 Advisors reportedly love to talk. However, most prospects as well as clients want us to do more listening and less talking. As Ralph Nichols said, “The most basic of all human needs is the need to understand and be understood. The best way to understand people is to listen to them.” Ernest Hemingway said, “When people talk, listen completely. Most people never listen.” This is your opportunity. As a great listener, you can differentiate yourself. This is still a relationship business and talking about yourself, your company, your products and services, or even your family is no way to start or foster a relationship. In an article by Peter M. Beaumont he says, “Recent studies have shown that we typically remember only 25-30% of what we hear. However, “Active Listening” can increase that figure enormously. One of the ways to use “Active Listening” is to remember the often-used expression that “eyes and ears (and mouths) should be used in the same proportion they have been allocated to us.” Mr. Beaumont gives four reasons why listening builds relationships:
It should come as no surprise that people will like you more if you listen to them, especially when you “actively listen.” You can show you are listening to someone through body language (e.g., facing someone, mirroring person’s stance, nodding, leaning forward), eye contact and verbal confirmation such as brief verbal affirmations like “I see,” “I know,” or “I understand.” If you really want to grow your business, get introductions and have long term, profitable relationships, you need to follow the 80/20 principle especially in initial client discovery meetings. That is, clients or prospects talk 80% of the time and you talk 20% of the time. To get people talking about themselves, you need to ask questions and the right questions. Following are a number of critical questions to ask. These questions can be used by financial advisors in initial and follow up discussions with prospects as well as with clients. Some questions can be used anywhere as conversation starters. Intake is where you start to learn about your prospective clients but each contact is about gathering wisdom (knowledge) about your prospects and clients. The more you know, the more you can personalize your relationship and deliverables. I suggest using a three meeting approach for the “intake process”. Whether or not you get to close in exactly three meetings will depend on how well you do and many prospect variables. Later in this article, I will discuss closing the prospect in less than three meetings. Regardless, the first meeting is always about the prospects and their family. It’s in this meeting that the prospects should be speaking 80% of the time. Your job is to listen actively, as suggested. I strongly suggest using a recorder to record all your client meetings and also take notes. You would of course seek permission from the prospects to record the session. There are many good reasons for recording sessions from the prospect’s perspective. Explain that you want to make sure you fully understand and remember exactly what the prospects have said so your advice best fits them. Naturally, you can assure the prospects that they are fully free to change their answers down the road. Note that the recordings are also great tools for your team to learn about and understand the prospects. The recordings will also be of great value to you in learning how you sound, how much you spoke rather than listened, any points you may have missed, etc. It will be one of the best learning tools you have ever used. You may want to listen in private initially. It may not be fun to hear how you did in initial recordings but be brave, it’s very important. Note that in the first prospect meeting you will have no prescriptions, recommendations, or opinions. You are there to learn. There are test questions you can ask to better understand the views of the prospects. This meeting is about the prospects and their family. It’s not even about their financial status though that may of course come up. My strong suggestion is that your first meeting is with both partners in a couple relationship. There are good reasons for suggesting that if there is no spouse in attendance, there be no meeting. The primary reason is that both spouses must view you as their advisor, their personal advisor. We know that after the death of a male spouse 70% of the surviving widows will leave your practice within a year. This and the relationship with adult children of clients are separate discussions. Suffice it to say; unless you establish a strong relationship with all parties in a household, you are likely to have challenges in retaining the relationship and assets after the death of one party if you don’t have a strong relationship with the other party. At this point however, you must ensure you are treating each spouse/partner as equally as possible in terms of asking questions, getting answers, paying attention, etc. Remember that women and men think differently, notice things differently, care about things differently, act differently in similar situations and more. This is not about right and wrong, this is about perspectives and upbringing as well as many other factors. Women for example are more likely to notice more things than men are. They will notice the facility you are in, how it’s organized, the décor, the books and magazines, the pictures, how you dress and appear, how you and your staff interface, etc., etc., etc. You need to pay attention to these areas as well as what you have to say. It is understood that part of this initial discovery meeting is to understand the prospect’s life and financial goals. As part of your consultative process, defining goals as well as risk tolerance is necessary to developing and executing your investment strategy. However many prospects are not fully prepared to define their “real” life and financial goals and they will likely change over time. This first meeting is to try to find where the hearts and souls of your prospects are, a somewhat lofty first meeting goal. From there you will develop, over time, an improving set of life and financial goals that may modify your investment strategy as life and time progress. Your initial meeting is about getting a pretty good idea of where the couple is and want to go in life and in building the relationship you need to acquire a new client. Your second meeting will start to refine the initial set of goals upon which you can create an initial financial plan and investment strategy. Here are some ideas for first meeting questions starting with, “I would like to get to know you both better because it will allow me to make sure I give you both the proper advice for your situation.” Knowing that people are massively passionate about themselves a good first question is:
Another opening question or a second question could be “Tell me why they decided to come in today? What were you hoping would come out of today’s meeting?” Use the Socratic approach by asking thought-provoking questions and avoid closed end questions. You would follow up with asking them to tell you about themselves. • Where are you from? (You can ask, “What it was like growing up,” if appropriate.)
