Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Life Health > Life Insurance

The Truth Behind Fairy Tales

Your article was successfully shared with the contacts you provided.

Most of us remember the story of the three bears. But did you know that baby bear had two siblings? Yes, there were two more bears born after the story was written. The three siblings were named Frugal Bear, Sensible Bear, and Lavish Bear. As their names imply, their personalities were quite different, though they all looked quite alike and had the same parents. If you were their advisor and were trying to gain each bear’s trust, you’d have to be cognizant of their unique personalities, and modify your approach to each one. But let’s get back to the bears. Here’s the rest of the story.

Frugal Bear was 52, married with two cubs, owned a trucking company, and lived modestly in a middle class neighborhood. He had an annual income of $125,000 and a net worth of about $3 million. He had been a goal-oriented saver his whole life, something he learned from his father, Papa Bear, who lived a simple, balanced lifestyle.

Sensible Bear was 49, married to a wonderful sow, and had three cubs. He was a middle manager with a large corporation and had an annual income of $100,000. His net worth was about $2 million and he lived in a middle-class neighborhood. He received his sensible nature from his mother, who was very pragmatic and self-disciplined.

Lavish Bear was a 47-year-old physician, married with three cubs of her own, and lived in an upper-class neighborhood. She got a late start in her career because she was in medical school for so long. She also felt the pressure to “look the part” of a successful physician and because her annual income was $250,000, she was always able to drive a newer model foreign luxury automobile. Her family enjoyed numerous outings to the country club where they were members, and took several trips each year to exotic destinations. Her net worth was about $1 million. No one knows for sure where she got her lavish tendencies. Perhaps it’s because she was jealous of her older siblings and was determined to outdo them.

They each had their goals. Frugal expected to retire at 65 and live on $90,000 annually. Sensible wanted to retire at 62 with $80,000 annually. Lavish planned to retire somewhere around 60 with an annual income of $225,000.

Frugal and Sensible both had written financial plans and updated them on a regular basis. They believed that having good advisors who provide good advice would more than pay for itself. Lavish, on the other hand, was so busy with her career that she hadn’t taken the time to have a plan drafted. Instead, she took cues from golf buddies and invested in the latest hot stock and attempted to time the market. Lavish did not see value in taking time to invest in a financial plan or to consider the long-term time horizon.

When the time came to retire, Frugal was able to retire early at age 63 instead of 65 and live on $90,000 a year, which was just what he planned to have. Sensible retired on schedule, at age 62 with $90,000 annually, $10,000 more than he planned for. Lavish had to work an additional 9 years until she was 69 and then retired on $150,000 per year, which was $75,000 less than she expected. Needless to say, Lavish had to make some major changes to her lifestyle.

This story involved three cubs of the same parents, who grew up at the same time in the same forest, and yet were completely different. Just as with bears, these differences appear every day in our clients and because each client is different, each requires a different approach.

How to Get There

All advisors want clients who will view them as their primary source of advice. Before they will look at us in that way, however, the clients must learn to trust us. How do you gain this trust? While in some cases it could happen quickly and in others it could take some time, the outcome largely depends on meeting two criteria. First, you have to be the right kind of person for that client, and second, the client must have the capacity to trust. To figure out if you are the right kind of person, ask yourself this question: If you had two products (product A and B) that would each meet the need of a client and one pays a higher commission, but has higher internal fees, would you hesitate over your choice? Which would you buy if you were the client? If you are strictly a salesperson, only interested in the amount of money you can make on the client, you would likely choose the product with the higher commission, even if the internal fees to the client were higher. You may make sales, but what kind of relationship are you building? If the client has any intuitive skills, they will eventually realize your priorities are not their priorities, and you could be finished before you begin. I have known advisors like this who made a lot of money “selling” financial products, but eventually the truth came home to roost. Moreover, in the present environment of increased litigation, it is especially important to be ethical and act with integrity. In short, you must be the right kind of person.

Then there is the second criterion for gaining the client’s trust–the client has to possess the capacity to do so. Some people, because of their personalities or past experiences, have more difficultly trusting others. These clients typically require more time and effort, but if you can gain their trust they can also be some of your best clients. Be careful, however, because if you move forward too quickly, they may back away emotionally.

Our goal–assuming we’re the right kind of person–is to motivate the client to want to work with us and not feel like we’re chasing them. Here are some real-world examples from my practice that illustrate this.

Lavish Bear Susan

An associate of mine introduced me to Susan and John. Susan was like the youngest bear, Lavish. A successful physician, she is married and earns over $500,000 per year. The couple live in an upper-class neighborhood in a beautiful home valued at well over $1 million. She and John came to see me, however, because they were consistently running out of money each month. They were going deeper and deeper into debt and said they desperately needed help.

I knew this relationship was not going to result in much revenue at first, but over the long term it had the potential to be very profitable. I suspected there weren’t many advisors who would be willing to work with a client who had not yet amassed a large pool of assets. Susan validated my suspicions. I began our first meeting by asking about their parents. Were they wealthy, poor, or somewhere in the middle, I asked? How did they handle money? Which parent made the money decisions?

