No matter what business you are in, everyone wants to maintain and enhance their lifestyle throughout their lifetime. This basic desire is forgotten many times when clients visit their financial advisor. The products and services offered by the advisor are insignificant if this primary concern is overlooked. Why is the most important financial concept rarely discussed? What is retireability? Some say they have no desire to retire or do not believe they will ever be able to retire because of the difficulties in the economy. Retireability is not just a state of mind of wanting to retire, it is also a capability of having the resources to fund that desire.
"Anything the mind can conceive and believe, it can achieve."
Though many would like to retire, most do not know what is required. This is where many people prematurely jump into a financial plan. Analysis of what you have is the last step in determining your Retireability Factor.
First, your advisor needs to know you. What is your purpose in life, what is important to you, what challenges are you facing now, what opportunities would you pursue if those challenges disappeared, what are you passionate about? These questions help your advisor know you. They need to understand your life story because without it how can they know what is important to you?
Second, your advisor needs to know where you want to go. What is your life dream, the vision of your future you and your spouse discussed when you were just dating? Too often this is a black and white, out of focus picture of the future. It needs to be a widescreen BlueRay movie with surround sound. The more we are able to visualize our future the faster it becomes a reality. Make sure your advisor helps you clearly define your dream for the future. A clear vision of your future becomes the catalyst for making it a reality.
Third, now you will need to determine why this dream is truly important. Is this dream necessary or just a nice idea? Unless your dream is vital you will not put the required motivation behind it to make it a reality. So take a moment and consider why this dream is necessary for you to achieve.
Fourth, at this point your advisor should ask when do you want to make this a reality? Too often we push our retirement into the distant future, when most of us can start to retire now. Why not start doing now what you want to do in the future? How many people do you know delayed their desires until retirement only to miss their dreams because of health concerns or an early death? This is unfortunate because everyone can start to retire now. By making your retirement urgent you can enjoy now what many will wait for and lose.
Fifth, now comes the difficult question, how do we make this a reality? If your advisor knows who you are and where you want to go and you believe this is truly important and you would rather start sooner than later, then they will be able to do the analysis necessary to create a plan of action to make this dream a reality. Too often this analysis is attempted before these questions are asked and answered. The result is clients are unprepared. These questions set the stage for the last step.
Sixth, and finally. After the important questions are answered and understood, both you and your advisor can go through the analysis necessary to build a bridge to where you want to go. Now your advisor can ask what do you have and it will have a context and can be used in the analysis to determine how to build your action plan to take you from where you are to where you want to be in the future.
Too often advisors start off talking about the money and then never get back to asking you about your life. This results is prescriptions being written before proper examination and diagnosis has occurred. In the health care industry this is called "malpractice".
This conversation creates a different result. These six questions, asked in this order will assist both you and your advisor in creating a compelling future, and building a road map to achieve your dreams.
This conversation is not a fifteen minute meet and greet. To do this properly you and your advisor should set aside a couple of hours. You can not tell your story in a few minutes and your vision needs to be more than a vague concept.
If your advisor is not doing this with you, find someone. If they will not take the lead, then require them to slow down and listen to you first, before they try to give you a solution.
We will talk more about the "retireability factor" in the coming weeks. If you find the information helpful send it to someone you value.
The window of time left is small, but the opportunity is great. In the next four weeks you can make a significant difference in the lives of others. And as they see in your actions your desire to help them achieve their dreams you can replace the lost assets that the market has temporarily taken away. So instead of just breaking even when the market returns, you can have a significant gain in assets and revenue, while having added outstanding value to the relationship.[display_podcast] Two Mental Paradigm 1. You must have a passion to make a positive difference in the life of other people.
2. Partner up with your clients to calm the fears and concerns of those they value and respect.
Window of Opportunity from now to December 15th 1. Clients are scared. They feel that their dreams are at risk. This is a rare opportunity to touch the lives of others in a meaningful way and help them achieve their dreams.
2. December is family month. They will not want to talk with you after December 15th. Everyone will be busy with the holidays.
