Over the past few years, I have presented numerous case studies based on experiences with real-life advisors who are clients of the Covenant Group and Market Logics Inc. Many readers of Investment Executive have written or called to say, “Hey, that sounds like me you are talking about!”

As a consequence, I have responded to hundreds of email comments and questions on a wide variety of topics around building a better practice. Now, I would like to provide a forum for everyone to share those questions and answers. Think of it as a “blog” captured on paper.

With that in mind, I encourage you to email me your questions, stories and opinions about any aspect of practice management. I’ll select some of the most interesting and relevant, and present them here for all to see.

Let’s see if, together, we can build a community of advisors with a common interest in making their financial advisory practices as good as they can possibly be. To get us started, here are a few examples of recent exchanges with advisors:



> Client Shuns Contact.

Advisor: I accept how important it is to maintain a high level of communication with clients during this period of market uncertainty. In fact, I have tried to meet face-to-face with every one of my top clients over the past few months. Unfortunately, a number of them have told me they don’t think it is necessary to get together.

I admit that I have not done a particularly good job in the past of meeting regularly with them. I am now concerned that their reluctance to see me may be a sign of dissatisfaction. Perhaps, they are considering or have already established a relationship with someone else. What would you recommend?

Coach says: To begin with, let’s acknowledge that everyone has been bombarded with information and opinions about what is going on in the markets, whether through the media, their advisors or cocktail party conversations with friends. Some people have simply grown tired of all the noise and genuinely don’t want to hear the same things over again. That being said, when your best clients refuse to meet with you, it may well be a sign of trouble.

I definitely encourage you to be more insistent in your requests for a meetings. Here’s why: I believe you have both a moral and a fiduciary responsibility to ensure that you have the latest information with respect to your clients’ life situations, portfolios, risk profiles and objectives.

It is very likely that, as a result of the market volatility of the past few months, the assumptions upon which you made your original recommendations are no longer valid. At the very least, you must update your KYC information for compliance purposes. Not doing so could conceivably mean that you are failing to meet your fiduciary responsibilities as a professional advisor and, at some point down the road, you could find yourself liable. I refer you to Ellen Bessner’s book, Advisor at Risk, which highlights the critical importance of keeping KYC information up to date.

Try saying something like this: “John, I understand that you might feel it is not urgent to meet with me because you have no plans to make changes in your portfolio while the market remains so unsettled. However, one of my responsibilities as a professional advisor is to make sure that I have the most up-to-date information in my files for every one of my clients. Obviously, your situation has been altered since we last reviewed your portfolio. The assets are different, your objectives may have changed and it is quite possible that you don’t view investment risk in the same way.

“At the very least, I have a legal or compliance requirement to document those changes. More important, I have a moral responsibility as your advisor to ensure that you are well positioned so that when the market turns around, you will be ready to take advantage of it.

“Let’s get together next week — for your peace of mind, as well as mine.”



> Mass Mailing, No Response.

Advisor: I have done two mail drops in a very affluent neighbourhood offering a “second opinion” on portfolios in view of the current market volatility. I figured if one of the big banks is using that as a theme in its advertising, it must work. Besides, I only needed one good new client to cover my costs.

@page_break@Guess what? I spent $3,000 to create and distribute a high-quality brochure to high net-worth people and not a single reply! What went wrong?

Coach says: The “second opinion” slant is one a number of advisors are using. The factor that seems to make a difference in their success, in my opinion, has to do with the “intimacy” of the approach. Television advertisements such as you describe are designed to appeal to the general mass of viewers rather than a select few with special interests. For example, you see lots of TV ads for Mazda, but few or none for Mercedes.

In fact, research has shown that the greater the affluence of the target audience, the less likely that market segment is to be attracted by broad-based marketing messages. High net-worth people far prefer to learn about products, services and providers through more intimate activities, such as personal introductions, recommendations from friends or their own networking activities among people they know and respect.

One advisor with whom I am working has generated very good results with the “second opinion” offer. Here’s what she does.

She is systematically meeting with all of her top clients to review their portfolios and insurance programs. When she has finished the review and initiated any required revisions, she asks the client: “Do you feel better now that we have gone over your situation and made these changes?”

The majority of clients respond with something like, “Well, I’m not happy with what’s happened to my portfolio, but I do feel better knowing we are doing all we can to make the best of a bad situation.”

At that point, the advisor continues: “I am glad that we have been able to give you more confidence about the future. That was my objective today. My guess, however, is that you know a number of people who don’t have confidence in their financial picture.

“In fact, I bet you have heard some horror stories from your friends, family or business associates — whether they were do-it-yourself investors, their advisors are missing in action or they simply have been unable to get the insight they want to make intelligent decisions. Does anyone like that come to mind?”

As often as not, the client will immediately come back with a specific example: “Oh my God, that’s my friend, Mary, you are describing. Let me tell you what’s happened to her.”

After listening to Mary’s story, the advisor makes this offer: “It sounds to me like Mary could really use some help and I would be willing to review her situation with her in the same way we have just looked at yours, if you thought I could help her. I can’t promise what the outcome would be, of course, but at the very least she will get a second opinion on some things she should consider.

“Do you think I can help her? Should the three of us have lunch one day soon?”

That advisor tells me she has had clients take out their cell phones on the spot and arrange introductions. Regardless, she always tries to have the client make the introduction face-to-face, because it creates immediate credibility and eases the early awkwardness that can come in an initial meeting.

Mail drops can work. On a per- person-reached basis, they are relatively low cost, but the conversion rate is also very low. Media such as this can be useful for publicizing an event such as a seminar, but will have little or no impact if you are promoting a higher value concept such as financial planning or a “second opinion.”

Make sure both the message and the media are appropriate to the market you are addressing.



> Quick Hits.

Advisor: A quick question for you: On a scale of one to 10, how important is it for me to have a written business plan?

Coach says: A quick answer for you: 11. One page or one pound — choose the amount of detail you want — but write it down! IE



George Hartman is president & CEO of Market Logics Inc. and a senior coach and facilitator with the Covenant Group. Send questions, comments and opinions on any aspect of practice management to george@marketlogics.ca