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Posts Tagged ‘financial advisor’

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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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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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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How Financial Advisors Get An Abundance of Referrals

Thursday, July 24th, 2008

Everyone tells you to get client referrals, that it’s the easiest way to build your business. But how many financial advisors do you know who get an abundance of referrals? Not too many. And how many producers work hard at it, but end up with little results? They join the board of a non-profit, they contribute to the symphony and get season tickets, and they hobnob in the “right” places. That’s a lot of work for uncertain results. Successful referral gatherers simply have their clients bring them more people. Those few financial advisors who have a continuous stream of client referrals have discovered three things that you too can use to generate that continuous client referral flow.

1. When starting off a new client relationship, you must ask your new client, “What will I need to do so that you tell all of your friends about me?” WRITE DOWN THE ANSWER AND THEN DO IT! Most clients will not say, “I want a 25% annual return,” or some other request that is impossible to honor. They will say something like, “I just want you to stay in touch every couple months, help me not to lose money and call back the same day when I call you.” You can certainly promise this and deliver it.

2. After 60-90 days, you set up a meeting with your client. You explain that the meeting is to do a review and for their assistance in developing your business. Tell them to bring their phone/address book. At the meeting you read to them what they told you at the beginning of the relationship. You read them the requirement they stated in step #1 above. Then ask them if you have done what they required. They then see that you did what you promised and they will also. They will provide you client referrals.

3. Last, you need to get your client to introduce you to the referral. If you just get a referral name and phone number from a client, that’s pretty worthless. When you call the referral without an introduction don’t expect much because: They don’t know who you are. They don’t know what you do. They don’t know why you are calling. They don’t know how you got their name. They don’t know why somebody gave you their name and they are not expecting your call. Therefore, you need your client to call the referral, send a note or physically introduce you.

Getting your client to send a note is easiest because you can have your client sign a standard form letter saying how great you are. With your client’s permission, you then run it back through your printer adding your client’s return address. The note arrives at the referral’s home and appears to have been sent from your client’s home. Of course, not every client will provide referrals. However for those clients that provide none, you will have other clients that provide 25. The key is to treat this as a system rather than an ad hoc process of asking whenever you remember. This process is neither a lot of work nor very time consuming. Best of all, you can build these three simple steps into your normal client monitoring procedures. Three simple steps to generate new clients every month.

Learn how to get professional referrals from CPAs, attorneys and other business owners.

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Capture Those Sales That Get Away

Tuesday, July 22nd, 2008

Every financial advisor has had the experience of losing a sale. You’re left scratching your head knowing that your proposal was right on, and the prospect should now be a client. What went wrong? Although there can be many reasons that the sale did not close, in today’s post, I will talk about one element in particular–your lack of credibility.

Don’t be insulted, I’m not addressing you personally. But please realize that in many cases, you simply are not a credible financial advisor in the eyes of the prospect. They have no prior knowledge of you, they were not referred to you by a trusted friend, and given the financial horror stories they read about in the newspaper, they are leery of you.

From the prospect’s point of view, are you any different than any other financial advisor in town? Is there any reason they should trust you? Often, we expect people to trust us just because we know we are nice people. If you want to capture more sales, you will need to prove yourself.

Can you overcome this prospect skepticism, even though they just met you?

The most powerful way in our society to overcome skepticism and to establish yourself as a trustworthy expert is to get published or have others write about you. Before you decide that this solution won’t work for you, I’ll show you that you do not need to write a word.

Think about it. Don’t people believe what they read in the newspaper? Don’t they automatically trust news reporters, columnists and authors? You can join these trusted ranks.

First, you can get interviewed repeatedly by your local press. Many times, our staff has been interviewed as the “expert” in local newspapers, national journals and on the web. I really don’t know any more about financial planning, insurance and investments than you do. I do however know how to get the press to pay attention to me. There is a simple process of sending press releases that gets the press to pay attention to me. Although describing this process and showing you a sample press release would be too lengthy for this article, just do a Google search on “press release writing” and you will find plenty of samples.

Secondly, you can write your own booklets. We ghost write financial booklets on several financial topics used by financial advisors all across the country. These financial advisors booklets give producers instant credibility and their closing ratio soars. I just got this email from a user this week, “Your annuity marketing system works beautifully!! My annuity sales are skyrocketing.” I did not teach this producer one thing about sales or annuities. I merely gave him a tool that positioned him as an expert in his local market. He now has credibility and he closes more sales.

Third, you can write a book. Actually, you do not need to write one word. I have seen estimates that up to 20% of books published are not written by the author whose name is on the book. These books are ghost written. You can do the same. You can hire a ghost writer to write what you want. You do not need to start from scratch and the work is already done, as there are some books on the market, already written, that can be printed with your name and picture.
Please be aware of FINRA rules about ghostwritten materials and make the proper disclosures. These disclosures are made in the booklets produced by Javelin Marketing.

