Atlanta—“I know the markets have corrected, but it just seems that with all of this volatility a number of my clients have lost sight of what I’m doing for them,” moaned Gordon. He then continued, “And most of these clients should know better. Do you have any suggestions?”
The greatest motivator of today’s affluent is the fear of loss. This isn’t a revelation, as fear has always been the greatest motivator. What’s interesting is that fear of loss is more likely to motivate a person than the desire for gain. Think about it for a moment: your house burning down versus purchasing your dream home. Regarding the former, you take action and purchase fire extinguishers and a security system connected to the police and fire department. In the latter case, you’re perusing luxury home magazines.
Market uncertainty, especially volatility, often creates this type of fear. With a bit of redirection, this motivator (fear) can be used to strengthen client loyalty. How? Mike Abramson, one of our performance coaches, recently shared his approach, which I thought was brilliant in its simplicity, and I’m now sharing it with you.
In a nutshell, most financial advisors, like most salespeople, have been taught a feature-function-benefit approach to sales. The feature could be the actual investment vehicle, the function would be how it works, and the benefit would be the results. In the case of an investment vehicle, the benefit is the performance of that particular vehicle.
This all makes perfect sense, but one key element is missing: understanding the goal of this feature-function-benefit process. Since there’s a tendency for financial advisors to take too much credit for portfolio increases when the markets are rising, they’ve conditioned clients to focus on the feature-function-benefit vehicle, not the goals they’ve established within their financial plan.
Mike went onto explain how he’s coached advisors into changing how they handle portfolio reviews. The following is an outline of his approach:
- Has anything changed regarding the goals from the client’s perspective?
- Are they on target?
Review Nine Key Wealth Management Areas
The Oechsli Institute research cites the following nine areas as important to affluent clients; your firm probably has its own version that you can use. After discussing each, two questions need to be addressed: 1) Are there any issues in this area? and 2) Is any action step needed? Obviously this discussion needs to be modified for each client—not all need education planning, some might be still working while others are retired, and so on.
- Banking Services—What’s the current involvement?
- Insurance Planning—Have policies been reviewed this past year?
- Asset Management—Review current status and performance over past year.
- Cash Flow Management—Review current status.
- Education Planning—Review current status.
- Tax Planning—Has CPA reviewed financial plan?
- Retirement Planning—Review of financial plan.
- Estate Planning—Review current status.
- Charitable Giving—Review last year’s charitable gifting.
Remember, this is a discussion with your clients on these Nine Key Wealth Management Areas, not a monologue. And these two questions—Any issues? Any action steps needed?—should be in the forefront of your mind for each area.
It’s very important to discuss each the above without any hint of a product pitch, i.e., selling insurance. It’s been our experience, and Mike Abramson has led the charge on this, that financial advisors who have embraced this approach are sold on it, whether markets are up or down. Why? Because of the feedback they’ve gotten from their best clients.
In effect, this goals-based review creates context for the client. Every aspect of wealth management, every kernel of advice they’re receiving, is directly connected to successfully achieving the goals they’ve established for their family. You’re making sure your client is aware of your capabilities, as well as making sure you’re performing them to your client’s expectations.
The following comment is from an affluent client, a c-suite executive who initially resisted the goals-based review: “Why aren’t we going over the portfolio?”, to which his advisor responded, “Just humor me. If you don’t like it, I’ll never do it this way again.”
As the advisor concluded the review, his client’s comment spoke volumes: “This was very thorough. Can we do every review this way?”