I use compliance strategies to not only paper my files but also to create “angel advocates.”
What is an angel advocate? It is the name used at our firm to describe those beloved clients who like us so much they are willing to put their own reputation on the line to refer us to their friends and relatives. My goal is to have 90% of our new clients referred to us by angel advocates. We are more than halfway there. In Minnesota, we had a five-month period where 100% of our new clients were from referrals.
Creating angel advocates out of our existing clients starts with a list that will make your compliance officer love you. I have one overriding thought in every client interaction: If I were in arbitration, could I defend this recommendation to opposing counsel?
As an attorney who has served as an assistant district attorney and a public defender, it is easy for me to visualize how brutal it can be for advisors to defend themselves in court or arbitration.
Here are the steps we take to make sure every recommendation is defensible and builds trust with a future angel advocate.
The Right Mindset
First: We only make recommendations in the client’s best interest.
This is a mantra that I drill into the hearts and minds of every team member we hire. In fact, I won’t hire anyone unless they feel as strongly about this as I do. Once you have a clear North Star, it becomes very easy to give your clients solid, defensible advice. Your suggestions either line up with the North Star or they don’t.
One example is the review we do on a client’s insurance products: If we think we can get them something better or cheaper, we will recommend they switch. If the client doesn’t need insurance, we tell them that too. If what they have is good, they are advised to keep their existing policies.
Sure, we may not make any money on those cases, but it is central to creating angel advocates: telling clients the truth, even when we don’t get anything out of it.
We currently have a client, Jim from St. Paul, who has a $1 million dollar VA in his retirement plan. Now, there was a time when I really liked some of the guarantees in a VA—unfortunately those same guarantees almost bankrupted some reputable companies by ’09. Jim’s VA has some features and guarantees that I would label as adequate but not stellar. It also has a few time bombs, including the ability for the insurance company to take the annual fees up to over 4% if they feel like it. With fees that high, he would likely never be able to keep up with inflation.
In my mind, this is not a clear-cut case—I think in the long run, he will have more flexibility, more liquidity and better returns, not to mention cheaper fees, with managed money. However, he is facing high surrender charges if he bolts and he will lose some of the minimum guarantees.
My solution: Just tell him the truth—I don’t have strong feelings about this product. It is an OK product—it is not great, but there are pros and cons to leaving. My job is to educate and as long as the client has full disclosure, then I feel they can make decisions that are good for them.