The Seven Deadly Sins of Year-End Advising

Slideshow December 14, 2022 at 11:57 AM Share & Print

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The holidays are here. It is a time for relaxation and celebration. Advisors need to keep their wits about them to avoid making mistakes that can damage client relationships.

December is not the time to put your business in cruise control. There was a saying back in the old Soviet Union. It went something like this: “They pretend to pay us and we pretend to work.”

The temptation advisors face: You go through the motions in December and have fun instead. Your clients might think you are not paying attention. Your production for December craters. You miss your goals.

December comes with its own set of opportunities to do business because the year-end deadline looms. If you resist these seven sins, you can take advantage of these opportunities.

Bryce Sanders

NOT FOR REPRINT

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1. Sandbagging.

You’ve heard this industry expression before. It’s when you hold back writing some tickets because you want to book that business at the start of the year. Things can go wrong. The prices of what you want to sell to make the purchase can diverge. If the client is sitting on cash, another advisor might be talking with them, making a compelling presentation to invest that cash at their firm.

Instead: When you think the time is right and the trade is in the best interests of the client, ask for the order right away.

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2. Telling clients you had your best year ever.

You worked hard. You made lots of money. Here is why sharing the news with clients is a bad idea. They pay fees and commissions. They do not understand you get only a portion of that amount. They may assume you are getting rich at their expense.

As of Dec. 12, the S&P 500 index was down 16.8% year to date. If they are losing money in 2022 and you are making lots of money in 2022, they might assume they are paying too much in fees.

Instead: Highlight things that went right for the client. This might include locking in some higher interest rates on fixed income. Thank them for their trust in following your advice.

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3. Not being thankful for gifts.

Some clients send you presents. Others send holiday cards. When you get busy, it is easy to put them aside intending to call the client later. Remember that nephew you send a check to every Christmas? Do they call or send a thank-you note? If they don’t, recall how that makes you feel.

Instead: The moment something arrives, pick up the phone and thank your client. If they are out, you can leave a message. Now the job is done.

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4. Taking off the rest of the year.

You know advisors who close up shop on Dec. 16, telling their sales assistant and manager, “I’ll see you in the new year”? Some clients might do that; as their advisor, you should not. There are often last-minute tasks like tax loss selling or getting required minimum distributions done before Dec. 31. If you are not available, they are in a jam.

Instead: If you are planning to take some time off, let clients know a week or two in advance. Let them know who will be providing coverage in your absence. Check your phone messages and emails regularly.

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5. Not planning ahead.

Weather comes in continuous cycles. An advisor’s business year ends on Dec. 31 and starts again on Jan. 1. Before asset-based pricing became the norm, some advisors likened business to pushing a boulder up a hill. On Jan. 1, the rock was back at the bottom. That can be very depressing.

Instead: Prepare your business plan for 2023. Have a written plan for the first business day of January. You can sit at your desk, open it up and make the call to book the first ticket of the new year.

FYI: I personally loved the start of the year. Like a horse race, everyone was lined up at the starting gate. The firm’s largest producer and I were both starting in the same place. I was not behind anyone!

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6. Not being proactive about deadlines.

Time travel has not been invented yet. You cannot return to the past. RMDs must be done by Dec. 31. Tax loss selling must be done in that tax year. The checks for the gift tax exclusion should be made far enough in advance so the check can be cashed by the recipient before Dec. 31.

Instead: Clients can be forgetful. One of the best ways to show your value as an advisor is to be proactive. Make the call early so the client can rest easy over the holidays instead of trying to rush everything through after Christmas.

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Let us add an eighth deadly sin to the list.

8. Not seeing the bigger picture concerning charitable contributions.

According to nonprofitsource.com, 30% of annual giving occurs in December and 10% occurs in the final three days of December. Your client might consider a gift as a check they write. It might be smarter to give stock with long-term gains instead, especially for large gifts.

Instead: Call your client. Initiate the conversation and outline their options. They might consider this an attractive alternative. You arrange the stock transfer. The free cash balance in their account remains intact. You might have ideas how to put those funds to good use. December comes with holiday cheer. It seems everyone is taking it easy. They are not. Neither should you.

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