Use these three recommendations to get credibility, establish yourself as an expert, and close more sales.

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Rethink How You Attract Clients

Tuesday, July 15th, 2008

Many financial advisors would like more and better clients. But their effort to obtain new clients is often wasted and misplaced. Here are three concepts that can help you attract more and better clients:

Make yourself scarce. We live in a culture where people want what they cannot have. In order for people to want you, you must make yourself scarce. That means you only deal with people who fit your profile (yes, turn away business). In all marketing you do, communicate that you only deal with a certain segment of people Here’s an example. A financial advisor only deals with people age 60 and over. His firm is called Senior Resources. His business card says “Retiree Investment Management.” He does not deal with people under 60. If his client says, “Can you help my son—he’s 48 and he has some money,” he declines and refers the son to a colleague. By being so picky, his clients refer him to others as “He’s a specialist in dealing with people like us.” No client wants to go to a generalist. They want a financial specialist. What do you specialize in?

Another example is the financial advisor who specializes in an industry, For example, an ex-engineer who only prospects chemical engineers. He becomes known in that circle, writes a columns for the engineers’ magazine and becomes an invited speaker at conventions. I know a guy who sold hundreds of life insurance polices to United Airlines pilots by visiting their layover facility at major airports. He gave talks to a group of pilots as they were waiting for their next flight. Be different. Every time you open an account, it’s because you offer something different than the client’s current advisor. Yet most brokers look alike—many do the same activities, offer the same products and services and are indistinguishable from the next broker. Why should the prospect deal with you? You distinguish yourself from others by crafting your business differently.

One way to be a unique financial advisor is by focusing on a certain niche as described above and making yourself scarce. Another way is to run your business differently. For example, if most financial advisors are recommending mutual funds, then you recommend stocks (and have a well researched argument with evidence as to why stocks would be better). If other advisors offer bond funds for fixed income, you offer individual bonds (and have a good presentation as to why individual bonds would be better). If other financial advisors have no system for selecting stocks, then you specialize in quantitative systems like the Dow Dividend Strategy, Value Line or CANSLIM (as documented by William O’Neill in How to Make Money in Stocks). Show people why “guessing” about stocks is no way to invest and why a structured system brings all-important discipline to the process. If other financial advisors are raising money for third party money managers, you be the money manager (if you use a structured system, the time it takes to manage portfolios is negligible as the system does the work).

If every one in your office is selling growth stocks, then specialize in precious metals or whatever interests you. Team up with the other financial advisors in your office and split commissions. They are not talking to their clients about metals and this business will be lost. It would be smart for both of you to split commissions and have him introduce you to his clients (other brokers will bring you business if they you are not competing with them, that you specialize in an area they don’t know about—metals, options, 401k, etc).

Write. In our culture, financial advisors who write are considered financial experts. If your name is in the newspaper or on the spine of a book, you will stand out from other brokers. You do not need to write a word. There are firms that offer ghost writing services to make you an author overnight. Think of the difference when you can give a prospect a copy of your book. Do you think he is more inclined to open an account with you? What about sending information to a referral and you include in the envelope two articles from the daily newspaper in which you are interviewed and one article you authored. Have you increased the probability of that prospect becoming a client? As you implement your marketing, ask yourself each week how you are being different and distinguishing yourself from every other broker in town. Why will prospects leave their current financial advisor to join you?

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How Financial Advisors Prosper From A Bear Market

Tuesday, July 1st, 2008

Many financial advisors have a knee-jerk negative reaction to a bear market. Securities firms commissions drop, brokers paychecks fall and the layoff of back office staff begins. This insanity repeats itself because brokers have failed to look at the underlying opportunities created by bear markets. In this article we will cover four of those opportunities.

You’ve Got More Prospects than Clients in a Bear Market
The negative reaction to bear markets is created by the broker’s concern of his existing clients losing money. Let’s assume you have 300 clients. You probably have a 10,000 prospects. By prospects, I mean all the people in your local area that meet your criteria for a new client and could potentially do business with you. Therefore, you have many more prospects than clients. In other words, your future is potentially brighter than your present.

Those10,000 prospects are now the clients of another financial advisor. These clients are getting less happy as a bear market progresses and are more inclined to make a change of advisers (you’re the broker in the “white hat” because you haven’t done anything wrong yet). That’s very good for you. So while a bear market robs net worth from your existing clients, it creates a lot more motivated prospects that you can gain as new clients. Bear markets are an opportunity to open more new accounts than ever. In the three months following the 1987 market crash, I opened up 100 new accounts. What I did was simple.