3. January Effect A. New popular President B. New Administration C. New Year D. Bad October
4. The opportunity is now.
Stop Putting Band-Aids on Scratches While Other Are Bleeding To Death If you have: 1. Taken your clients through a relationship conversation 2. Identified their Risk Profile 3. Properly allocated their assets 4. Diversified their portfolio 5. Communicated with them throughout this market decline 6. Offered them the opportunity to re-profile their risk 7. Answered their questions THEN YOU HAVE DONE EVERY THING YOU CAN.
Where Is Your Focus? When things are good focus on your clients, because during these times clients are difficult to replace. Everyone is happy with their current relationships. Therefore strengthen your client relationships by helping them fulfill their dreams. This will be easier during the good times.
During Difficult Times First prepare yourself, then settle your clients worries quickly. 1. Remind them that times like these have occurred in the past and will occur in the future. 2. Help them establish a long view of the economy. They have no need to worry. 3. Use the example of trusted experts: Bernanke / Buffett 4. Re-explain to then what controls the market 5. Re-confirm the disciplined process that you have taken them through to determine their needs and the unique solution that they have working for them currently.
Do not try to call or contact each client personally, use mass communication tools like email, broadcast fax, letter, podcast, or conference call. The exception to this would be your Top 25 Clients who you should call after you have sent the mass communication information.
FOUR NEXT ACTIONS 1. Capture All Tax Credits The tax credit is cash captured now guaranteed.
2. Letter to Clients Send a letter to all your clients reminding them of the steps that have been taken to protect them. Offer them the opportunity to reassess their risk profile Most Important: Include a paragraph
3. Contact All Old Prospects Make sure they are not worried. Offer analysis, at no cost, and no obligation. If they say no in this situation, they are either well serviced or not interested in working with you. Either way remove them from your prospect list. They are not prospects.
4. Call Top 25 Partner up with them to make a positive difference in the live of someone they value and respect.
Example script for call Mr. Client over the past several weeks we have talked to many people who are worried and fearful. They had no one to help them understand their situation. If you know someone you respect and value who is worried, there is no need from them to be in that situation. We’ll be happy to take them through the same analysis we use with each of our clients, at no cost or obligation, to make sure that they know where they are today, where they want to be in the future, and have a plan of action to get there. We do not what someone you care about to be afraid.
Introduce us to each other. Send them an email and copy us. Simply same Bill, I want to introduce you to Sally. Sally I want to introduce you to Bill. Here is the contact information for each of you. You should talk together.
The conversation is just that easy.
Call Top 25 1st week, then the next 25 the next week, then back to the Top 25 the following week, and then back to the next 25 the last week.
For more information see: -Sample Letter to Clients -Mastery Habit: Crisis Management -Mastery Habit: In Good Times Focus on Your Clients, In Bad Times Focus on Prospects -Mastery Habit: Never Follow Institutional Managers During the Extremes in the Market -Notes from the last conference call -Link to Fed Chairman Bernanke’s Speech to the Economic Club of NY -Link to Warren Buffett’s letter to the NYT To conduct a conference call with your clients contact: Ed Shea from Audio Podium Email: firstname.lastname@example.org
If you have found this of value, forward this page to someone you respect and value who is worried.
The following is a sample letter you can change to you own words and email to your clients. Include the full hyperlinks to the articles if you do not email. Add your clients first name for Client and your name for Advisor.
We are lucky today to have two great resources from knowledgeable experts to help us focus during these turbulent times. The Fed Chairman Bernanke Spoke to the Economic Club of New York, NY on October 15. Read it here: He made four important points:
1. This is not 1929-32 - we learned from our mistakes. Hover waited three years to respond and then tightened money. Fed acted immediately and loosened. 2. Fed Reserve has doubled in size, giving it a greater ability to impact the economy positively. 3. Everything hinges on the banks lending money again. 4. Therefore the Fed’s money will be used to stimulate the economy, if a bank does not lend money they will not be given money. They will learn quickly to start lending.
