At the 2014 Advisor Network Summit in Las Vegas, Retirement Advisor magazine’s and Annuities Channel Editor here at LifeHealthPro.com Daniel Williams picked the brains of the top five Advisor of the Year finalists to discover their unique thoughts on education, holistic retirement planning, inflation, annuities, work-life balance, and the biggest challenges to the industry (and how to overcome them).
To learn each finalist’s background in more detail, see: The big five: The 2014 Advisor of the Year finalists
Here’s a recap of what Jay LaMalfa, Philip Rousseaux, Greg Hammer, Jason Jenkins, and Bill Danner had to say about how they’ve become so successful in their practices.
First topic: Educating the client
How does education play a role in your practice?
Rousseaux: We’re not high-pressure sales. We’re high-education, high touch. We lead them to the water. And on top of that, you always have to try and better yourself and become more educated as an advisor. Because if you’re not, your competitors are. It’s critical.
Jenkins: We saw a shift in our practice when we began to talk our clients’ language. How many times have you sat down with a client and they’ve said, “I don’t understand any of this.” That’s really the big challenge, to take what we know and speak their language. A big thing we’ve done in our practice is making sure our systems are simple for our clients to understand. It’s not a matter of how smart you are; it’s a matter of how well you’re able to communicate the plan to the client.
Hammer: The simpler you make it, the more approachable you are, the more clients are willing to be comfortable with you. And making them comfortable allows you to make an educated decision.
LaMalfa: Most people who are approaching retirement are really investing in risk and risk planning. And the average person doesn’t really understand risk. We tell people that there are three things you can do: you can avoid risk, you can manage it, or you can transfer it. Nothing’s too good to be true, but it’s usually too good to be free. So that’s the way we try and present it to people is educating, not selling. Asking, “Does this make sense for you?”
Danner: There are thousands and thousands of investments out there and the client generally doesn’t understand how any of them work. And they all have different potential outcomes. Our role has been to help them identify the plan and then try to bring the solution. It’s a matter of understanding what each type of investment can and can’t do for them, and then applying it based on what they want.
Up next: The holistic approach
Do you use a holistic approach with your clients?
Danner: I have come to believe that the only way I can properly serve the client is to know everything there is to know about that client. We talk about risk, as well. I try to get the client to identify and understand all the potential risks they could have in retirement — the health care issue, long-term care issue, investment risk, interest rate, inflation, tax risk, etc. — and understand how it applies to them so we can build the plan to address those obstacles.
Hammer: When I look at holistic planning, I view it as coordinating all the major concerns in your retirement path: how taxes come into play, how the legal end of it comes into play, how you look at Social Security, and even simple things like Medicare supplements. People don’t even know how to get signed up. I think creating that comfort level and having a knowledge of and relationship with other professionals, and coordinating and orchestrating all that, allows clients to go into the plan feeling better.
Up next: Inflation
How do you help your clients plan for inflation?
LaMalfa: I believe there is going to be massive inflation on the health care side of things and the costs faced by the average consumer. We’re trying to incorporate healthy living and trying to explain to our clients that it probably has more impact on their longevity than they think it does. Ask the average person who goes food shopping about inflation. Regardless of what the government is reporting, I think people feel it.
We use variable annuities because we feel it gives people that inflation edge. That’s one of the key positive elements. We have the guarantees, but we have the ability to be more aggressive in areas we probably wouldn’t do without those benefits.
Jenkins: I always ask the questions: “How much risk can you afford to take,” and “how much risk are you willing to take?” The “afford to take” is incorporating information and all of those key elements that we agree with, and making sure that whatever forecast tools you’re using are complete and that you’re stress-testing them. If hyperinflation does come over their lifespan, they have an honest snapshot of whether or not they’ll run out of assets.
Up next: Team-based practices
What are the benefits of a team-based practice?
Rousseaux: I was originally a sole practitioner. I had an intern and would go to events like this, but then I hit a plateau. I could only do a certain number of seminars. I capped out at $15 million [in AUM]. I didn’t want to be working 90 hours a week for 52 weeks a year. So I made a decision to transition my business, hire advisors, and become a mentor, a manager, if you will.
The most difficult thing is finding the right people and incentivizing those people, training those people, to create a team environment. In our office, everybody knows everybody else’s job. If you’re trying to do everything yourself, then when you’re not there, who’s helping your office?
Jenkins: I work with my younger brother. One of the things that my brother has brought to the practice that allowed us to do $44 million in eight months was efficiency. Want to talk about balance? Create efficiency. From the moment you start talking to your prospect — whether it’s radio, TV or direct mail — you’ve got to know: What is your message, who are you speaking to? So when they come into your office they know exactly what your focus is. When we started doing that, we noticed that the net worth of our clients began to leap.
Up next: Industry challenges