Executive Summary
Enjoy the current installment of "weekend reading for financial planners" - this week's collection of articles are drawn entirely from the blogs of financial advisors and the companies and consultants who serve them, and starts off with an interesting profile of a financial planner from India who is building a practice comprised almost entirely of virtual, online clients who can purchase increasing expensive and sophisticated tiers of service and advice, effectively allowing the planner to both build to the highest priced financial planning offering over time and have the opportunity to get paid while cultivating those relationships!
From there, we have a number of additional articles about building business online and through social media, including one article that emphasizes the importance of having a good online website (which is now even more important than having a good high-end glossy brochure), some guidance on what Search Engine Optimization (SEO) means for financial advisors and tips to improve it for your website, and a discussion of building networks on LinkedIn and whether it's a good idea to accept any/every LinkedIn invitation that comes your way.
We also have several practice management articles, including one on the perils of having a book of aging clients (though the tipping point is not merely when clients retire, but instead when they start reaching their late 60s and early 70s), another on marketing and how to differentiate yourself by providing case studies of how you work with your target clients, and a third on why networking is so unsuccessful for most advisors (hint: don't just search for prospective clients, search for prospective advocates who can open the door to many more clients down the road). There are also a few more technical articles, including one about how to address life insurance for your diabetic clients, and another with a good checklist of key areas to consider for any same-sex married couple clients since the Supreme Court DOMA decision.
We wrap up with three final articles: the first is from "Investment Committee Doctor" Tom Brakke about how our efforts to better convey information graphically and visually could lead us to make new behavior mistakes in our investment decision-making process; the second looks at what financial advisors can learn from the TV show Mad Men about specialization of roles within a firm and separating business development and relationship management from financial planning creativity and expertise; and the last looks at a recent survey that finds what matters most to clients is not your fees, your advice, your service, your knowledge, or your experience, but your interpersonal skills, the ability to use the right side of your brain to tell stories and create connections, and the importance of starting out by talking not about what you do, but why you do it in a way that clients can make an emotional connection. Enjoy the reading!
(Editor's Note: Want to see what I'm reading through the week that didn't make the cut? Due to popular request, I've started a Tumblr page to highlight a longer list of articles that I scan each week that might be of interest. You can follow the Tumblr page here.)
Weekend reading for July 27th/28th:
How To Offer Fee-Only Financial Advising In Tiers - From the AUM In A Box blog, James Cornehlsen profiles an interesting financial planning service being offered by Raag Vamdatt, a financial planner in India who is working with Indian clients virtually, and worldwide, with a rather unique internet-based business plan. Vamdatt offers a membership-based program, with a one-time plan preparation, annual trainings, and eBooks, structured in a series of tiered products at different price points. For instance, the top tier "My Financial Plan" costs $135 and covers a financial plan roadmap with typical topics (investment recommendations, life insurance analysis, retirement planning, cash flow, etc.), while the second tier focuses on just income tax planning and is provided as a DVD/CD, the third tier is analysis of a specific mutual fund or insurance product for $25, and the fourth is an entry-level eBook for $5. While the pricing is specific to India (the costs of at least some tiers would almost certainly be different here in the US), the underlying principle is key: Vamdatt has created different levels of products/services that allow prospects to "test you out" before hiring you at full cost for your premium value. In fact, Vamdatt has a system that allows him to get paid for the effort of delivering value while cultivating new relationships with clients!
Why Have A Brochure If You’re Absent Online? (article no longer available online) - This article makes the great point that as marketing and business development goes increasingly online, advisors may be spending too much time focusing on their physical marketing materials, like the high-end glossy brochure, and not enough on their virtual marketing presence. The reason this matters is that while a brochure is still nice to hand out at the end of an initial meeting or seminar, online information is accessible 24/7 for any prospective client, whenever they want to look for you. And increasingly, your website will be the first impression you make with a prospect, so if it doesn't share information about your practice, your story, your credentials, etc., you'll have lost your chance and may never have the opportunity to get that meeting at all. In addition to a website being accessible continuously, the article also notes that websites are quickly and easier for your clients to share and refer to their friends/family/colleagues (faster to share a website than a brochure), and websites can be more easily changed and updated (as the information is altered live in real time, unlike brochures that can't be taken back and updated once distributed). And this isn't just about reaching young people; Pew research surveys show that 83% of people aged 50-65 use the internet regularly and seek information there, too.