What controls the market? What makes the Market go up? Cash flow. What makes the market go down? Lack of cash flow. Cash flow into the economy is cash into the market. The infusion of $800 billion into the US economy by the Federal Reserve will be a stimulus.
The press continues to encourage investors to watch what the institutional and hedge fund managers are doing as an indicator for what they should do. And because they are selling, so should the investor. This is foolish advice, because institutional managers, during the extremes of the market, are never doing what they personally want to do. Because of redemptions during crashes and infusions of new money during rallies they are forced to liquidate or invest against their own best judgment. Investing is counter intuitive. One of the great counter intuitive investors is Warren Buffett. Read his letter to the New York Times here.
If you feel your risk profile has changed and would like to redo your risk profile analysis, we will be happy to help you.
Over the past several weeks we have talked to many people who are worried and fearful. They had no one to help them understand their situation. If you know someone you respect and value who is worried, there is no need from them to be in that situation. We’ll be happy to take them through the same analysis we use with each of our clients, at no cost or obligation, to make sure that they know where they are today, where they want to be in the future, and have a plan of action to get there. We do not what someone you care about to be afraid. Send them an email and say, Client I want to introduce you to Advisor, Advisor I want to introduce you to Client. Here is your contact information, you two should talk.
Follow this letter with a call to the Top 25 repeating the last paragraph.
The window of time left this year is small, but the opportunity is great. In the next four weeks you can make a significant difference in the lives of others. And as they see in your actions your desire to help them achieve their dreams you can replace the lost assets that the market has temporarily taken away. So instead of just breaking even when the market returns, you can have a significant gain in assets and revenue, while having added outstanding value to the relationship. Example script for call to Top 25
Mr. Client over the past several weeks we have talked to many people who are worried and fearful. They had no one to help them understand their situation. If you know someone you respect and value who is worried, there is no need from them to be in that situation. We’ll be happy to take them through the same analysis we use with each of our clients, at no cost or obligation, to make sure that they know where they are today, where they want to be in the future, and have a plan of action to get there. We do not what someone you care about to be afraid.
We will post the audio file and notes from the conference call next week.
The following is an excerpt from the new Second Edition of Attract Clients that will be available soon. There are times when the biggest difficulty you face in business is getting clients to commit their funds to an investment choice. Perhaps they agree with the concept of fee-based assets and even go so far as to say they want to place their money with professional managers, but then the question becomes not so much what to do or how to do it, but more importantly when. When is the best time to make the change and move the assets?
When asked about the best time to invest in the market, Warren Buffet said, “Whenever you have money.” Most of the time the market will be higher in the future from a present point in time; 60% to 70% of the time the market will be higher 18 months out than today so Warren Buffet is correct. The best thing you can do whenever you have money is to invest it.
That said, there are two types of money: money at risk in the past and money that was not at risk in the past. If we all had the risk profile and confidence of Warren Buffet to say, “I am setting these funds aside for an unlimited period of time and I will not worry because I will buy good companies and just hold,” then we could invest whenever we have the money. Unfortunately, this is not usually the case and we find that many investors are anxious. The stock market is a scary place for them. The funds they invest may never have been in the market before - a rolled over CD or GIC, or funds received from a business sale or real estate sale. These funds may also represent a large portion of a client’s total asset base. Therefore, prudence may encourage us to move into the market gradually. Some people like to put their toe in first and test the waters then gradually move in, while others are fine diving in. For “divers” the best thing to do is invest fully whenever they have the money. However, for the ones who want to wade in gradually, we created a model that assists your clients in adding funds to the market on a systematic basis.
I believe there are four important dates for the investment of new funds into the stock market. These dates are March 15th, June 15th, September 15th, and December 15th.
The dates are significant in that they precede the last two weeks of each quarter.
Something significant happens in the market during the last two weeks of a quarter called window dressing. When managers, investment advisors, mutual funds, and institutions liquidate underperforming positions, selling is the order of the day. This practice presents an ideal time for investors to add funds to the market as the institutions are in sell mode.
