Who: Stanton C. Selbst, SmartPros
Where: Madison Bistro, 238 Madison Avenue, New York City
When: March 17, 2009
On the Menu: Sole filet Colbert style, fried leek, and advisors becoming "want creators"
Stanton Selbst, the man in charge of financial services training at SmartPros, teaches me a lesson of sorts even before we set up our lunch meeting. He agrees to an interview only on the condition that he has time to prepare for it and understands what we are going to be talking about.
"This is what makes a professional different from an amateur," he says. "If I come out to play on weekends, how I play doesn't matter. The worst thing that can happen to me is that I'll be laughed at. But if I present myself as a professional and people laugh at what I say, it will be hard for me to get paid for what I do."
Professional athletes, even those like Tiger Woods who are head and shoulders above their competition, train every day. It is just as important for financial advisors to keep perfecting their professional skills and expertise.
Selbst offers me another free training session as we sit down to our lunch. The first thing he asks me to do is to talk about myself, and then reciprocates by describing his own background. Not just professional background, mind you. He likes to talk about his family, his wife and four grown up kids.
This kind of exchange does more than just break the ice, he explains. It is a first step toward a relationship, which after all starts with knowing things about each other. Learning about each other gradually transforms a customer into a client.
Selbst draws a triangle with three (more or less) equal sides on a notepad. Each side represents a key component of the advisor's job. At the base he puts "motivation," and labels the two sides "products" and "sales skills".
The function of training is to strengthen all three sides of the triangle. To be successful, the advisor needs to be motivated, of course, to have thorough knowledge of the products he or she sells and to be able to communicate this knowledge. If any of the three components is neglected, the whole triangle becomes weak.
Selbst notes that over the past couple of decades, there has been a shift from product orientation to relationship management. While product knowledge entails academic learning, relationship management is more of an art form. Selbst clearly likes to discuss various aspects of selling.
"Everybody has his own style," he says. Selling skills entail not only being able to gauge what style your client prefers but also having a thorough understanding how you as a seller come across. If you're a skillful salesperson, you should be able to adapt your own style to the way the client is comfortable with. SmartPros calls it the "Sell as the Client Buys" approach.
Selbst also stresses that the best source of new business is existing accounts, not prospects or even referrals from clients.
When Relationships Sour...
Relationships with the client become all the more important in a bear market. Selbst encourages advisors not to disappear -- even though he understands that many advisors, especially those with a close relationship with their clients, can feel just as awful as the clients themselves do about huge financial losses in the market. On the contrary, advisors need to step up communications with their clients. Without being annoying, of course, they should continue to make calls, to explain the situation in the market clearly and honestly and, especially, to ask questions.
"Financial advisors are like me," laughs Selbst. "We all love to talk. But it may now be the time to listen."
Nevertheless, there can be no beating around the bush. Markets suffered severe losses, people are extremely angry and distraught -- bereft is the word Selbst uses, with some justification -- and some relationships simply can't be salvaged. On CNBC and Bloomberg, financial news is often interspersed with commercials advising investors to sue and offering litigation counsel.
In response to such concerns, Selbst runs a one-day workshop on protecting advisors' practices. It addresses typical risk issues for advisors and provides solutions for avoiding or resolving conflicts with clients. Selbst recommends that advisors be aware of potential problems and have a contingency plan -- namely, what they do and where they go if a problem arises.
Looking at the longer term, however, Selbst believes that the implicit "contract" between financial advisors and investors may have been flawed, in effect obligating advisors to make money for their clients and taking too little account of realities of investment.
Back to Products?
The industry has long stressed relationship management, with "life coach" becoming an industry buzzword. But both clients and advisors have been rattled by the product side of Selbst's triangle. What has emerged during the current bear market is that on the downside investors' tolerance for risk is invariably zero.
The attitude to investing may change as a result. The emphasis on relationship management may give way to risk management. "It has been said that risk management will change the industry," suggests Selbst.
Back when Selbst was a working advisor, all he had to offer to clients were stocks and mutual funds. Now, an array of diverse products -- and not necessarily the complicated financial engineering concoctions which have gone out of favor -- can be used to mitigate market declines.
An emphasis on products will go hand in hand with another change in the industry that Selbst envisions. "Up until now everybody wanted everything," he explains. "Selling was not very difficult because there was so much demand. Now, as an advisor, you don't only have to convince people that they should do business with you and your company, but that they need and want your product."
In this new environment, Selbst concludes, advisors will have to be "want creators."
Up Years, Down Years
Part of the pleasure of talking to people like Selbst, who have a lot of experience in the market, is their longer-term perspective, a key component of wisdom. Selbst started in the financial services industry at the old Bache & Co. Bache was acquired by Prudential in the early 1980s, at the start of the current wave of disappearances which has consumed most of the once-illustrious Wall Street brands. Prudential Securities was eventually bought by Wachovia, itself now part of Wells Fargo.
"I've seen plenty of bear markets, admits Selbst. "Many more than I expected when I first started." These included the interminable 1970s slump.
Selbst recalls visiting the famed Fidelity Chart Room, where the performance of the stock market is tracked going back to the early 19th century. "What you see is a steady pattern of one or two bear years followed by a few bull years. Except on the stock market, the years don't follow our calendar. Some can last a few months while others stretch longer than the calendar year."
Don't make the mistake of thinking that bear years are also down years in the industry. Firms are recruiting, and advisors are taking this opportunity to look for change. It is the best time to pick up new clients and lay solid foundations for growing the business in the future. Moreover, a bear market is the ultimate test of relationships with existing clients. If they survive the hard times, there is no place for them to go but up when an upturn inevitably comes.
PHOTO BY Leeza Semionova
Alexei Bayer runs KAFAN FX Information Services, an economic consulting firm in New York; reach him at firstname.lastname@example.org. His monthly "Global Economy" column in Research has received an excellence award from the New York State Society of Certified Public Accountants for the past six years, 2004-2009.