talk too much and that makes selling hard. In fact, the more you tell, the less you sell. Selling is easy when you succumb to the new definition of selling: “The asking of appropriate questions so that your prospect sees the solutions for themselves.”
The payoffs to selling by asking questions are enormous. Questions increase your sales in five ways:

1. They direct your prospect’s thoughts. When you speak, your prospect’s mind wanders, he thinks up objections, he questions the validity of your facts, he questions your credibility and he may even think about what to have for dinner. But when you ask a question, you get laser-focused attention. We have been continuously trained to answer questions as accurately and completely as possible, starting from the first grade. Correctly answering questions is even the basis for most television game shows. So when you ask questions, you take advantage of your prospect’s training to provide their full attention and best answer.

2. Questions allow you to find out the necessary facts (ethically important for any advisor and legally important for securities licensees to comply with the “know your client” rule)

3. Emotional questions allow you to determine the “emotional facts” (your prospect’s likes/dislikes). If you don’t know how your prospect feels, you cannot make a recommendation that feels “right.”

4. Questions increase your stature and credibility in the prospect’s eyes (the fastest indicator of a person’s intelligence and caring are the questions they ask)

5. Questions allow you to maintain control of the conversation (the person asking the question controls the conversation, while the person answering has lost control).

You were taught to sell by some product-crazed insurance company and to talk about the features and benefits of the product but American’s hate to be talked at. In fact, we have an aversion to being told, or worse, being “told what to do.” Prospects become naturally resistant when being told. We self-reliant Americans find it preferable to discover things in our own. So why not allow your prospects to do that and help more people have what they want? And in the process, make more sales and get rich. That would be great, wouldn’t it?

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Lazy Financial Advisors are Rich Financial Advisors

Tuesday, August 5th, 2008

Get Lazy and Get Rich? Sounds like a paradox?

Most of the financial advisors I observe work too hard, work too many hours and sweat too much over getting new clients. It’s time you get lazy and get rich. You do this by establishing your marketing so that people contact you and your job is to react. You also do this by delegating and have others do the work.

Most of us resist some simple truths about ourselves that could make us a lot more money:

1. We are lazy. Wouldn’t you rather be laying on a beach right now? There’s big money in admitting laziness as I explain in a minute
2. We are reactive rather than proactive. Would you rather answer the phone and open an account or cold call to open an account? We are great at reacting. We are very good at answering the phone, responding to inquiries and taking orders. We are lousy at proacting as evidenced by the dozens of books teaching brokers how to overcome the fear and drudgery of cold calling. There are many great order takers and few great (proactive) salespeople.
3. We are good at doing the same things over and over. Notice that in companies, 5% of the people have jobs in management—the people who need to create their own day and determine on their own where to focus for results. The other 95% of the employees are people who are told what to do and then do it over and over, day after day—the bank teller, the customer service person, the auto laborer. Most of the population can do these repetitive routine tasks well but few can invent their own daily work activities without direction.

Most likely, you have set up your business to require all of the actions that you do not do well or don’t want to do: work hard, proact, and do different things everyday. In other words, you require yourself to fight the above list of inclinations and that makes each day hard. You have established a significant headwind and each day is a struggle. But it can be different. Let’s see how to plan each day to make it easy.

Here’s how to make a lot of money by capitalizing on being lazy, being reactive and doing the same things over and over.

You must set up all of your marketing to react. You get people to call you by:

