The Annual Review: A Booster For Your Business

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In any given year, as many as a third of us will experience a life change that impacts our financial situation. Getting a new job or a promotion, having a child, buying a house, moving, getting married, getting a divorce, or retiring can all create new financial needs.

These needs often translate into the purchase of life insurance, the rollover of a 401(k) plan, or the investment of new assets in mutual funds, annuities, and other financial instruments. More importantly, most people have these needs–including many of your existing clients.

Because your clients financial needs and circumstances change as the years pass, the only way to keep up is to review their financial situations each year. And yet, fewer than one in 10 financial planners schedule annual reviews with their clients. Most planners fail to capitalize on what is perhaps their best opportunity for new sales.

Conducting annual reviews is widely considered a benchmark for providing good customer service. But there are other upsides for your practice. Not only can the review process help you uncover new financial needs that your clients may have, it can help cement those relationships. And financial professionals who regularly review their clients financial plans and status say at least a third of these meetings result in referrals.

A 2001 survey conducted by my firm, Woodbury Financial Services, indicated that financial professionals who implemented management practices such as annual reviews and focusing on clients goals enjoyed significant increases in production. Their sales of variable universal life insurance jumped 55% and their sales of variable annuities rose 27%.

So how can you make annual reviews work for you and your clients? How can you get your clients to actually sit down with you without kidnapping them or offering a vacation sweepstakes?

One approach that has been successful for many practitioners is the “bandwagon” appeal or the “my-clients-made-me-do-it” pitch. You can schedule annual reviews with your clients throughout the year by sending letters inviting them to a meeting in your office. In the letter, explain that more of your clients each year ask you for help with financial issues such as planning for retirement, saving for college and transferring wealth. You have, therefore, decided to offer all of your clients an annual review of their financial planning status and will call them shortly to set up a meeting. Of course, if that doesnt work, you can always offer free food.

Dont forget to follow up your letter with a phone call. Financial professionals who use this technique report that their response rates increase from 7% to more than 60%. Your assistant can easily make these calls, leaving you more time to meet with clients and assess their financial needs during the reviews themselves.

Before sending the letters, schedule time with your assistant to go over your clients files. Teach your assistant to generate time-value-of-money calculations to better track the clients financial progress toward their goals.

Plan to invite all of your clients to an annual review, but start with your top or “A List” clients because many of them will actually want to meet with your more often than once a year. Mail annual review letters 10 weeks each quarter or to 1/40th of your clients each week. Your assistant can print and stuff 100 letters at a time so they can simply be dropped in the mail during most weeks.

Once your client is seated in your office, the meeting should start with the basics and build from there. First, ask about any significant changes in your clients financial situation. Has he or she changed jobs recently? Any births or adoptions of children to report? Has one or more children entered college? Is he or she contemplating an early retirement?

How your clients answer these questions can uncover new financial needs. Changing employers, for instance, may necessitate the rollover of a 401(k) plan to another type of retirement investment. Your client may now need additional life or disability coverage. A big pay raise may trigger a need to put away additional savings for retirement.

After catching up with your client, review the overall progress of his or her financial goals. If your client is investing for retirement, is he or she on target? Is it time to reallocate the assets to a more conservative asset mix? How far along is your client toward reaching other financial goals such as saving for college, buying a beach house or starting a business?

No checkup is complete without a review of each financial product your client owns. Compare and contrast the purpose of owning each product with your clients current financial goals and risk tolerance. Review the performance of each product, any tax ramifications and the technical aspects that may be relevant to your clients continually evolving financial situation.

A good example of how a clients life situation may dictate changes to his or her financial product mix is a decision to retire. This client may be ready to stop accumulating assets and start generating income from them.

External factors also affect any review you conduct. Market conditions may create unanticipated financial or product issues for your clients. This is especially critical if your client is ready to make a major life transition such as retiring or paying for a childs education. Some of your clients may simply need your reassurance to keep them on track toward their long-term financial goals in the face of market volatility.

Any concerns your client has about his or her financial picture should be addressed at this point. If changes need to be made, discuss your clients options and agree on what steps should be taken to address them. In some instances, you may need to help your clients find the cash they need to reach their financial goals.

Its at this point that many clients, after youve spent time focusing on their financial needs and objectives, are ready to provide you with referrals. After all, your expertise has helped them and they may know others who can benefit from your skills. Stress that you are not asking to be introduced to others who necessarily want to use your services. Rather, you merely want to expand the network of people who know about your services.

Ask your clients for “introductions” as a personal favor and encourage them to contact the referral candidate to first ask permission for you to send a short letter asking for a brief meeting. Then reassure your clients that you are simply looking for an introduction and will in no way pressure the prospect to do business with you.

The more annual reviews you conduct, the more both you and your clients will get out of them. Youll find that these meetings will become an integral part of your financial practice and will help you take your business to the next level.

, M.A., Ph.D, is director of practice development for Woodbury Financial Services in Woodbury, Minn. You can e-mail him at patrick.leone

@woodburyfinancial.com.


Reproduced from National Underwriter Life & Health/Financial Services Edition, November 11, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.