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

When Talk Isn't Cheap

Your article was successfully shared with the contacts you provided.

In the early 1990s, I met a superstar insurance agent who I’ll call Percy (not his real name). Percy looked a little like Bob Denver but he had impeccable credentials: a Princeton grad with a law degree from the University of Virginia and an MBA from Stanford. After stints as an attorney and a venture capitalist, he decided the real action was in life insurance.

Percy wasn’t arrogant, but he was extremely confident in his knowledge of law, finance, and insurance. His background and experience gave him unique skills that were highly valued by high-net-worth entrepreneurs. So he decided to only work with those who had a minimum of $100 million who would generate $500,000 in commissions. This master influencer only closed two to four cases a year. But his annual income put him in the top 1% of all insurance agents in the U.S. So I asked him for the key to his success.

“You have to have big conversations with these people,” revealed Percy. “Most advisors engage wealthy clients in small conversations, at the level of a technician. The people I work with already hire dozens of technicians–if I’m seen as just another technician I’m dead on arrival because of the prospect’s conscious and, more importantly, subconscious perceptions of me.” Percy believed that “the size of your conversation determines the size of your paycheck,” your house and, ultimately, your legacy. So he set out to have “the biggest conversations with the wealthiest people possible.”

Percy’s strategy was to position himself as a peer of his clients, rather than an employee. Wealthy clients, he argues, yearn to talk with someone who understands their issues and pressures–they need someone who asks big questions and guides them into a “big conversation” in which he listens to their most deeply felt concerns.

When I asked Percy why he didn’t increase his number of clients by lowering his minimums, he said, “A lion will starve eating mice all day. Why have conversations that will attract mice when I know how to have conversations that attract elephants?”

Those words echo in my mind as I write this column. Over the past 25 years I have seen the conversations held by the entire investment industry become bigger and bigger. There are five conversations that chart where advisors come from and where they are going:

  1. Securities selection
  2. Investment manager selection
  3. Fee-based portfolio management
  4. Comprehensive wealth management
  5. Wealth and life optimization

By tracing the past we can see what types of conversations leading edge financial advisors may be having in the future.

Starting Small: Product Centered

In 1981 I got my first job in the financial services industry–as a wholesaler for a sponsor of real estate partnerships and mutual funds. I called on a lot of old-fashioned stock pickers whose favorite conversation went something like this–”Mr. Jones, XYZ Corp is currently selling for $10 a share, but our analysts predict that within six months it should be selling for $18 share. How much do you want to buy?”

The top-producing stock jockeys had all the securities and market statistics at their fingertips. They used that information to overcome objections and bully people into buying individual stocks and bonds that they said would beat the market.

Although many of their clients had extremely large securities portfolios, they hid that fact from their brokers. Since the majority of the brokers focused on small “product” details, and had no real process for managing money, they ended up with small accounts and small trades.

Under this approach, the complexity of the securities marketplace and the imponderables of the future were boiled down to a simplistic premise: We have specialized information that will make you rich if you take my advice.

In the 1980s, brokers were taught to have small conversations about individual securities. It seemed proper, based on the history of the industry, but it was soon overtaken by a much more sophisticated offering.

Bigger: Client Need Centered

During the early 1980s I also called on financial planners. I noticed that they were having “bigger conversations” with their clients than the brokers. Since they prepared a written financial plan, they saw all their clients’ assets. Most importantly, they enlarged the conversation to include not just the clients’ current situation, but their future goals. The focus was revolutionary: make financial and investment recommendations based on the unique needs of each client.

The focus of these investment conversations was not about individual securities but rather on how to pick the right mutual fund manager or managers to help clients achieve their goals. Mutual funds had many benefits for owners of individual securities, especially if they had large portfolios holding many securities through multiple brokerage accounts. The planners stressed professional management, diversification, and consolidation of the clients’ assets into a select group of mutual funds.

Most important, the documented track records of mutual funds gave the financial planners benchmarks for future performance projections. Although many of their projections proved to be overly optimistic, they laid the foundation for an entirely new approach to the investment industry: putting the client’s needs–not products–at the center of the conversation.

Not surprisingly these bigger conversations often attracted bigger portfolios including rollovers, inheritances, and other serious money.

Bigger Again: Compensation

The next evolution in advisor/client conversations started in the late 1980s and exploded throughout the 1990s: professional, fee-based portfolio management services. With a new generation of software and Internet connectivity, we could now efficiently manage the managers. These mutual fund wrap accounts (and separately managed accounts) required financial advisors to have even bigger conversations with their clients and prospects.

Now, in addition to understanding clients’ current situation and future goals, advisors needed to know about professional money management and learn new technologies. The shift to being compensated for advice and services rather than transactions led to conversations to manage clients’ expectations downwards instead of hyping them upwards.

Advisors who expanded their conversations were rewarded with larger accounts, but this time they also experienced a bonus of referrals from other professionals and a growing income for themselves.

Today: Wealth Management

Comprehensive wealth management is the current buzzword. The idea is to capture a larger share of each client’s wallet by extending your services to include banking, trusts, estate planning, business lending, mortgages, insurance, and so forth.

So the conversation surrounding these comprehensive services is far bigger than the original $10 stock talk. The advisor must enlarge the conversation to include discussions about clients’ business or professional practice, insurance coverage, and their estates. While this gets us closer to Percy’s Big Conversation, it runs the risk of becoming too complex and can overwhelm the client and the advisor.

Advisors who try to introduce this level of service are often overwhelmed by the sheer volume of time that this approach can entail.

The Future Is Now

Although the industry seems to be focusing on delivering comprehensive wealth management, a small group of financial advisors is starting to have an even bigger conversation. This is a holistic approach that attempts to integrate financial, personal, and career goals into the financial planning process. There are many different models for this approach, which is sometimes referred to as life planning.

That’s not my favorite term. It sounds restrictive–like a budget or a diet. I don’t believe it communicates benefits that will have mass appeal.

I suggest we refer to the emerging new big conversation as wealth and life optimization. The focus of the conversation is discerning ways to use all the client’s resources to optimize his quality of life. It integrates knowledge of financial planning, investment management, life coaching, business consulting, and behavioral finance. This is a quantum leap from a conversation about what stock to buy and is in a bigger league than the fine points of strategic versus tactical asset allocation.

This new approach is revolutionary because its practitioners take the conversation where no financial advisors have gone before. They ask questions that go beyond money to discover what the money is for. These conversations address what clients value and what they fear. They discover what each client wants in life. Then, like Percy, they develop and implement strategies to deploy their client’s resources to create the best quality of life. Their recommendations might involve seeing a career counselor, a travel agent, or a personal coach, along with the traditional estate planning attorney and maybe pension administrator.

Advisors offering these wealth and life optimization services guide their clients to connect with and pursue some of their most cherished dreams. By providing solutions to some of their most perplexing problems, these advisors are elevating themselves to the highest level of relationship. The advisor becomes the clients’ mentor.

The stock jockeys used information to manipulate investors so they could make commissions. This is basically a win-lose business model that is based on a belief in scarcity.

In the new wealth and life optimization model, advisors use their technical knowledge and detailed understanding of their client’s needs and wants not to manipulate them, but to help them get what they really want in life (or as close as is prudent). Our industry is evolving into a win-win way of thinking and a win-win business model that is based on a belief in abundance. That is quite a transformation!

Steve Moeller is president of American Business Visions and author of Effort-Less Marketing for Financial Advisors. Call American Business Visions at 800-678-1701, or visit


© 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.