These are a small sample of the questions and the types of questions you may want to ask. In our book, “The Financial Advisor’s Success Manual” there are about four dozen questions for your consideration. We have also prepared a separate updated questionnaire. You will likely have too many questions to ask in a single session. At most, the first discovery session should be kept to 90 minutes, even 60 minutes, if possible. After that attention wanes, on the part of both the prospects and the advisor. It’s always courteous to ask your prospects (as well as clients) how much time they have allocated to the meeting before you start. Prepare a questionnaire in advance. It’s quite okay to have it in front of you and use it to record answers, noting from whom the answers came (i.e., partner one or partner two). Feel free to ask the prospects if they mind if you use the questionnaire so you make sure to cover everything. It is extremely rare that people would ever say they would mind. In fact, using the questionnaire is one way of showing your preparation and professionalism. There are some questions you can ask that give you time to respond to comments or questions if you need a minute to think about a reply. You can essentially ask for further clarification with these questions:
In addition to preparing a questionnaire in advance of the meeting, you should have researched the prospect. Prospects as well as clients want to know you have thought about the meeting prior to the meeting. They want to know you have put time into preparation for the meeting. Naturally, you would have googled the prospects, looked into their LinkedIn and Facebook pages if available, looked for news articles, etc. If you have an idea of what is important to them such as tax law changes or other items, list those that specifically pertains to them. If you know people in common, try to learn about their interests, but cautiously, as inquiries will get back to the prospect. At an appropriate point, early in the meeting, let them know that you have spent time preparing for the meeting by perhaps complimenting the couple on something your research has discovered. However, the most important point is to invite the prospects to let you know exactly what is top of mind for them. By the end of this first meeting, you should have qualified the prospect and gained an understanding of whether you are on the road to a good relationship and they are willing to consider you as their advisor. The most telling moment here is whether they commit to a second meeting. At the appropriate point, you can say, “Thank you very much for sharing about yourself and your situation with me today. Is there anything else you want to address that I may not have asked you about? Your answers and comments have given us excellent background that we can integrate into your plan. Our next step will be a complete diagnostic of your current financial situation. I can’t promise that we can fulfill all of the wants, needs, and goals we discussed, but if you are comfortable with me so far, we need to see your financial data in detail.” Then, provide a checklist. At this point you should have begun to develop some rapport and a meeting of the minds. The moment of truth is now to invite the prospects to a second meeting to discuss their financial situation and in-depth experiences. After the meeting, you need to reflect on the meeting perhaps with your team for 15 or 20 minutes. Meeting with a teammate can clarify what you heard. You need to get your notes recorded which can and should be using technology and/or delegated. You should listen to the recording as soon as possible after the meeting primarily at this point to update your notes that would be posted to your CRM. I also recommend you put together a summary of your notes into an email (or letter) to send to your prospects along with your thanks and comments telling them how much you look forward to your next meeting. (As a training tool you can listen to the recording a bit later but in enough time to improve your next meeting. When you are pleased with your meeting effectiveness you no longer need to listen to those recordings but an annual or semi-annual checkup by you and/or a teammate will be of value. Continue recordings as a standard practice.) Your notes will be used as part of your second meeting kickoff. You first meeting goal will have been accomplished if you have started to learn about who your prospects really are and if they commit to the financial discovery meeting within the next week to 10 days. Some of my clients find that in this day and age of “Right now!” three meetings may be too many for some prospects. Taking three meetings for some clients shows you are not overly anxious and that it’s most important to build a relationship correctly rather than too quickly. A first meeting done well can have some prospects ready to make a decision to move ahead with you right away. If they are willing to come in for a second meeting, they may be willing to sign on as clients. If they are ready to sign and it seems appropriate, move ahead but still complete the detailed discussion of the prospect’s financial situation (Meeting 2 content) and the detailed discussion of the prospect’s game plan (Meeting 3 content). It’s understood that some prospects don’t want to take the time to physically meet three times. Technology can be used to eliminate that need and in fact can be used effectively and efficiently for many client and some prospect meetings. In summary, the process is the process whether it takes two, three or more meetings. If it’s a qualified and quality prospect and the relationship looks promising, the three elements that you must complete are:
If you want to improve your business by exploring ways to create new levels of client service, “signature experiences” if you will, make an appointment on my calendar to discuss if and how I can help you. David I. Leo David Leo is Founder of Street Smart Research Group LLC. He is an author, speaker, coach, consultant and trainer to financial professionals. David is an experienced business manager who works solely with Financial Advisors, Planners and firms who want to organize, structure & grow their businesses by attracting, servicing, and retaining affluent clients. If you would like additional details or have any questions about his articles or an interest in coaching schedule a free 45 Minute Strategy Session @ https://calendly.com/davidileo or contact him @ David@CoachDavidLeo.com. Call 212-598-4229 (Office) or 917-379-1249 (Cell) and visit @ www.CoachDavidLeo.com  ESCAPE SAMENESS An old business friend, Frank Capek, coined an expression “Beyond Better Sameness.” While there has been increasing attention and spending to improve client experiences, Capek said that change has been slow to come to the retail brokerage industry. For example, financial planning itself has an almost five-decade history. Forms of technology have been used for financial planning for perhaps 40 years or more. However, as Michael Kitces says, “For much of its history, financial planning software was basically just an elaborate calculator. Advisors could gather client data, feed it as input to the calculator tool, and the software would spit out the projected results…which were then used to facilitate the sale of a product.” Financial planning is evolving, however, and as Kitces says, “has increasingly become a tool for real-time collaborative scenario planning.” While financial planning tools have improved significantly, the purpose and quantitative aspects of offerings have not changed dramatically. The qualitative side of the process has changed, and is changing with an increased focus on the emotional needs of clients and their families, such as how they see living the next 20, 30 or more years in retirement. From a service perspective, advisor’s primary deliverables relate to financial planning, estate planning, insurance, various communications services from in-person meetings to phone calls to mailings as well as various administrative functions. Some advisors provide education-funding solutions and banking services (in the case of a broker, if they are part of the broker-dealer or alternative offerings). A few firms offer “personalized” investment policy statements. These can even be developed using technology. Some advisors offer technology solutions that scan and upload pertinent family documents in a secure encrypted online vault that allows controlled access for family members and advisors. Estate planning documents, insurance and banking documents, contracts of any kind and supporting paperwork can be stored and retrieved safely and securely. However, most of what wealth managers are providing today do not significantly change the state of services offered to clients or differentiate an advisor. The reason that is so critical is seen in the “Kano model”. It says that over time, client expectations grow such that what once excited clients becomes everyday service expectations, and eventually become so basic that clients only notice them when they are missing. With growing client expectations and very a competitive marketplace, financial advisors must continue to seek more and better ways to differentiate themselves, i.e., “beyond better sameness,” such as prettier reports or improved credit card offerings. Certainly, excellent and consistent delivery of the above mentioned services are critical.  However, there must be services that advisors can offer that are needed and/or wanted by individual investors and that have the potential to differentiate by adding significant value where and when needed. In other words, to keep your clients loyal and attract new business, you need to continually create “delight” with strategic updates that excite or re-excite the client. Kano suggests some of these services are “latent” client demands. In other words, in some cases clients may not yet recognize these services as being wanted or needed, i.e., you may be “ahead of the curve” – a leader, which could be a differentiator.
What are examples of services advisors can provide that could “delight” clients and provide differentiation? Along with your capabilities, other professionals can provide special services to your clients that can address critical life issues and involve finances. You can build a professional network of “vetted strategic partners” to help your best clients. Strategic relationships go well beyond, “I have a guy” and provide support in areas such as: Educational services:
Family and healthcare services:
Legal, tax and accounting and administrative services:
Emotional services:
Living services:
Many of these services as well as your current primary deliverables can and should be “personalized” for your best clients. A client advisory council can help you identify and prioritize services of value to your best clients, yet only a relatively small percentage of advisors conduct these councils. If you are fortunate enough to be in a niche-based practice, some of the above services will have more or less relevance to your niche. This is a critical part of your offer analysis. Delivering services such as those above require business decisions as to what, who, how and when to provide them. It involves costs, whether delivered by the advisor or a member of her or his team or “virtual team.” The virtual team can include “vetted strategic partners” with whom you have a personal and business relationship and to whom you can introduce potential clients and who can introduce potential clients to you. Costs would be incurred as a function of the:
Known costs needed to be addressed by one of several means including but not limited to:
As Guy Kawasaki said, you have to “jump to the next curve. Big wins happen when you go beyond better sameness.” In addition, as Wayne Dyer said, “There is no scarcity of opportunity to make a living at what you love to do; there is only a scarcity of resolve to make it happen.” It’s your resolve that will result in jumping to the next curve where you will find yourself special. If you want to improve your business by exploring ways to create new levels of client service, “signature experiences” if you will, make an appointment on my calendar to discuss if and how I can help you. David I. Leo David Leo is Founder of Street Smart Research Group LLC. He is an author, speaker, coach, consultant and trainer to financial professionals. David is an experienced business manager who works solely with Financial Advisors, Planners and firms who want to organize, structure & grow their businesses by attracting, servicing, and retaining affluent clients. If you would like additional details or have any questions about his articles or an interest in coaching schedule a free 45 Minute Strategy Session @ https://calendly.com/davidileo or contact him @ David@CoachDavidLeo.com. Call 212-598-4229 (Office) or 917-379-1249 (Cell) and visit @ www.CoachDavidLeo.com  Many FAs select a top down growth target, e.g., $100,000 new production or $10,000,000 in net new assets or perhaps 15% growth year over year. Another way of estimating your growth for the year is a bottom’s up approach that focuses on how you plan to grow your business. In this approach, you calculate where your new business is going to come from by category.
