From the January 2009 issue of Research Magazine • Subscribe!

January 1, 2009

10 Tips to Winning in Tough Times

Clients have never been more jaded, or advisors more fatigued. And no wonder. As advisor coach Matt Oechsli, who heads the Oechsli Institute in Greensboro, N.C., puts it: "Right now, we're in a Category Five financial tsunami. The trust factor the affluent have with Wall Street has been shattered, and it's unlikely to be rebuilt to the level we've known it in our lifetime. People are spooked. People are scared. And affluent clients, who are usually pretty much on top of these things, are beside themselves."

Yet a new Oechsli Institute "data point" suggests that only 13.4 percent of advisors have increased their personal "face time" with clients. And that's very bad news indeed when you consider this sobering statistic: Following the 2002-2003 market decline, according to Spectrem Group, it took up to four years before investors were happy with their advisors again.

"There's a huge lag between market recovery and relationship recovery. Research shows clients wanted to hear from their advisors much more often and it took many years before they were comfortable again," notes George H. Walper Jr., president of the Chicago-based research and consulting firm. "If the market rebounds over the next six months, advisors can't just take a deep breath and say it's over with."

All but forgotten in this mess: Difficult markets are the best time to win new assets. Why? Investors are starving for good advice and a compelling value proposition that combines solutions with high-touch communication.

When the dust finally settles, John Bowen, CEO of CEG Worldwide in Northern California, predicts the largest group ever of losers and winners as the advisory market shakes out.

"It's clearer than ever before that it's about the relationship," he says. For the most part, investments have been commoditized -- and the only asset class that's up is cash. "There's no place to hide," he adds. "It takes being proactive, and the opportunity to win hasn't been better." Already, Bowen has observed some sizable results. One advisor he knows, for example, worked his top 20 clients hard and brought in millions of dollars in new assets in 30 days. Another has grown his business by over 50 percent. For that matter, staying even in a declining market like this one is no mean feat.

"What a lot of clients are saying is that they are extremely frustrated and they don't trust their advisors," Bowen says. "Frankly, what advisors do over the next year on being proactive will define the rest of their careers."

That's tough talk -- with huge consequences.

Here are 10 tips to help put your practice in the win column:

1. Communicate. It's such a basic, but most advisors fail at it on a fundamental level. Consider this: A recent Spectrem Group survey shows that failure to return phone calls is the most common reason for high-net-worth clients to part with their advisors.

Still, significant numbers of advisors have gone into a duck and cover mode. "They're doing it for very human reasons: The news is miserable. People are emotionally upset because they've had so many losses and some actually blame their advisors. To put yourself in front of your clients in an environment like this is to open yourself up to being vulnerable and open to people who are really stressed out and negative. To say the least, it takes a lot out of you," says Michael E. Kitces, director of financial planning for Pinnacle Advisory Group in Columbia, Md.

But just a little human outreach goes a long way.

As Dennis Gallant, president of Sherborn, Mass.-based Gallant Distribution Consulting, notes: "I know one advisor whose client called and said 'I know you're busy. I know you told me not to worry. I just need you to tell me one more time.' The client just wanted reassurance and the advisor calmed him down. All of that is about communication. If you're not communicating with your clients, you're going to lose money. This is going to be a huge weeding-out period."

2. Set up relationship reviews. Joe Lukacs, president of International Performance Group, a financial advisor coaching company in Melbourne, Fla., suggests re-profiling your top clients and asking such questions as: What is most important to you about our relationship? Are we meeting your requirements? Is there anything else we can do to enhance the communication between us? What is most important to you with regard to your money and investments? What are your concerns about your portfolio?

"The client you're working with today is not the same client they were pre-October. We're at a seminal moment. Things won't go back. There isn't a normal anymore," says Lukacs. "I'm advising all of my [advisor] clients to re-profile -- and they're finding shifts in what's important to clients in terms of risk tolerance and what they want out of their relationship with their advisor. This has to be formalized. You can't make assumptions."

3. Go after all of a client's assets. There is no better time than in a fractured environment like this one to press this key point. Set up an appointment and pursue this tack: 'I can't be a full solution provider unless I have all of your assets.'

As Gallant notes: "This is a terrific opportunity to talk to clients you have partial relationships with. The clear message here is: Until I get all of it, I can't provide any solutions. I can't protect on the downside or manage risk if I only have a slice of their net worth."

4. Focus on referral marketing. In a disjointed market, nothing carries more weight than a referral from a trusted source. "Right now, this is probably the most critical thing an advisor can do," says Matt McGinness, principal of Best Practice Research in San Diego. Hand out business cards and brochures to your clients and centers of influence, asking them for referrals. "Put the things in place for your clients to talk about you and your firm. Create the mechanics."

And here's a heads-up from the Oechsli Institute: While 83 percent of affluent clients have a negative reaction to being asked for a referral, 79 percent say that, if asked, they would gladly introduce their advisor to someone "specific" -- such as their sister, Mary, or accountant, Joe.

5. Craft your story. How easy have you made it for your clients to talk about you and your firm? For an analogy, McGinness points to the fictional Tom Sawyer. "Everyone remembers how he got the kids to whitewash his fence, but how did he do it? He told a whopper of a story about how much fun it is to paint," he says. "If you want your clients to do that difficult job for you, you've got to make it easy for them to talk about you."

Think of it as a refined elevator speech: Explain in a way that clients can understand what it is you do, who you do it for, and how you help your clients achieve their goals. "A lot of advisors don't see value in something like this, but it's extremely important," McGinness adds.