The word “stock” became a dirty word during the bear market. So I had the good sense not to prospect with stocks but rather used bonds. At that time, Safeway had bonds yielding 11.75%. I called people age 60 and over and said “Mrs. Jones, the reason I’m calling is because Safeway is offering bonds that pay 11.75%. Do you ever shop there? They would of course answer “Yes.” “Well,” I said, “you’ve probably given them plenty of your money over the years, how would you like to have some of theirs?” I opened 100 new accounts.

The Fallacy of Perceiving Bear Markets as Bad
Your aversion to bear markets may stem from the fact that you view gaining new clients more difficult than keeping your existing clients. That’s simply a function of your false scarcity mentality. There is, in reality, no scarcity of qualified prospects. As an analogy, ask any investment banker if there was any of scarcity of money for investment in companies with no revenues and no earnings. The banker knows that money is abundant and all that’s required is a good story. Similarly, prospects and new clients are abundant and any other perception is simply inaccurate.

Because you view clients as scarce, you can create more damage to your existing book during a bear market than is necessary. All along, you’ve been telling your clients to take the long term view. If you now react to the short term fluctuations, you appear to be talking out of both sides of your mouth, you appear to have no conviction and you appear far less trustworthy in the eyes of your clients. Now more than ever you must reiterate your long term philosophy. If you don’t, you are guilty of the same criticism you have about most investors and their short-term orientation.

The Opportunity to Become a Better Money Manager
Bear markets are an opportunity for self education. If you’ve been a momentum investor, you now get to fully understand the ramifications of that methodology. These declines give you an opportunity to see if your strategies and philosophies are appropriate in all types of markets and whether you’ve selected the right types of clients.

My revenue never declined from existing clients during bear periods. I had each client on a system. They either paid an annual fee or they were on a system which required annual re-balancing and the constant flow of commissions each year. Brokers whose earnings decline in bear markets have their clients on a trading system (often called the shoot-from-the hip-system) which is bad for the client and bad for the broker. Time to clean up your act.

Your Clients Are Finally Ready to Listen
If you find that your clients are oriented toward the short-term no matter what you say, try this analogy with a client: “Joe, you have grandchildren don’t you?” “Have you ever babysat for them when their mother went on an errand? The child asks when will mommy be back.” You say, “in about an hour.” Then five minutes later your grandchild says, “has it been an hour yet?” That’s the same way adults act with the stock market. Rather than looking at the performance of their portfolio over years, which is the appropriate time frame for stock investing, they keep looking at their portfolio day to day and even minute to minute. “Has it been an hour yet?”

If you have younger clients you simply need to teach them as follows. Ask any client that’s 40-years-old if they will be investing more money during the rest of their life than they have already invested. If they say of course, then point out that bear markets are a huge buying opportunity with stocks on sale. Therefore, market declines help them more than hurt them because the bulk of their money is yet to be invested, at bargain prices. If you have clients dollar cost averaging, show them the example below which illustrates that dollar cost averaging benefits by higher volatility (over time, dollar cost averaging accumulates more shares from a volatile market than a stable market).

Dollar Cost Averaging—Volatile Market

Investment	Month	Price (changes 10% from start each month)	Shares Purchased
$100	January	$10	10
$100	February	$11	9.09
$100	March	$9	11.11
$100	April	$11	9.09
$100	May	$9	11.11
$500 (total investment)		$10 (average price for period)	50.4 (total shares accumulated)

Dollar Cost Averaging—Stable Market

Investment	Month	Price	Shares Purchased
$100	January	$10	10
$100	February	$10	10
$100	March	$10	10
$100	April	$10	10
$100	May	$10	10
$500 (total investment)		$10 (average price for period)	50 (total shares accumulated)

Bear markets are a great opportunity to take in new clients, orient your accounts to more stable investment methodologies and focus your business to capture the greatest profits yet to come.

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To Gain Clients, Differentiate Yourself

Thursday, June 12th, 2008

There is no reason for a prospect to choose you. No reason that is unless you look better or superior than their other choices. You can easily differentiate yourself with info-documents. Steve Van Yoder, author of “Get Slightly Famous” says:

“Free info-documents that address your target market are effective marketing tools when they offer quick, concise solutions to common problems, challenges and concerns.”

That’s the method we use at Javelin Marketing to have the financial advisor stand out. We have them send the prospect a well-written booklet on a topic that the prospect has requested. The booklet is prepared with the financial advisor’s name, photo and credentials on the front cover. When the prospect receives the booklet, the advisor gains instant credibility and stature in the prospect’s eyes (note that the booklet clearly discloses that the booklet was written by Javelin Marketing and is thereby compliant with FINRA rules on published materials).

The advisor using credibility-gaining tools before ever speaking to the prospect has a significant differentiation advantage and is far more likely to have a new client.