1. Send a lot of the right mail to the right people. Yes, direct mail works but not for most financial advisors. It’s because their firm and the financial advisors have taken zero time to study what makes direct mail work. Advertising firms are of no help here. Direct mail is a science. Invest 40 hours of study and you can get a 2% response whenever you mail. Send 1000 pieces a week and have 20 targeted, qualified people contacting you. I know financial advisors that use direct mail to get responses and fill up seminar rooms year after year or fill their appointment calendars.
2. Advertising works. You can earn $10,000 toi $20,000 monthly from small ads costing you less than $1000 per month. The ads have people contact you and you just respond (thet trick is writing compelling ads and that means you need to study copy writing).
3. Have your clients send you referrals. You do that by telling the new client that you will work hard for them and fulfill what they demand of you, but in return, they must refer people to you. You then, after proving yourself, have them introduce you to referrals by either them calling the referral, introducing you in person or sending a letter. If you leave out the above two steps, asking for referrals won’t work
4. Getting and giving referrals to your peers. Financial advisors are the most nearsighted group of professionals when it comes to getting business from their peers. Notice that doctors refer to each other like crazy. And the smart ones are money machines from doing so. Yet brokers will meet a client interested in establishing a 401k for their business and then scurry around to learn what they can so they can put together a half-baked proposal. Rather, they should find the person in their firm who is the 401k master and split the business! Let others do the work for you. Refer like crazy and spend your time on the few items at which you are expert. If you refer, you will be referred to (if you are known for an area of expertise).

Time to get lazy, react and do business.

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How to Replicate Your Easiest and Most Lucrative Sales

Tuesday, August 5th, 2008

Professionals in financial services often make the sales part harder than it need be. I have seen the following occurrence many times. You may recognize it:

A financial advisor tries a new system of generating business. Everything works well and they capture a few easy and profitable sales. The financial advisor thinks that he has found the holy grail so he does more of the same, but soon the results stop coming. So he abandons that holy grail and moves on in search of the next holy grail. Such financial advisors move from product to product, system to system, broker dealer to broker dealer, etc. They are always looking for the one activity that will turn them into a top producer.

This model of searching for the next greatest thing is the road to permanently low production or inconsistent flash-in-the–pan results.

Take a lesson from marriage relationships. If you want a marriage that works, you make a commitment and you stick with it. You work out the kinks, get professional counseling if you need it, do some soul searching but you commit to making the marriage work. You do not change spouses every year or two like you do your business activity. If you treated your business with the same commitment, you’d be rich and retired by now.

You say you’ll get committed as soon as you find a system that’s worth getting committed to? You’ve got it backwards. The system that works is the one you commit to.

Let’s say you start doing financial seminars. The attendance is great at first and you open a lot of new accounts and gather new financial clients. But then the attendance starts falling, appointments drop off and it’s costing you the same amount to hold the financial seminars for reduced results. Right at this point when you are ready to chuck the system, stop!

There is nothing wrong with the system! Rather, there are variables affecting your results that you do not yet understand or identify. Your job at this point is not to chuck the system and start your searching, but to dig in your heals and commit to finding the key variables which cause the best results.

I think there’s “simplistic thinking disease” we catch from being in the financial services business. The “gurus” reduce everything to a few simplistic variables such as rising interest rates, a falling dollar or the employment report. So we begin thinking that there are only a few variables that matter with any financial services marketing system that we select for generating business. We get the “simplistic thinking disease” and stop trying to figure out what causes our results.We adopt this simplistic thinking when in reality, there are thousands of variables that affect the market. Similarly, there can be thousands of variables that can affect any business approach you take. The key is to find the “key success factors” and control these to maximize your outcomes.

With seminars, you can experiment with several factors:

  • Change the day
  • Change the time of day
  • Change the location
  • Invite people from different zip codes or with different demographic criteria
  • Change the seminar title
  • Add a picture to your invitation
  • Remove the return address from the envelope

There are dozens of factors you could change. Use your intuition and your gut to select the key factors you should change first and make only one change. You can only carry on a scientific experiment and measure the results of changing a factor if you change one factor at a time. This is the type of tenacious research that had Edison invent the light bulb or is responsible for almost any drug you can buy. Trial and error based on educated guesses. Those who are most committed get the extraordinary results.

The process is never done. I know top producers that have done seminars for 20 years, and these top producers are still experimenting. These seminars have been very profitable during and those most committed know they can always achieve better results.

I once had a teacher who told me, “Don’t expect to get heat from the fireplace until you put the wood in.” Great results follow from committed action, not from a continual search for the next idea you hope works better. Identify the last approach you employed that initially gave good results and then you stopped using the system. Return to it, commit to it and master it.