6. Maximize your reach. Many advisors today are rushing from call to call, and are failing to take disciplined steps to manage the circumstances. One solution is to take advantage of conference calls and webinars as a way to reach out to your clients and their centers of influence. It's a methodology that speaks to both client care and referrals.

"You need to get through to all of your clients in an organized fashion. These are accessible and they're affordable," observes Stephanie Bogan, president of Redlands, Calif.-based Quantuvis Consulting. "It's the slingshot effect. If I flick a pebble, it will go a certain distance. Take the same pebble and put it in a slingshot: What happens when I let it go? The trajectory is far greater."

7. Develop client loyalty. Studies show that there are multiple loyalty factors but the No. 1 statistical criteria for strengthening loyalty is solving a problem and communicating the resolution clearly to your client, according to Oechsli.

"From our perspective, we know affluent clients are not leaving their advisors because of performance, unless they've been totally blown up. They're leaving because of a lack of communication and lack of attention," he says. "Everywhere clients look, they see a leadership void. This is your time to shine. Your actions over the next 12 months will define your business over the next 10 years."

8. Reassess your business model. Take a hard, honest look at your business model and your own state of mind. What's working? What's not?

"What advisors are doing now who are getting it, first and foremost, is they are taking a hard look at their current business and making any necessary changes. If they haven't used financial organizers in the past, they are now. If they haven't been showing the love, they're doing it now," says Oechsli.

Also, think outside the box. What other things can you do or offer to demonstrate added value? As Bill Blase, president of New York-based W.T. Blase & Associates, puts it: "It could be as simple as a conference call where people can call in and participate. It will take some time, some preparation and there are some expenses associated with anything. But what will people remember when they get through this crisis? The guy who took the extra step."

9. Demonstrate leadership. Don't let the pundits on TV become your clients' de facto advisor. It's important that you represent the voice of reassurance and reason -- not them.

Gallant, for example, knows an advisor who in the peak of the panic sent his first e-mail blast to clients in spite of the fact that he had always prided himself on individual communication. His message? "We want to talk to each of you. We've put together a plan. Turn your TV off. We've got this under control." Translation: leadership.

10. Expand your emotional bandwidth. No one knows how long the roiling markets will last so it is extremely important to guard against becoming emotionally bankrupt and mentally fatigued.

"Clients and prospects right now have a lot of fears -- fear of change, fear of the markets -- and the only way you can connect with that person is to have a deep emotional conversation. If you don't have that bandwidth, you can't be effective. That's the biggest threat we have right now as an industry," according to Lukacs. "We always think we deal with inanimate things: stocks, bonds, mutual funds. We don't always realize how much of an emotional business this is."

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Down Markets, Rising Assets

o Since August, advisor Roman Batschynsky has picked up over a dozen new clients and $10 million in assets, not exactly loose change. In a series of personal letters and phone calls during the market crisis, the president and founder of Oakwood Financial Network in Troy, Mich., has contacted each of his 250 clients, asking them to come in for a review. "You need to see them in the face. They're scared and quite frankly they have every right to be worried," the CFP said about his clients, most of whom are 50-plus. "After the review, knowing what they have in today's dollars and what they need to live on, we're adjusting if necessary." Meanwhile, Batschynsky, who has $300 million in assets under management, has received a number of referrals, some from investors who are seeking an advisor for the first time. "Calling an 800 number may have worked in the past," he says. "It's not working this time."

o In mid-October, just after the Dow had tanked 1,000 points in one day, Phil Lubinski, head of First Financial Strategies in Denver, hosted a Q&A for his clients. "One hundred and thirty-five people showed up for cookies and coffee," says the CFP, who specializes in an income-for-life strategy. "I told them it usually takes a steak dinner to get this many of you to show up. Obviously, you're interested in what's going on." After explaining that only 25 percent of their funds were invested in the market and that 75 percent of their holdings were actually making money, Lubinski was able to get them "unfocused" on the piece that wasn't doing well. "For some clients this was the first turbulent ride they've been on," adds Lubinski, who has tagged himself a "financial pilot" to his 250 clients. "After 31 years in the business, I've flown these airways before and feel confident they will reach their destination, as long as they don't jump off the plane or try to fly it themselves. Additionally, I'm on the flight with them. I own the same things they do. This gives them great comfort." Since the fall, Lubinski has lost one client and gained five.

o Even though the market was down significantly, Whitnell & Co. of Oak Brook, Ill., brought in more new clients this past September, October and November than in all of 2007. "A lot of our wealthy clients don't have all their money with us. This is the opportunity to prove we do add value," explains Whitnell President and COO Bill Thonn. "It's a subtle thing, but we've had people say this is the fifth time I've talked to you this month and I haven't talked to my other advisors more than once." With 400 clients and more than $695 million in assets under management, Thonn says he has worked very hard at client communication and reinforcing the fact that the firm has a very clear plan and strategy in place for its clients, mostly closely held business and corporate executives. "A big part is calling up and saying: 'This is how our strategy was designed to deal with this.' Basically, it's reinforcing the fact that we're getting up every morning thinking about what's going on in their account," adds Thonn. "The next five years are going to be a real game changer. We have a saying in our company that you never want to confuse intelligence with a bull market. We find we bring in more new clients in bad markets because people place higher value on advice."

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Freelance writer Ellen Uzelac is based in Chestertown, Md.; the former West Coast bureau chief and national correspondent for The Baltimore Sun, can be reached at ellenuzelac@msn.com.

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