Start with the categories for organic business growth, i.e., There are essentially four ways to increase a client’s value to the business. You can and should develop plans for each of these areas:
There are 15 to 20 ways to grow the business externally from client introductions to cold calling and cold walking. All approaches for new client acquisition work for some advisors to some degree. I believe in focusing on what we view as the five primary methods that are most productive and develop plans for each of these primary client acquisition approaches:
Networking and continuing development of client social relationships are a natural part of business acquisition and may or may not be “programmatic.” Let’s convert all growth opportunities in production as some opportunities generate revenue and some asset growth, which converts to revenue, so revenue is a common base. Organic Growth Opportunities Planning fees – Let’s say your firm allows you to charge for financial plans or you are in fact a planner, a CFP. Fees for plans vary widely but let’s assume a modest fee of $2,500 for a plan and you have a goal to sell six plans per year. Resultant revenue = $15,000 which equates to $2,000,000 in new assets at 75 BPS. Increasing client returns on assets (ROA) – You select perhaps 20 clients whose ROA is less that say 50 BPS. Review their portfolios and as part of your next proactive contact, you suggest various portfolio improvements that are appropriate for your client. Because of DOL, you may also need to move the client’s assets to a managed account. Let’s assume 10 clients agree to the recommended changes and you yield $2,000 per client. Resultant revenue = $20,000 which equates to $2,670,000 in new assets at 75 BPS. We would not to make any recommendations that are not warranted but if portfolios have not been reviewed for over a year, the asset allocation might be out of balance with the client’s current wants and needs or current market conditions. (See my paper “A Five Step Process for Moving from a Transactional to a Fee Based Practice”) Acquire assets held away by current clients – While most FAs believe they have 100% of client assets, firms believe that number is perhaps only 50%. Many HNW clients maintain more than one advisor. In many cases, there is value in having your assets managed by a single advisor in order to have a comprehensive and logical asset allocation and a holistic portfolio diversification by client. The client also gets more efficient financial planning, less effort, single view of net worth, etc. Set a goal of increasing assets from current clients of $4,000,000. At 75 BPS, this equates to $30,000 in revenue. Increase savings and provide asset protection and other insurance – Of course, there are many types of insurance and annuities you can offer to clients. For sake of simplicity for this example, let’s say we just focus on Long Term Care. Let’s target four policies of $100,000 each. If each policy yields $2,500 in revenues this would be $10,000 revenue in total. This equates to $1,333,000 in new assets at 75 BPS. Total revenue from organic growth =
Total = $75,000 in revenue or an equivalent of about $10MM in new AUM at 75 BPS. New client Opportunities Introductions from clients – You have put the proper plans in place and deliver high quality service so you are referable. Clients know you are open to a select number of new clients mode. You have a comfortable and consistent way of seeking introductions. Throughout the year, you receive six introductions to client family members or friend and business colleagues. You convert three prospects to clients who have an average AUM of $500,000 clients. This is $1,500,000 in new assets. At 75 BPS, this is $11,250 in revenues. Introductions from centers of influence (COI) – You have built strategic relationships with a four COIs. You contact them every 6 weeks or so to provide valuable information on the markets, to check in, to invite them to your events, and share ideas over meals. You have been doing this for 2 or 3 years with those COIs and eventually receive introductions. Let’s assume you get four introductions over the year and convert two million dollar clients. This brings in $2,000,000 in AUM. At 75 BPS, this is $15,000 in revenues. Book of Life -- Networking (personal and corporate) – You have built a current list of your family members, people from places of previous employment, your country club, the Rotary or similar organizations to which you belong, religious affiliations, small businesses you may work with, medical/dental/legal practices you know and/or use, employees affected by layoffs, school classmates, people who you participate with in hobbies and other life interests, etc., etc., etc. Generally it has been said people know at least 250 other people. If you construct a list, without judging their potential for client-ship, you may identify dozens of quality prospects. Let’s assume four individuals are willing to meet with you over the year and you convert two to $250,000 clients. This is $500,000 in AUM. At 75 BPS, this is $3,750 in revenues. Niche Marketing -- There are many ways to develop niches. Using “client wisdom” will identify opportunities for introductions whether one on one or through group meetings. For example, who does your client work for, what hobbies do they participate in, etc. You may be able to conduct “targeted roundtables” for small groups of employees, e.g., sales people, in one or more of the companies where your clients work. For these groups or “niches” either after work or at a “lunch and learn,” you can meet people by discussing relevant topics like “State of the Markets” or “The Value of a Holistic Financial Plan. For groups of women, you can conduct a targeted roundtable for “Financial Needs of Women in Transition.” Conduct one seminar per quarter with a goal of meeting with two individuals over the year from each event. Meet with only eight individuals and convert only four prospects to $250,000 clients results in another $1,000,000 in AUM. At 75 BPS, this is $7,500 in revenues. Use LinkedIn to Identify Connections of Your Connections and Get Introductions at Lunch or Dinner – Conduct lunch or dinner a quarter for a connection of a connection. If you convert only two $500,000 clients that results in another $1,000,000 at 75 BPS or $7,500 in revenues. Total revenue from new client acquisition =
