About Donald SpeakmanOne of the biggest challenges we face as advisors is beginning the relationship with a new prospect. Once trust has been established, a prospect could be a client for life. But how do we do that from the get-go?
During a press conference, a savvy spokesperson once asked reporters, “What questions do you have for my answers?” Advisors would be wise to approach meetings with potential clients the same way.
Use the following questions to determine what prospects should be asking of you and be prepared to answer openly and honestly. Share these questions with potential clients and encourage them to reflect on how your answers match the qualities they value in a financial advisor. By demonstrating a willingness to share your background and expert insight at the start—and even give them questions to ask of other advisors they are considering—you will establish the foundation of a longer, stronger advisor-client relationship.
Industry Know-How
Questions about the industry are sometimes difficult to answer because they are often hard-hitting. While we can’t predict industry performance, we can explain concepts succinctly and address any concerns they might have. I’ve drafted some replies to common industry questions to demonstrate effective ways to communicate with your client.
Is my money liquid?
“Everyone needs to keep a certain amount of their money liquid. How much, really depends on each client’s comfort level. Liquid money typically earns a very low rate of return and is taxable. Keeping too much money liquid can prevent you from achieving your financial goals. Look ahead and determine what purchases or changes could be coming up that would require significant amounts of liquid cash, and plan accordingly.”
How do you think the market will fluctuate in the next year?
“It is best, especially these days, not to focus on market fluctuation but rather, what your long-term goals are, and what investments are likely, after inflation, to help you achieve these goals. Watching the markets daily fluctuation can make your head spin. Such volatility can cause you to make bad decisions with your long-term money because of what is happening short term. We can design your investment plan around your comfort level, but typically lower volatility is going to mean a lower long-term rate of return.”
Are annuities bad?
“As the media has pointed out, some annuities have extremely high fees, are very illiquid, and have very poor track records on their rate of return. While I can’t control individual product performance, I don’t offer those annuities, so it doesn’t become an issue for my clients. Similarly, some mutual funds have had a terrible performance but again, as long as they are not the funds I am using, what difference does it make? I try to focus on a variety of options which include quality annuity products as solutions for my clients.”
Practices of the Practice
Questions specific to your practice will require responses tailored to best reflect your individual personality and business. Keep in mind these helpful tips when crafting your response.
What are the fees for your services? Are fees charged up-front or annually? And what fees do your money managers charge?
Ultimately, every potential client wants to know how far they’ll have to dip into their pocketbooks for your ongoing expertise.
Is your compensation based on transactions or my investment results?
If I were a client, I’d much rather consider working with an advisor paid based on how well my account does, rather than simply every time they move my money or make a transaction.[i] And yet fee-based services may not be best for all clients, so it is best to identify expectations up-front.
What have your net results been after fees?
The focus as an advisor should be the net performance of a client’s investment. I’m not concerned so much with the fees for an individual plan as long as their net performance is competitive.
All about the Advisor
How have you performed so far this year?
Provide examples or anecdotes that may resonate with a potential client.
How long have you been a financial planner? Describe your practice.
I wouldn’t elect to have brain surgery by a new doctor or one that rarely performs that type of surgery. Sharing this information adds credibility and reinforces a commitment to the industry and your clients.
What credentials do you have?
An advisor without credentials isn’t necessarily a bad advisor. My personal belief, though, is anyone who really wants to help with a client’s long-term financial plan would pursue a formal education in financial planning. I’ve spent years of my life in this business and am very careful in the advice I give and how I handle my clients’ portfolios to avoid losing what experiences have earned me. Do everything possible to stay up-to-date on current industry developments. I read one to two hours daily, participate in a national study group and attend national and international conferences several times each year. Additionally, I am a member of financial associations like the Million Dollar Round Table (MDRT), where I have access to useful resources, current information and opportunities to interact with some of the greatest minds in the business. Having earned Top of the Table status provides me with additional exclusive access to advanced sales and productivity ideas, as well as the opportunity to develop interpersonal relationships with the top financial services producers and advisors in the world.
Do you specialize in any particular area of financial planning?
Many advisors have a specialty, and it should be made obvious to prospects. I focus on retirement planning and look for clients who are interested in preparing for this stage in life. Identify your passions, and consider conversations with prospects a step in finding the perfect match.
Describe your typical client. What is your client-retention ratio?
Prospects should choose a financial advisor they are comfortable with—one they look forward to meeting. Do prospects fit the market you’re looking to serve? My average client is 72 years old and is very relationship-oriented. More than 80 percent of my clients have worked with me for ten years or more, and most are what I consider regular people.” They aren’t “super-rich,” but they understand the importance of planning. I certainly serve other types of clients, but this is an area where I perform best.
What makes you unique or different from any other financial planner?
My practice doesn’t have an extremely large client-base but our staff of 10 can consistently deliver what I call “Disney” service. We host extra functions to build both a personal and business relationship with clients—several fun activities they have grown to enjoy and look forward to. Determine what sets you and your practice apart before reaching out to new prospects.
Do you have a client reference list?
I would never trust anyone to do important work for me until I had carefully examined their background. I have hundreds of clients on a reference list who have agreed to be contacted. Encourage prospects to inquire about clients’ satisfaction with your services.
Before They Invest
Is this investment covered by FDIC insurance?
The only investments covered by FDIC insurance are savings accounts and Certificates of Deposit (CODs). They are very safe, but historically their after-tax yields have not kept up with inflation. One of my clients recently referred to his CODs as “Certificates of Depreciation” because he was guaranteed, after taxes, to lose ground to inflation.
What is the probability your advice will help me save on federal income taxes?
I rarely start a new client relationship in which we are not successful in giving them at least a few strategies designed to reduce their taxes. Offer extra tips and advice as able, and your clients will appreciate the attention and insight.
As my advisor, what additional value can you offer to benefit me in this relationship?
I have averaged a high retention rate in my 33 years in the business, and I don’t believe it is due to the rate of return my clients have achieved. Relationships with my clients have grown over time to where each sees me as a primary resource for any and all financial issues that may arise. Become more than just an expert for your clients—become a trusted friend and confidant.
How much risk is involved with my investment?
While risk is based on each client’s comfort level, the main priority should be that they have no surprises. We customize each plan to individual desires and risk-tolerance. Get to know your clients to best determine how much risk they can handle.
How often would I meet with you after I become a client?
The most common term used in our office is “comfort level.” Every investor should find a planner and develop a plan they are comfortable with. We offer to meet with every new client once each quarter, but ultimately let them choose. When clients have the freedom to dictate the frequency of your meetings. This will add to your relationship and they will learn to trust even more.
Summary
This is how I handle these types of questions. They are common and you should feel comfortable being asked and encourage your potential clients to ask these questions. Your prospects will feel more secure with you as an Advisor and will become your client for life.
[i][i] Investment advisors can be paid on a commission basis when acting in a broker/dealer capacity.
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