I then asked Susan and John to tell me which of them was more frugal. I told Susan I understood the pressure she must feel to “look the part” of a successful physician. In short, I tried to uncover the origin of their problem. Although this couple was motivated to receive help, this “discovery” phase demonstrated that I was listening and interested in helping them. We spent about 15 minutes discussing their feelings about money and how those feelings might be influencing their behavior. The next 30-45 minutes was spent gathering some initial financial data, then they left. About a week later, the associate who made the original referral told me he had spoken to Susan and John and that they said they really liked me. They appreciated the fact that I didn’t judge them, he reported. Most interesting of all were their comments on how I talked about the psychology of money. I didn’t think I had done such a great job on the topic, but the couple thought differently. Moreover, the colleague told me that Susan had been telling all her medical partners how much she liked her new planner.

That was when I realized two important points. First, I knew I had a client for life as long as I didn’t do anything to jeopardize the relationship. Second, I became more aware of every individual’s need to feel accepted and understood. Everyone is longing for an advisor who will take time to listen. This experience reminded me of the Aesop fable where the mouse takes the thorn out of the lion’s foot and the lion becomes a friend for life. This couple is now on the road out of debt and has changed the way they view and handle money.

Frugal Bear Bill

Somewhat like Frugal Bear, another recent client of mine–Bill–was a partner in a business. He is a detail-oriented individual who had passed the Series 7 exam. He had also taken the five required courses for the CFP program but decided not to sit for the comprehensive exam as his life was taking a new direction. When the business was sold, he received several million dollars as his share. He came to me with clearly written goals, which included moving out of state and changing careers. He had outlined how much he expected to pay in education costs for himself, his wife, and their three children. He summarized how much salary he expected to earn and when. He even had it planned down to the expected outlay for the kids’ summer camps, new cars, and weddings.

Everything was neatly spelled out and I was charged with the responsibility of figuring out if his plans were possible. His wife was understandably a little nervous about Bill’s proposed career change. During the process, I had called him numerous times to make absolutely sure I understood each of his goals. I knew, being the detail-oriented person he was, he would only be comfortable with the results if he were sure each “t” was crossed and every “i” was dotted. Needless to say, when it came time to present their plan, I knew their situation extremely well. After the presentation, he paid me the highest compliment any advisor could expect to receive. He began by saying how he liked the fact that I had asked questions no other planner had asked to make sure I understood all his plans. He then agreed to give us all his business. This happened in part because I demonstrated an ability to pay attention to the details.

One of our most fundamental human needs is to feel appreciated and accepted. Part of our job as advisors is to “validate” new and existing clients. Be a good listener. Connect with them before you begin to gather the quantitative data. Anyone can profile a client on her existing assets, income history, and debts. The key to unlocking the client relationship is to uncover that client’s motivations, dreams, and fears.

Reading the Client Tea Leaves

So how do you tailor your approach? How do you know which approach to use with a particular client? Here are a few tips that I’ve found helpful in my practice. One of the first observations you can make is whether they talk a lot or are quiet, whether they are outgoing or reserved.

A quiet, more reserved client is telling us a couple things. He is either analytical, suspicious, or both. If he’s analytical, he’s probably processing what you have just said, so don’t rush him. Give him space and let him think. Remember, an analytical person needs to trust in your process before he will trust in you. He needs to be assured that you will be as accurate and careful with the details as he would be.

The suspicious person may be suspicious of you, your personality type, or of people in general. The reason for that suspicion may be buried in her past, and if you can gently uncover it, you’ll be provided with great insight into her predispositions. Once you uncover the reason, you can validate it and move the relationship forward. Ask open-ended questions and get her talking. With the analytical and suspicious personalities, remember not to push. Gaining her trust may take a little longer.

A talkative client is usually a quicker thinker. She may be demonstrative and controlling or she may be very friendly and just like to talk. The demonstrative and controlling person is more impatient and often has a strong need to feel important. You should let her know you see her as important and then stay on point. Don’t linger, or use too many words, and keep the details to a minimum. Assure her you can and will provide results. The very friendly client will tell you stories about his life, his job, his pets, and what he had for breakfast. He is more difficult to keep on track. Listen patiently for a while and look for areas where you can relate to him. Be aware of opportunities to transition–much as a newscaster does–back to the main topic.

Whenever anyone is faced with a decision, especially when it involves an area of unfamiliarity, he may attempt to gather the facts before he makes the decision, but ultimately he will decide with the emotional side of his brain. The difference is that an analytical person will gather more facts, and that requires more time for the decision-making process.

By the way, in case you’re wondering about Goldilocks, she was so devastated when the bears returned home that she moved to New York and became a showgirl at the Copacabana. She remains single to this day.

Mike Patton, a CFP and AEP (accredited estate planner), is a financial planner with JP Morgan Private Client Services in Baton Rouge, Louisiana. He specializes in retirement and investment planning and wealth transfer strategies, with an emphasis on probability analysis using Monte Carlo simulation. He can be reached at [email protected].


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.