Total = $45,000 in revenue or an equivalent of about $6,000,000 in new AUM at 75bps. Total Business Development = $16MM in equivalent new AUM or $120,000 in revenue from your nine business development programs over the year. If you run a hundred million dollar book, this is a 16% increase in AUM. If you plan each marketing activity and block time for execution, you can get this done. The key is to execution. Some of these projects will take more time than others. I suggest devoting at least 20% of your time to Business Development. This gives you at least 400 hours a year or 10 full weeks over a year’s time, more if you work longer than a 40-hour week. Naturally, you can see that the sum of small numbers of organic growth and new client acquisitions from multiple sources adds up to meaningful new business. You choose the paths you wish to follow based on your skills and interests, and yes, ambition. Using a simple methodology, you can put plans in place to make your growth objectives come true. Whether you do a tops down or bottoms up approach or both, it’s critical to plan your work and work your plan. Tops down and bottoms up are plans that must be followed up “religiously” by strategies, tactics, and actions to implement your plans, i.e., working your plan. Peter Drucker once said, “Plans are only good intentions unless they immediately degenerate into hard work.” Which opportunities will you incorporate into your growth plans and how much time will you block to execute on your strategies, tactics, and actions? By when will you start and how will you measure your results? If you want to improve your business by exploring ways to create new levels of client service, “signature experiences” if you will, make an appointment on my calendar to discuss if and how I can help you. David I. Leo David Leo is Founder of Street Smart Research Group LLC. He is an author, speaker, coach, consultant and trainer to financial professionals. David is an experienced business manager who works solely with Financial Advisors, Planners and firms who want to organize, structure & grow their businesses by attracting, servicing, and retaining affluent clients. If you would like additional details or have any questions about his articles or an interest in coaching schedule a free 45 Minute Strategy Session @ https://calendly.com/davidileo or contact him @ David@CoachDavidLeo.com. Call 212-598-4229 (Office) or 917-379-1249 (Cell) and visit @ www.CoachDavidLeo.com  All of us are challenged to follow through regardless of who we are or what are intentions are. This is pure fact! In an article by David Rock and Jeffrey Schwartz, “The Neuroscience of Leadership,” they state that “...changing behavior is hard, even for individuals, and even when new habits can mean the difference between life and death. In many studies of patients who have undergone coronary bypass surgery, only one in nine people (11%), on average, adopts healthier day-to-day habits. The others’ lives are at significantly greater risk unless they exercise and lose weight, and they clearly see the value of changing their behavior. But they don’t follow through.”
This is merely one example albeit a dramatic one. There have also been some estimates that 90 percent of books purchased in bookstores never get read past the first chapter, and that nearly three out of four new health club members stop going within just three months of signing up. Forbes reports that self-improvement, or at least the desire for it, is a shared American hobby. It's why so many of us—some estimates say more than 40% of Americans—make New Year's resolutions. But for all the good intentions, only a tiny fraction of us keep our resolutions. In fact, a University of Scranton research suggests that just 8% of people achieve their New Year's goals. In another article I learned the problem is so timeless in fact, that ancient Greek philosophers like Socrates and Aristotle developed a word to describe this type of behavior: Akrasia. Akrasia is the state of acting against your better judgment. It is when you do one thing even though you know you should do something else. Loosely translated, you could say that akrasia is procrastination or a lack of self-control. Akrasia is what prevents you from following through on what you set out to do. In our business, it’s not only a natural type of behavior, it’s daily unplanned interruptions from clients, staff and the firm, local, national and international events over which we have no control that we need to understand and react to, and like everyone, unexpected family matters. The point here is not to attempt to control the uncontrollable but to manage the controllable. There are perhaps five critical task over which you MUST be in control:
Have you ever left a conference inspired with ideas that could greatly help you with any or all of these five critical tasks only to find your notes 3 months later and realize one or more could have resulted in new business or created a “signature experience” for a client or clients? Do you realize your PSG (primitive guidance system) listens for squeaks and greases the squeakiest wheel? Your PSG couldn’t care less about intelligent guidance; all it cares about is squeak. The fact is, we don’t have a problem knowing what we should do. The problem is we just don’t do it! According to a survey of 400 advisors by SEI Advisor Network, which could be repeated annually, advisors want to generate growth through referrals in 2018. What was your commitment for 2018 and are you on track to meet that commitment? The number one resolution for advisors for 2018 is to take steps to increase referrals because most are having difficulty generating as many referrals as they would like in order to reach growth goals, the survey said. What was your commitment for 2018 to acquire 1, 2 or 3 introductions from COIs (Centers of Influence) or even develop 1, 2 or 3 COI relationships in 2018 and are you on track to meet that commitment? What is your contact strategy goal for 2018 and are you on track to meet that commitment? What was your plan for deepening your financial planning offerings and 2018? How are you doing with that commitment? Follow through can be improved by:
It’s not about luck, it’s not about trying, it’s not even about caring, it’s about commitment to your own success, hour by hour, day by day, week by week, month by month with CONSISTENCY!!! If you want to improve your business by exploring ways to create new levels of client service, “signature experiences” if you will, make an appointment on my calendar to discuss if and how I can help you. David I. Leo David Leo is Founder of Street Smart Research Group LLC. He is an author, speaker, coach, consultant and trainer to financial professionals. David is an experienced business manager who works solely with Financial Advisors, Planners and firms who want to organize, structure & grow their businesses by attracting, servicing, and retaining affluent clients. If you would like additional details or have any questions about his articles or an interest in coaching schedule a free 45 Minute Strategy Session @ https://calendly.com/davidileo or contact him @ David@CoachDavidLeo.com. Call 212-598-4229 (Office) or 917-379-1249 (Cell) and visit @ www.CoachDavidLeo.com While millennials in general may not be hot prospects, the young adult children of your best clients may be another matter. If you want to keep managing that money once it is passed to the next generation, then you need to start making millennial marketing part of your strategy. There are a projected 75 million Americans between the ages of 18 and 34, according to Pew Research. What portion of those millennials should FAs be working with and why? The short answer is that you primarily should be marketing to the adult children of your high-net-worth clients. However, let’s add some details to that statement. At What Age Should You Catch Them? A recent Horsesmouth Chart Talk feature, “Prospecting the Younger Investor,” reported that about 60% of affluent investors met with their first financial advisor before the age of 45. Here’s that chart again, showing that about 33% of people in the group have already met with an FA before they are 35. Many, if not most, FAs (and in fact the entire industry) have increased their focus on millennials, not least because it is known that 98% of children will move inherited money to a new financial advisor. Figure 1: Get to Know That Millennial Before Another FA Does  To me, it’s apparent that FAs need to establish relationships with millennials before they reach the age of 35. Although many wealthy clients want to leave an inheritance to their children, only 25% strongly agree that their children are prepared to inherit the family fortune. In addition, while most wealthy clients say their family would benefit from establishing a set of principles to guide the purpose of their wealth, only 10% have done so. I suggest these are good talking points for discussion with your wealthy clients. I also suggest putting a plan in place today to develop relationships with the adult children of your best clients. Do Millennial Assets Make It Worthwhile? During an exchange about these statistics with one advisor, he asked if I knew the level of assets in the millennial marketplace. The question got me thinking about the broader issue of how and why to approach millennials. The question suggests concern about whether or not the millennial marketplace has enough assets to warrant the effort. In the case of this successful FA, it was not a concern, because he meets with prospects where they are regardless of their assets and has “always maintained that the interest of the client must come first.” Nevertheless, it’s a consideration in most cases. It’s a good and important question as part of a strategy that considers a number of factors, such as wealth and age of parents, age and occupation of children, where they went or are going to school, their family situation, their interests, the interest of their parents to have you work with their children, the number of and relationship with their children and so on. Figure 2, below, shows AUM by age group. As you may already have guessed, it is not likely that millennials generally have enough wealth to warrant marketing to them as a specialty for practices with sizable AUM. Even with smaller practices, most millennials will not have enough assets to warrant a special focus on this group. Rather, your contact with the millennial group is about developing a multigenerational practice as a longer-term plan to retain the assets of your HNW clients—and in certain cases, the assets of your competitors’ HNW clients. Your Millennial Service Strategy I don’t think a millennial strategy should take an inordinate amount of time. You would have to strike a balance between time spent and potential for asset retention or growth based on your particular clients. First of all, a millennial strategy would primarily address only a subset of your clients, e.g., the top 20% of your clients that provide 80% of your revenue and assets. I am thinking of clients who have or will have, perhaps $2 million to $3 million or more and who have three or fewer adult children. I should also note that the FA must have the agreement of the parents to engage in a relationship with their adult children. You would have “regular contact” with adult children of HNW clients, but there would not likely be extensive meetings (unless the millennial becomes an independent client). For