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Financial Planning > Charitable Giving

Avoiding the Spiral

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Many financial professionals are giving away their time, energy, and expertise for free in the form of unpaid sales presentations and elaborate financial plans with the hope of selling product on the back end. If they do make a sale, it’s barely enough commission to pay their overhead. Add in a few years of performance losses and the result is disillusionment and burnout. I’ve met countless financial professionals caught in this paradigm, many of whom got into this business for entrepreneurial freedom and control over their own time. Now, they’re feeling totally trapped in a vicious downward spiral of more work and less income.

The bad news is that the problems are systemic. The factors that create this downward spiral are part of the air that we breathe in the financial industry. They are the invisible by-products of otherwise acceptable and well-intentioned business practices and the evolution of technology and market-growth. What are the signs that you are caught in the spiral?

Problem 1: Free Consulting, which is sharing your hard-earned wisdom without getting paid, is nothing more than a marketing ploy to sell more products–and easily recognized as such by prospects.

Problem 2: Commission trap is the need to find more clients to whom you can sell more products in order to maintain your past business and lifestyle.

Problem 3: Overhead is the ever-increasing expense necessary to simply stay at the same level of business you’ve been doing. It acts like inflation eating away at your profit margin.

Problem 4: Performance losses happen when your clients lose money in an investment you sold them. The losses may occur as a result of normal market fluctuations, but you are the one who will suffer the consequences.

Problem 5: Commoditization is when your services and knowledge become merely average and available at every firm. With no discernible added benefit, it becomes a competition of price.

Problem 6: Overload occurs when you’re working harder than ever, you’re earning less, and there’s no light at the end of the tunnel.

Almost everyone in the financial services business finds themselves in the grip of these problems, but they are so caught up in the spiral, they can’t extract themselves long enough to even talk about it.

Acknowledging the problems is the first step. Talking about them invites new approaches and even better ways to serve your clients.

Here are three specific tactics to help break the vicious spiral.

Escape Tactic 1: Multiply Your Income

At issue here is how financial professionals have traditionally been paid–by selling products. It follows then, that most believe that in order to make more, they must sell more. The irony is that the way to actually make more is to sell to fewer clients. That is, instead of earning commissions from product sales alone, charge fees. Earning a perpetual and recurring income stream completely free from the need to sell gives you more time to meet with clients and prospects, and helps establish and solidify relationships.

Complete the income multiplier exercise below and discover what charging fees could mean for you. Fill in the numbers based on your top 30 clients.

The first step to multiplying your income is to eliminate as many back-office tasks as possible, such as creating reports, communicating or keeping up with your legal and compliance department, as well as developing marketing materials. All these tasks can be outsourced to a Turnkey Asset Management Program (TAMP).

Escape Tactic 2: Shift Your Role

Financial professionals charging a fee often mistakenly believe their role is managing money. In fact, there are simple systems for tracking money and filling out paperwork–what you really deserve to be paid for is managing your clients’ emotions. The industry tends to assume that what investors want is a way to beat the market and get rich quick. While that might sometimes be true, at the top of investors’ needs is peace of mind about their money– and no product can offer that.

To break the spiral, you must consciously shift your role to becoming a coach who helps clients attain peace of mind about their financial future. Once your clients understand how valuable this role is, they are more than willing to pay you to do it.

There are three traditional roles for the financial professional:

Implementor–a person who offers a wide range of investment products and recommendations.

Advisor–someone who is given the power to give advice or an opinion, prepare written plans, assist with tax and retirement issues, and manage risk.

Coach–a person who instructs, trains and expands others’ capacity to take effective action, manages client emotions and behavior, and provides a system of discipline for reaching lifelong goals.

Each of these roles is critically important and occurs mostly in an evolutionary process. The implementor role is the only way your clients end up owning your investment products. The advisor role elevates your value in the clients’ mind; while the coach role occurs when you’ve established mutual trust and a meaningful relationship to stand the test of time.

Shifting your role means reversing the evolutionary process. Instead of initiating the client contact with product sales, first forge a coaching relationship. Only after the coaching role has been established does the relationship move into data analysis, financial planning, and sale of products.

How does a coach interact with a client? A coach focuses on creating a meaningful experience for clients. To do this requires listening carefully for verbal clues about the client’s needs and financial shortfalls before moving on to offering any product or solution. A coach leads investors through a process that helps clients:

o Discover their true purpose for money so you can determine what purpose (or value) underlies their decisions about money.

o Defeat their money demons by finding out what deeply rooted negative beliefs stop them from having peace of mind about money.

o Focus on their future by defining what goals are important.

o Choose an investment philosophy that will provide a stable foundation on which to base future investment decisions.

o Understand the dimensions of risk and return, i.e., how risk is related to achieving returns and finding the investor’s risk tolerance level.

o Examine their expectations and establish realistic expectations in line with the investing results they want to achieve.

Coaching is an experiential process, not a quick fix, that builds trust so investors feel secure moving forward. The client trusts that the financial professional has his or her best interest at heart and understands that the method is designed to help the client achieve lifelong dreams, not merely earn a certain rate of return.

Your consultation is no longer a “giveaway,” but a necessary confidence step prior to the process of signing paperwork, gathering money, and product selection.

Escape Tactic 3: Attract the Affluent

A common complaint in the industry is not having enough high-net-worth clients and prospects. The problem is twofold: The complex financial needs of today’s affluent demand something more than the average commodity and high-net-worth clients want peace of mind.

Financial professionals have long believed that the best way to get new clients is through referrals. But referrals pale in comparison to introductions. An introduction happens when your client physically introduces you to another person who wants the same experience your client is getting, rather than giving you the phone number of someone who might use your services.

To avoid the spiral, provide a meaningful investing experience that delivers peace of mind. Clients will seek you out.

Mark Matson is president and CEO of Abundance Technologies, a company based in Cincinnati that teaches financial professionals how to coach investors. He can be reached at [email protected].


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