MDRT Speaker Tells How to Add 'Alpha' to Your Client Relationships

How can an advisor add value to client engagements, foster deeper client relationships that lead to greater profits and generate more referrals and opportunities for cross-selling? 

Sally Munford, an advisor with i*financial, a San Antonio, Tex.-based planning firm, offered answers to these questions, and many more, during a Wednesday focus session of the Million Dollar Round Table, held in Anaheim, Calif., June 9-13.

Munford said that essential to client attention is scheduling an annual review, regardless of whether changes need to be made. This is a client entitlement and should be structured around a “Client Bill of Rights” that ensures a client-based focus and complete integrity. 

As part of the annual review, Munford said all clients fill out a risk profile, which not only assesses their attitudes regarding risk and reward, but also their capacity to take risk because of such issues as positive net worth, adequate life insurance, or positive cash flow and an acceptable level of liquid savings. 

“After this assessment, I create an investment policy statement for all clients that reflects how they expect their investments to be managed going forward, as well as their time frame for needing the assets,” said Munford. “This document is a valuable tool for avoiding misunderstandings.”

Munford also pointed to the importance of taking detailed notes during such meetings and transcribing them afterward. These details, often very specific, include children’s school activities, their hobbies, and their travel plans. 

In this way, according to Munford, clients feel they truly are being heard when they hear their personal data fed back during subsequent meetings. It also puts everyone on the same page with regard to the facts and serves as reminders of items not fully completed in the prior year. 

Munford then said that the next topic she covers is the fleshing out the clients’ goals, be they are as simple as doing home repairs or as complex as starting a new business. Such dialoguing permits understanding client attitudes and convictions driving their finances. 

Along these lines Munford described having just started a new icon-based technique for helping clients visualize their progress toward financial soundness. These icons represent the following areas: debt service as a percentage of income, savings rate, accumulated retirement assets, insurance coverage, estate planning documents, articulated goals, college savings, and business planning. 

“All clients receive a rating in these areas based on a soundness key,” said Munford. “The number of icons next to each topic signifies progress made toward the optimum level. For example, Stage 5 represents no debt or 100% funding of college for children. Many clients thus understand their financial footing as never before.” 

Munford said that before starting an in-depth discussion of client accounts, she reviews her company’s “Guidelines for Working Together.” She said that many clients have the one-sided perspective that all responsibility for growing and maintaining the client/advisor relationship rests with the latter. 

Yet, there are client responsibilities that include providing relevant financial information, changes to their financial situation, establishing financial goals, and, in the final analysis, trusting the advisor’s expertise to guide them. 

Next in the review is a detailed analysis of client accounts. Munford said she segues into a full discussion of client accounts with a brief commentary on the financial markets and their uncertainty, and a focus on those things that can be controlled as opposed to those that can’t. In this approach, she said she discusses some of the funds she has chosen for her managed money model that add flexibility to a client’s accounts.

Munford reported that she and her partner review the “aggregate” of the non-college portfolios to determine whether it is in line with their particular investment policy. Further, she and her partner want to see how this aggregate performs relative to the market as a whole and, more importantly, to an index that approximates the same asset allocation as their portfolio. 

They also focus on volatility as measured on a three-year basis against that of this index. Finally, they show the clients their actual fund expense ratio. 

“After the aggregate, we deal with each account sequentially to examine some of the same factors,” said Munford. “In each case, we either make recommendations to reallocate or stay put.  We also review the college accounts in the same way, factoring in the ages of the children and the length of time to college. 

“In the case of qualified accounts, we emphasize the need to add contingent beneficiaries with appropriate language for monies to be left to minor beneficiaries,” Munford added.

Next up for review is risk management of client life insurance products, perusing the type of insurance, face amount, and, for term insurance, the level premium period and when the policy was purchased. Munford said she also integrates client group term insurance when possible as well as policies that her company may not have sold. 

Following this is a discussion whether the insurance portfolio needs specific attention. Considered in turn are primary, appointed and contingent beneficiaries and whether they are current.

Munford then talked about the need to prod clients to get details of all of their disability insurance coverage to include individual and group products; and recommend supplemental policies where appropriate.

Following risk management in the review is a discussion of health care costs as well as the actual costs of different types of long-term care. This produces a grid of what Medicare does and does not pay for regarding long-term care. The combination of these two pieces of information tees up any subsequent discussion of client need to purchase long-term care insurance.