Quick SEO Tips For Financial Advisors - From the Financial Planning magazine blogs, this article provides a nice introductory summary for advisors on Search Engine Optimization (or "SEO" for short). The goal is SEO is simple - to make the advisor's website appear more often and higher up on search engine rankings, as the findability of a site is highly related to how often it is visited. Strategies to improve SEO are broken into two subcategories: off-page SEO, which refers to strategies outside of the website's design itself; and on-page SEO, which are strategies to improve the website internally through how the pages themselves are designed and written. The primary off-page SEO strategy is to get outside website to link in to yours, as search engines rank authority and relevance by looking at what other websites that are authoritative and credible link back to yours; the more links there are to your website, the more implied "votes" there are that your website is worth being found. So how do you improve inbound links? Creative high-quality content that others will want to link to and share; consider guest blogging by contributing content to other credible websites that can come back to visit your website if they find the content interesting; and submit your website to online directories like Better Business Bureau and YellowPages.com (and make sure your social media profiles link back to your website, too). In terms of on-page SEO, the easiest change is to ensure that the keywords that people might use to search for you are well embedded in the page, through headlines and subheadlines, image tags, and links; in other words, if you want small business owners or ophthalmologists or some other specialized niche to find you, be certain that your articles frequently mention small business owners or ophthalmologists or whatever that niche is. The more descriptive your pages and keywords are, the more you can differentiate your website from the competition and make it findable by those who want to reach you.
Should You Accept Or Decline That LinkedIn Invitation To Connect? - From Stephanie Sammons of Build Online Influence, this article takes a deep dive into LinkedIn, with a specific focus on how widely you should (or shouldn't) try to grow your network on LinkedIn. And the breadth of your network does matter, as when people search for a professional on LinkedIn the search results are prioritized by who's a first, second, or even third degree connection in your network; in other words, the bigger your network, the more opportunities you have to be found and the more likely you are to show up in the results when people are searching for solutions. In addition, the reality is that while you might not have a priority on building a network now - especially if you're not actively looking for clients or seeking a job - you never know when you might be in the future, and it's better to have the network already built than to have to start at the moment of need. That being said, Sammons still suggests that you don't just build your network blindly, but instead focus on growing it "intelligently" with the following tips: have your must haves (professional image and headline); make it clear whether you work locally only, or nationally; keep your connections focused in the industry in which you work, and the industries where your prospective clients work; connect beyond just your clients and immediate colleagues, as you never know who can lead to a new client; and don't be afraid to remove connections if you feel someone is negative or spamming you or "pitching" you inappropriately. And of course, remember that you don't have to just wait for LinkedIn invitations, and can do outbound invites to grow your LinkedIn network, too!
The Perils Of An Aging Book - From the Russell Investments blog, this article notes that as advisors are aging (44% of advisors are over the age of 55), so too are their clients, and that shift is beginning to impact the value of financial planning practices and the risks they face. With typical investors going through three phases - accumulation, wealth maximization (when inflows/outflows are minimal and returns dominate the results), and decumulation (when the portfolio really begins to spend down) - financial advisors focused their practices primarily on the first two categories, but as the years have passed clients are increasingly transitioning to the last category. In turn, this introduces new risks, including the outright risk of decumulation (that clients will spend down assets faster than growth rates and deplete advisor AUM), asset flight risk (large portfolios may be tempted to seek out better returns, since the returns are so dominating on the outcome), and generational risk (potential that the assets won't be retained after an "estate" event, i.e., when a client dies). Notably, because clients are often conservative on their withdrawals in earlier years, the crossover point is not merely when clients retire, but a little later as clients get into their late 60s and especially their 70s. So what should you do? As a starting point, take a finely sliced look at your own book of business, and determine what percentage of revenue comes from clients in different age cohorts (especially those over age 70), and then consider whether/what you need to do to manage that exposure.
Getting Past “Blah, Blah, Blah” When Talking to Prospects - On Advisor Perspectives, Dan Richards looks at the "blah blah blah" challenge... that point we've all had where we're listening to someone who knows their topic well but goes on too long and in too much detail until our eyes glaze over, and a situation that unfortunately many advisors subject their prospective clients to in their own explanations of their services and what they do. Richards makes the point by telling the story of a small business owner who had a recent liquidity event and went in search of an advisor, interviewing three different referrals. All three advisors were credible and trustworthy, had a solid online presence, treated him professionally, and demonstrated a genuine interest in his situation with good questions. However, when it came time for the advisors to talk about their own capabilities and approach, the situation shifted rapidly. In describing their own services, all the advisors went on too long, with too much technical jargon, even while describing themselves using virtually the same words (credential, experience, disciplined, conservative, quality team, committed to client service, etc.) in a manner that left them completely undifferentiated. So how did one advisor stand out? By pulling out a "case study" example that showed in more concrete terms exactly how the firm worked with another 65-year-old business owner just like the prospect, explaining what that client's (similar) needs and goals were, and exactly what the firm produced and delivered to that person, followed by an offer to connect the prospective client to another similar client of the firm for a reference. So what do you do to concretely explain your value and actually show exactly what you do for your clients?