The dollar-cost averaging model starts with today’s date. If the client agrees the investment is a good thing to do, then they put 50% of the money in the market today. Then you determine future investment dates. For instance, if today’s date is February 20th, then select March 15th and June 15th as the remaining two date lines. Half the remaining assets, 25% of the total, will be invested into the market on each of these two dates.
Three scenarios can occur in the market after the initial investment of half the assets. Historically, over an 18 month period, the market tends to be up about 70% of the time. The other 30% of the time, the market could be down or flat. If we are bullish and think the market will be up in the future, it would be foolish to hold back part of the funds and wait to invest them later at a higher price. But what if we take a large portion of a client’s assets and invest today and then, in 2 months, the market drops significantly? The investment timing seems imprudent and the client might be upset. By using the Dollar-cost Averaging model a disciplined approach to making the investment decision of adding funds to the portfolio is established.
In my practice, when a pool of money accounts for 25% or more of a client’s existing assets, the Dollar-cost Averaging model was presented to the client as an alternative to investing all funds at once. If the client agreed, we immediately invested 50% of the assets in the market that day. We then determined the next two investment dates and allocated 25% of the total to be invested on each of those days. The client gave us a market order for those specific dates. My team wrote the order tickets for those dates, but the tickets were not dated for reasons I will explain shortly. My service assistant kept a folder for each of the four important dates: March 15th, June 15th, September 15th and December 15th. When a predetermined date arrived, all order tickets in that folder were executed.
Assume a client has $100,000 to invest, a large portion of their current assets. They agree to invest 50% today, 25% on March 15th, and 25% on June 15th. However, during the period between today and March 15th, the market pulls back and drops 9% below the previous quarter. That means the designated funds can buy at a 9% lower price than originally paid. It is not March 15th yet, but because the market is down 9% from the previous quarter, the folder of order tickets for the next important date are executed now. It is important to note that we never took discretion and contacted clients by phone to explain the opportunity to buy in earlier at a reduced price and to obtain their authorization. If you take discretion in client accounts, you can explain this possible scenario to the client up front.
Along comes March 15th. Since we already invested the funds, we do not do anything until the next quarter’s investment date. The market continues to go up. By June 15th, the market is higher. That is alright though because the client understood in advance that 70% of the time they would pay higher prices.
On average, the market may drop 9% inter-year about once every 18 months. If the market drops 18% inter-quarter, take the next two investments, the remaining 50%, and invest them both early. Over the last decade we invested near lows of the cycle by using this model.
When an investor is nervous, the Dollar-cost Averaging model is the best way to get their money into the market. Dollar-cost averaging renders a disciplined approach and the potential to pay significant benefits by investing at or near lows of the period. Even if you do not reap the additional benefit of investing at a lower price, the client still benefits by investing over time without missing the opportunities of a market that on average is up more often than down.
With the markets in turmoil and your clients worried, what do you tell them and what is your most important next actions. This podcast will help you focus your attention on what to do now in you practice. The notes for this Podcast are here. [display_podcast]
Everyone wants to retire, even small account clients. The problem is that, too often, no process is put in place to make a small account grow into a larger account. Financial advisors must help their clients understand what it takes to achieve established goals. Everyone dreams about the future that can be accomplished. A client might require greater contributions, less spending, or more saving. Once the apt requirement is identified, a systematic means of achieving that objective needs to be implemented. If an advisor accepts an initial small account investment and does nothing else, that is a disservice to themselves as an advisor and to the clients. This podcast outlines a simple process to gather valuable information from your most valued clients.
Scheduling appointments is a business necessity. It is the energy by which a business moves forward, yet this laborious activity is often avoided. Whether you do the scheduling yourself, or delegate it to an assistant, the activity is not enjoyable. Therefore the task is often delayed and business productivity suffers. Would you like a process that guarantees every appointment is set without effort and no calls need to be made to set appointments?
This podcast gives you a process to make scheduling effortless.