non-client millennials who are children of clients, you may want to speak with them several times a year and meet periodically, depending on the millennial. Included in the strategy would be educational events, among many other events, and emails of pertinent articles and research and even your experience in educational, personal and career development if appropriate. If the millennial becomes a client, they will be offered your core set of deliverables, including, but not limited to, financial planning, liability, estate and risk planning as appropriate, and so on. Once they become clients, scheduled meetings will in part be a function of their asset level and that of their parents, assuming they are also clients. Who are the Millennial Investors? Let’s learn a little more about millennials as potential investors. Fidelity shares a wealth of relevant data on millennial wealth in “Exploring Wealth Potential Across the Spectrum of Investors: Findings from the 2014 Fidelity ® Millionaire Outlook Study.” Here’s an interesting chart that gives an overview of the wealthy demographic: Figure 2: Who Are the Affluent?  Source: Fidelity
The study remarks that “the emerging affluent may soon be seeking advice, because the majority (90%) who don’t use an advisor feel they aren’t knowledgeable enough about investments to make decisions on their own.” Most millennials are likely to be in the “emerging affluent” class at best, unless their parents are ultra-high-net-worth ($30 million plus) and you have found a trust fund baby or Silicon Valley entrepreneur. In another study, “Wealth gap calculator: Are you in the millennial one percent?” authors Rob Wile and Fusion Interactive state that it “takes an income of about $106,500 a year to be in the millennial one percent, according to data from the U.S. Census Bureau’s Current Population Survey. That’s a group of about 720,000 young adults.” As an advisor, the salary or potential income of the millennial may be another criterion used to determine whether or not you will want to work with this person. The same article notes that “a salary of about $60,000, the typical starting rate for a computer science or engineering major, would put a recent undergrad in the top 10% of potential earners between the ages of 18 and 34”—a marketplace of about 7 million. What Do Young High-Net-Worth Individuals Want? Of course, there are those who already are enjoying substantial wealth. Phoenix Marketing International did a study of young high-net-worth individuals on behalf of Merrill Lynch’s Private Banking and Investment Group in early 2013 that offers some interesting insights. The study surveyed a small number of individuals (153) with net worth exceeding $1 million and “included those who have inherited most of their wealth (28%) as well as those who acquired it through entrepreneurial ventures (26%) or by working their way up at lucrative jobs (58%).” “These young people aren’t rebelling against the traditional investment approaches advocated by their parents—not only do most say they would have no objection to using their parents’ financial advisors, they are also most likely to describe their investment philosophy as ‘buy and hold.’ They aren’t turning to their friends and peers in their digitally managed social networks for investment guidance, and don’t uniformly spurn professional advice. To the contrary, eager to learn, they seem to value expertise.…” The study reported six primary observations for your consideration.
These investors want to see the math and often “ask how they can best accomplish their goals.” Many have the attitude: “If I invest, I will probably lose, unless I’m extremely careful.” Hypothesis: FAs must make strong, logical, and proven cases for their recommendations.
A full 72% of respondents describe themselves as being “self-directed” in their investing, with 41% reporting having “no financial advisor of any kind.” While 40% of the group takes a “buy and hold” attitude, the group as a whole takes a “variety of investment approaches.” There is skepticism in this group. It was also reported that the group has “a hard time believing that advisors necessarily have their best interests in mind. According to our survey, only 19% agree with this notion. (Another 40% disagree with it.)” In addition, “As a generation intently focused on the value add of almost every service or product they buy, millennials simply seem to question whether paying for financial advice is worth it.” There is a tendency towards index funds—ETFs and mutual funds that simply track a host of indexes. Hypothesis: FAs will face a self-directed population and must establish deep trust and show specific value add and differentiation. There is also fee sensitivity. Don’t rush the sale! The study itself suggests, “One of the most important roles an advisor can play is serving as a kind of behavior coach who can help maintain discipline through the various (market) cycles.” Also, see my paper “Why Should I Do Business With You?”
However, this section of the report also suggests, “many of these young people have a perfectly natural response—the stakes seem high, so they’re afraid of failing.” This comes from studies that show “even quite considerable family wealth is completely lost by the second generation 70% of the time, and by the third generation 90% of the time.” Millennials conclude that “No matter how difficult the discussion of money might seem, transparency is critical.” There may also be perceived challenges living up to the older generation’s legendary standards. “The older generation, in turn, ‘sometimes doesn’t want to share too much, because they don’t want to demotivate their children’.” Hypothesis: FAs can play an important role in helping these constituents develop a healthy relationship with money and investing—if one does not exist—in part by helping to educate the individuals if they are inexperienced regarding financial subjects. A delicate balance is required here.