Why Is Networking Often So Unsuccessful? - From Maribeth Kuzmeski's Red Zone Marketing blog, this article looks at networking events, and why it is that only about 1% of advisors seem to respond that networking is working for them, even though the number one strategy for most entrepreneurs and business developers is to go network. Is networking itself broken, or is the problem just that networking isn't being done correctly? Kuzmeski suggests the problem is the latter, and that the primary reason is that most advisors enter networking with the wrong mindset. When you look at the results of those who do networking successfully, it becomes clear that the goal is not about collecting and giving business cards, nor is it even about finding people who may be good prospects for you; successful networking is about finding and cultivating potential advocates, who are already well connected and may or may not even become your client personally but can help you get in the door with prospective clients. Thus, the ideal networking advocate is not a great potential client, but the head of a human resources department, or the president of a chamber of commerce, or a local nonprofit leader; someone who is already a great networker and connector themselves, who might not become a client but could bring you 10 others. So the next time you're looking at networking opportunities, don't think about who you could reach that would do business with you, but who you could reach that might be an advocate and introduce you to many others who could do business with you. Make a list of not your best clients, but your best advocates or potential advocates, and reach out to them to connect, not to sell them something but just to get to know each other and begin the relationship.
Life Insurance For Diabetics - From Brantley Whitley's "Insurance Pro" blog, this article looks at the challenges and complications that arise for diabetics who want to get life insurance. The good news is that underwriters are increasingly open to offering coverage to diabetics, but the details of pricing, requirements, and ideal products will be different than for clients who don't have problems maintaining normal insulin levels (and will further vary depending on whether it's Type 1 or Type 2 diabetes). Insurance companies are especially concerned if the applicant is not doing a good job complying with the instructions of their physician about he/she manages the condition; ideally, insurers want to see evidence of someone diagnosed with diabetes really making a serious effort to control the disease, including dietary changes, consistent exercise, and cessation of smoking. The insurer will also do their own thorough evaluation of the condition, including not only looking at doctor's records but also doing their own complete physical exam and lab work-up. Because diabetes is essentially degenerative as it takes a toll on the vascular system over time, younger applicants with Type 1 diabetes will usually be highly rated (i.e., a high premium surcharge), while middle-aged applicants with more recent onset may only have a small rating/premium increase and may potentially even get standard rates if the disease is well managed and controlled. Control of diabetes is often measured using the A1c test, which essentially measures average blood sugar levels over several months and is scored on a scale, where 7 or less indicates good control and 10 or more is a sign of poor control; the higher the A1c, the greater the risk of long-term complications and the higher the premium surcharge will be. Additional risk factors, like excessive weight, smoking, and elevated blood pressure or cholesterol, also increase risk of complications, and the combination of those factors and diabetes can result in premium rating significantly higher than either condition alone. It's also notable that many insurers will give a more favorable rating for those who buy permanent insurance (e.g., universal life) rather than term insurance, which in some cases can mean a permanent insurance solution may not be all that much more expensive than term coverage. Because different insurers may rate a complex diabetes situation differently, it's also crucial to shop around for coverage with an agent who can present the health situation to multiple underwriters and identify which companies will be favorable and which companies to weed out (highly preferable over getting decline from one company and then applying to another, as subsequent companies will be more wary after another insurer has declined to offer coverage).
Financial Planning For Same-Sex Married Couples - From the blog of Tom Tillery, this article provides a good overview of the recent Supreme Court decision regarding the Defense Of Marriage Act (DOMA), and some of the immediate planning implications for the roughly 130,000 married, same-sex couples in the US (from the 13 states plus the District of Columbia that allow such marriages). In the past, planning for such clients followed a "belt and suspenders" approach where a lot of planning was redundant and there was overlap in the strategies, just to be certain that the wishes of the couple would be honored, especially since the Federal government didn't recognize the marriage under the provisions of DOMA. With the June 26th Supreme Court decision, though, any same-sex couple that is married and resides in a state that permits the marriage must be considered married for the purposes of Federal law as well. A checklist of key items to consider at the end of the article includes: reviewing income tax returns and filing amended returns for the past; updating retirement planning projections to determine if the couple can now jointly manage financial independence; apply for Social Security spousal, survivor, and even divorce spouse or survivor benefits; updating qualified plans where the same-sex spouse is now covered under ERISA (including eligibility for qualified joint and survivor annuities for same-sex spouses);the ability to split retirement accounts in divorce with a QDRO or roll over an inherited retirement account to a surviving spouse; employee benefits from Family and Medical Leave under FMLA to health insurance benefits; and updated estate plans given the ability to now utilize the marital deduction for estate and gift purposes and the potential for estate exemption portability, along with the new-found ability for gift splitting and titling property as joint tenants with rights of survivorship or even tenants by the entirety.