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How To Retain Accounts in a Bear Market

Friday, August 1st, 2008

I see financial advisors who lose accounts and these losses are avoidable in most cases.
Even if you lose 5 accounts a year which could be avoided, that’s an additional 50 accounts you would have at the end of 10 years plus their referrals and their kids accounts, etc. In other words, knowing how to stop exiting clients can be very profitable. Client retention is easy with the proper steps in place–it can even be automated.

Client Retention Starts When You Meet The Prospect

Let’s face it. The main reason clients leave is because their expectations are not met. They think you do not call enough, or they don’t trust you, or they do not understand when you answer a technical question, etc. Studies show that rarely do clients leave because of poor investment return. Therefore, the major reasons they leave are due to something amiss in the communication or your follow through.

If you are not sure what each client wants, ASK THEM. In fact, every time you open an account, you must ask a client, “What are your expectations of me? What would you consider a very good result of our relationship? There’s no need to guess at what your clients want–just ask.
You may want to ask subsidiary questions:How often would you like me to call? To meet?Do you like phone, fax, email or mail contact best?When you call me, how quickly do you think I should be able to return your call? What do expect from your portfolio? Answers to the above question will also help you decide if you should take this client. If their expectations are unreasonable, say goodbye to them now. Client retention is somewhat a matter of selecting reasonable clients in the beginning.

Last, do not assume that because the client gets a portfolio statement every month, they know what’s going on with their account. Call after the first statement for a statement review meeting. Many clients cannot understand the statements and they get confused (and may be embarrassed to say anything because they feel they may be stupid). So 6 months later, the client tells his friend, “I closed my account because the financial advisor never let me know how I was doing.” This is especially important–statement reviews, during a bear market when the news will unsettle your clients.

Client Retention is Solidified by Your Actions

1. Do not use jargon. When you answer a question, use plain English. Ask yourself if a third –grader would understand your answer. Jargon = misunderstanding = lack of trust = lost accounts.

2. Respond fast. (a) If you cannot return the call within an hour, have your assistant return the call and tell the prospect that you are tied up until (time) and that you will call back by (time). Then do not be late with this scheduled call.(b) Block out times during the day when you’ll return calls. When a call comes in, your assistant can set a phone appointment at a specific time. (My assistant also sets an alarm for me on my computer.) That way, you can manage the prospect’s expectation. It’s okay if you don’t call back in an hour, as long as your client doesn’t expect you to do so and knows you will serve them at a specific time later that day. Client retention is partially illustrating to your clients how important they are to you.

3. Never depend on your firm to follow through. It’s your responsibility to make sure client requests get handled. Remember, the people that work in the processing area of your firm are not highly paid. When a processor takes a week vacation, their work probably just sits on their desk getting old. When they return, they lose a week just getting re-organized. Your client has now been waiting 2 weeks with no response. Do you think they may be irritated?

Therefore, you must have contact management software with an alarm function. Set yourself an alarm to follow up in 3 days with a specific person in your firm. Similarly, if you are waiting for an outside transfer firm to handle an issue or another company to transfer funds, it’s your responsibility to follow up (of course, an assistant can do the follow-up, but it’s your job to have a well-trained reliable assistant who understands that their income is paid by your clients).

Place Complaints At The Top Of Your Priority List

Not only will a tardy response to a complaint result in a lost client, you may be tempting a legal confrontation. You must handle complaints immediately. Drop everything. In my observation, most arbitrations are the result of the complaints not be handled quickly and properly in the beginning by the producer.

When you call the client in response to their complaint, before they have a chance to say anything, you say “Mr. Smith, I understand you are not happy about (item). I want to assure you, I will do everything possible and as quickly as possible to fix this. Tell me what I can do.”
It amazes me that some brokers will argue with the client, tell the client they are wrong or worse, ignore the complaint thinking it will go away. The client may go away only to be replaced by their lawyer.

If you already have good client retention practices, learn how to automate client retention here.

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