Millennials believe that “the real path to wealth is through business innovation—not through investing… which can translate into a reluctance to have their money tied up in ways they cannot access.” “Most young inheritors want to exit the shadow cast by their successful parents by putting their own stamp on the world.” The study also reports young inheritors have said, “I don’t need more” and “I want to do something with what I’ve been given.” How would they like to make their mark? What are their entrepreneurial, social, and/or philanthropic interests? Hypothesis: FAs need to understand the drivers and deep interests of millennials beyond money. A strategy of investing a portion of the assets of the millennial while retaining the flexibility to invest in their businesses may be appropriate in some cases.
The study states that for millennials, “in selecting a wealth management provider, two attributes topped the list: understanding the needs of investors in their twenties and thirties and an ability to communicate in a way that resonates with people in their twenties and thirties. Other factors that rated highly included values based investing (3), access to products and services not found elsewhere (4), and access to funding for one’s own business (5).” The study participants are also looking for “connections to people or to expertise that might help them with their livelihoods or with their businesses.” Hypothesis: As above, FAs need to understand the needs and wants of this group and communicate in the way they want to be communicated with. The report also states that “members of the Facebook and LinkedIn generation want to know that your network will help them expand and deepen their network.… In a world of intense connectivity, young people value relationships very, very highly.”
FAs can be more successful with millennials, as in an example from the study, “by asking questions, listening, and coming to understand that what the client was most concerned about had to do with securing the financial future of his young children and helping strengthen the community that he’d grown up in… The plan involved a lot beyond investing.” In addition, “advisors must continue to carefully listen to clients in order to gain a clear understanding of their anxieties and aspirations.” Hypothesis: Ensure your prospects understand that you offer a holistic set of wealth management solutions and that you are able to deliver them in the context of the client’s real wants and needs. More data, more details Here are a few other observations to flesh out your view of the millennial generation. An article from CNBC, “Millennials Make Most of Massive Inheritance,” reported “that knowledge seems to have made them better savers, more risk averse, and more worried about their retirements than their parents or their grandparents.” In addition, “They are even worried about their parents.” Millennials are also interested in community service and are more politically involved than their immediate predecessors are. Many mistrust financial systems and are concerned about inflation, national debt, and Washington’s inability to take action because of partisan politics. Two groups heavily represented in the study, physicians and entrepreneurs in the tech sector, often have “some altruistic endeavor in the mix.” Finally, the “Wealth gap calculator” article mentioned above also notes that “the No. 1 profession among millennial one percenters is lawyers, followed closely by miscellaneous managers. The more high profile CEOs come in third. Such positions, of course, require a college education, and usually of the prestigious variety. As a result, they tend to favor individuals who grew up in more affluent households…” Software developers come in fourth among wealthy millennials. Also note that millennials are the most stressed out generation in America, according to a new survey from the American Psychological Association (APA). Summary: Why the millennial marketplace? Here then are the arguments for why you should be paying attention to millennials:
Summary: Who is your ideal millennial prospect? Your prospective millennial client is:
I have not included asset level as a criterion, because if the millennial is a child of a high-net-worth client, you will most likely not have a minimum for them. If the millennial is not the child of a high-net-worth client, the other factors above and your practice should drive your decision on any minimum. I do not suggest that you need to have millennial prospects that are seeking advice, are self-directed, are not fee sensitive, and trust the financial system. These are issues you address regularly with at least some of your clients and prospects. Of course it’s appropriate to be aware of these potential objections, but I believe you can likely address these concerns. During your discovery process you should of course look for these concerns and even bring them up so you can “preframe” the objection. Discovery should also validate your prospects’ beliefs regarding their savings approach, risk aversion, thoughts about their future, including even retirement, as well as their parents’ health situation and potential future monetary needs. As millennials are also interested in community service and are more politically involved than their immediate predecessors, discover those interests as well. Find out any other concerns they have about inflation, national debt, and even Washington’s inability to take action because of partisan politics. Raise questions that may be on their minds so you show an understanding of issues important to millennials. Each of these factors is part of your discovery process, the process by which you get to know your clients and their families. This is especially important with your high-net-worth clients—those whose assets you would like to retain in perpetuity. It’s time to get your millennial strategy in place. If you want to improve your business by exploring ways to create new levels of client service, “signature experiences” if you will, make an appointment on my calendar to discuss if and how I can help you. David I. Leo David Leo is Founder of Street Smart Research Group LLC. He is an author, speaker, coach, consultant and trainer to financial professionals. David is an experienced business manager who works solely with Financial Advisors, Planners and firms who want to organize, structure & grow their businesses by attracting, servicing, and retaining affluent clients. If you would like additional details or have any questions about his articles or an interest in coaching schedule a free 45 Minute Strategy Session @ https://calendly.com/davidileo or contact him @ David@CoachDavidLeo.com. Call 212-598-4229 (Office) or 917-379-1249 (Cell) and visit @ www.CoachDavidLeo.com |