Donning The Goggles - From the Research Puzzler blog, "investment Committee Doctor" Tom Brakke looks at some interesting research finding that an increasing volume of digital, visual information is giving us whole new ways to look at and understand our world. While this has generally been viewed positively, though, Brakke notes that some research also shows that "while visual-spatial skills are enhanced with certain screen-based activities, other skills... were lost, specifically 'deep processing'" skills that are key to making good decisions. In other words, the problem is that with all the new visual graphs and tools becoming available, we risk getting to a point where our brains so adapt to the visual information and the way it's presented that we lose the ability to do the deep analysis that is ultimately necessary to come to the right conclusion. Or viewed another way, we risk letting a rising wave of visual information become little more than a series of visual behavioral-finance triggers for our decisions, which may be problematic for long-term investing for clients, especially since we don't necessarily control that visual information in the first place, but instead simply receive and interpret (possibly with insufficient analysis) whatever is presented before us (and possibly presented by an entity that is more interested in our transactional business than watching out for our and our clients' interests).
What Advisors Can Learn From Mad Men (article no longer available) - From Foundation Room Finance, this article looks at the popular Mad Men television show on the 1960s advertising world and makes a simple but important point: even 50 years ago, the advertising world separated "account men" (Roger Sterling and Pete Campbell from the show) who are responsible for drumming up new business and managing relationships with current clients, from the "creative men" (Don Draper, the show's lead) who are responsible for actually coming up with the ideas and solutions for clients. The fundamental point is that this is about specialization of labor; Adam Smith in his famous "The Wealth Of Nations" recognized that division/specialization of labor is a key for economic growth, as it allows the economic or a business to better train skilled workers to tackle smaller pieces of a big task, once its broken down into parts. Restaurants get this, with the cooks, servers, bussers, bartenders, hostess, managers, etc., because it's crazy to imagine one person fulfilling all of those functions. Yet in the financial planning world, many advisors do in fact perform all the functions at once, or at least far more than they should. The article suggests that as a starting point, just as the "account men" are separate from the "creative men" in Mad Men, that planning firms should separate client acquisition (and relationship management/retention) from financial plan design (and the actual analysis work that goes into providing sound financial advice). Right now, the top advisors seem to be those that are lucky enough to have a bit of each skillset naturally; but for the rest of us, perhaps it's time to recognize what we do best, focus on our strengths, and find a partner who can complement us with the other half of what the business needs to succeed. When you look in the mirror, are you a Roger (relationship) or a Don (creative)?
What Matters Most to Your Clients and It’s Not Your Fee, Your Advice, Your Service, Your Knowledge or Your Experience - This article, from the blog of Dutch financial planner Ronald Sier, tells the interesting story of a very left-brained (i.e., logical, rational, analytical) planner who has shifted to being more right-brained after being greatly influenced by Simon Sinek's "Start With Why" book, and has become an advocate of the more balanced approach. Being a left-brained individual, though, Sier starts by making the analytical case for being more right-brained, centering on a recent client experience survey from Australia that showed the quality of an advisor clients find most important is Interpersonal Skills (82%), overwhelmingly ahead of other typically popular traits like Professional Reputation (only 19%), Quality Information And Advice (17%), Service (15%), and Technical Skills/Expertise/Experience (4%). Sier suggests that the key interpersonal "right-brained" skills that really differentiate in this context are the ability to connect with clients through storytelling and the effective use of metaphors to package ideas and communicate with clients. In addition, strong interpersonal skills allow clients to feel important and appreciated (building rapport), get emotional affirmation, and most important to simply feel understood. The caveat, of course, is that interpersonal skills and emotional intelligence are harder to train and measure than technical skills, but nonetheless appear to be the better pathway to becoming a trusted advisor, especially in a world where expertise alone is no longer as much of a differentiator or valued skillset given the plethora of information available online. That doesn't mean there isn't still value to being a knowledge worker, but that even a knowledge worker must focus on emotion as well to find real and sustainable success.
And although it's not specifically included here for Weekend Reading, I'd also highly recommend checking out Bill Winterberg's "FPPad" blog on technology for advisors, including his weekly "FPPad Bits And Bytes" update on tech news and developments!
I hope you enjoy the reading! Let me know what you think, and if there are any articles you think I should highlight in a future column! And click here to sign up for a delivery of all blog posts from Nerd's Eye View - including Weekend Reading - directly to your email!
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