Principle 24: It’s the Relationship, Stupid! (Part II)

Clients Aren’t Cattle

And, if you treat them like cattle, they’ll treat you like a cattle prod or an electrified fence. They will simply avoid you. They will not want to come in for reviews. They won’t call you when they receive an inheritance or need to rollover their 401k. They’ll second guess you and resist your advice. They won’t send you referrals. You’ll be reduced to product selling, peddling your wares like a door-to-door salesman. Wait. Maybe product selling is what you do now, and you feel like you’re on a runaway train: you can’t jump off or you’ll surely die, so you hang on and hope for a miracle. I am here to tell you that you can escape the certain disaster of mediocrity. You can turn it around and develop the practice you’ve always dreamed of, if you will just start to focus on the relationships.

The problem with too many advisors is they are in a hurry. They are in a hurry to see the next client and they are in a hurry to make the next sale.  The clients don’t really matter so much. It’s their money that advisor is after. Some advisors run up to 40 appointments a week and skip lunches (no kidding, I know some). This is madness. You can out produce these folks with a fourth of the appointments, and you’ll sleep better at night. You’ll get all the client’s assets. You’ll have a happier staff. And, you’ll have more free time than you’ll know what to do with.

A Little Experiment

Try this: the next time an existing client comes in for a review (You do those, right?), schedule it for 90 minutes. Spend the first 45 minutes with their file out of site, and your notepad, calculator, and pen still in the credenza drawer. Have your staff bring in some hot coffee or an icy cold beverage and something sweet to munch on, say, some fresh baked cookies (get a toaster oven). Once the client sits down and is served, clasp your hands on top of your head, lean back in your chair, smile broadly, and say, “It’s really great to see you. Tell me what’s new in your life.” Then just listen. Ask more questions. Keep the conversation going. Tell a related story or two. Show genuine interest in the client’s personal life. Laugh a lot. Share a little of your own story (remember, intimacy is spelled in-to-me-see). Make friends. And, keep doing it every time you see them. Soon, they’ll start to look forward to the visits. They will enjoy themselves in your company. They will leave your office with a sense of satisfaction and contentment, and they will start to care about you (this stuff really works). It’s called love. Spend it lavishly on others and it comes back to you in spades.

There IS a Silver Bullet

Clients won’t hire you, or if they do, they won’t stay long, if they don’t like you, trust you, and find you competent. But, even if you are hitting on all these cylinders, if there’s no relationship, you’ll eventually be toast. Why do people go to class reunions, keep seeing the same doctors, stick by their friends through thick and thin, frequent the same restaurants (even if the food isn’t that good), and stay in difficult marriages? Relationships. Sure, you need to be good at your work, produce reasonable returns, throw a good party, have a nice bedside manner, and all the rest of it. But, what truly builds the business and gives it longevity is your ability to make friends with your clients and build strong relationships with them. There’s your silver bullet. It’s the relationship, stupid!

Principle 24: It’s the Relationship, Stupid! (Part I)

Why Do Clients Come Back?

The reason surely isn’t the investment returns you bust your can to produce. It isn’t your spiffy college education, your crazy wow-factor master’s degree, or your prestigious alma mater.  It isn’t your over-the-top, no-holds-barred, insanely expensive annual client appreciation event. It isn’t your penetrating insight into the financial markets or your utterly remarkable financial planning expertise. It isn’t your crack administrative staff. It’s not even your extensive list of licenses, professional designations, or other industry credentials (Sorry, I know you’re proud of all those.). Public speaking skills? Office location?  Cool business card logo? Nope, nope, nope! (drum roll, please) It’s the relationships you’ve built.

Eating at Fred’s

I have been dining at Fred’s Italian Corner for 25 years. I live in the Houston suburbs, and Fred’s is 40 minutes one-way across town through the busiest 3 miles of Texas interstate, deep in the famed Houston Medical Center. My family eats there once or twice a week. I first started eating at Fred’s in the 1990s when my cousin, Eddie, had leukemia and needed regular blood transfusions at nearby M. D. Anderson Cancer Center. I’d donate some blood, then stop in at Fred’s for a hot plate of steaming Sicilian spaghetti and meatballs. I grew to love Fred, the slender, quirky, Sicilian owner of Armenian extract, who’d sit behind the register, taking orders with his skinny, and ridiculously tall chef’s hat, chatting up the customers and barking orders over his shoulder to his kitchen staff, who, in his opinion, were imbeciles, and never seemed to get anything right. He always had a big smile and wanted to know what was going on with you. After 10 years, he died of cancer. I was stressed. Not only had a lost a friend, but I feared for the restaurant’s future. The place had become my own personal kitchen. Everything was just so, and nothing ever changed.

His son, Andy,  took over for a while, but I was worried it would fail. I resented his son’s presumption to take over “my” restaurant. Andy knew I was uneasy about his taking over, but he persevered. He’d come by our table and make small talk every time we came in. I got to where I’d call down to the restaurant on the way there, and he’d take the family’s whole order over the phone. When we arrived, our table was ready and the food was promptly delivered. When Andy was thinking up a new dish for the menu (he liked to tinker with the sauces and this annoyed me beyond reason), he would whip one up for us on the house, and then ask for our honest opinions. He eventually won us over.

One day, we came into the restaurant and saw some new faces behind the counter. Andy explained that he had decided to sell the business, and to foreigners at that! I was miffed. Not only were they not Sicilians, or even Italians, they were Iranians. The first thing they did was install a TV in the restaurant. Can you believe that? I was disgusted. For several months I was leery and very stand-offish with the new owners, not giving them the time of day. I would ask for my favorite (pre-ownership change) waitress and just ignore the new owners. But, they kept coming to the table, visit after visit, always smiling goofily and lavishing upon my family a gross amount of warm, personal attention (A gross amount, I tell you!). They kept piling on, first one family member, and then another. We got to know all their names, and they finally pierced my armor. I call the old man “Papa” now. His son, Amir, recognizes my voice when I call ahead with my order, and he doesn’t even ask if it’s me. He just says “Hey, buddy! What would you like tonight?” To tell you the truth, the food isn’t even that good anymore. But, where else can I go and feel like I am in my own kitchen and among my own friends, EVERY SINGLE TIME?

The Morals of the Story

It should be obvious from my experiences at Fred’s over the years that building good relationships is essential to building good businesses. But, I’d like to draw out two additional morals from these experiences. The success of both Andy and Amir in working hard at winning my friendship ensured that I’d be a longtime customer of the restaurant, even through ownership changes, a decline in the food quality, and a host of other things got under my skin.

Moral #1: If you decide to pass along some of your B and C clients to an associate advisor, the associate advisor’s top priority will be to focus on building a quality personal relationship with each client before trying to do any significant business. This is the best way to ensure the relationship stays in the house, so to speak. People usually hate change. A change in advisor can be devastating for a client. The only thing the new advisor should be in a hurry about is making friends.

Moral #2: Relationships trump everything else. Great relationships will endure poor service, long lobby wait times, and lousy investment performance because they are rooted in love. We all need this reminder: “Love is patient, love is kind and is not jealous; love does not brag and is not arrogant, does not act unbecomingly; it does not seek its own, is not provoked, does not take into account a wrong suffered, does not rejoice in unrighteousness, but rejoices with the truth; bears all things, believes all things, hopes all things, endures all things. Love never fails.” – 1 Corinthians 13:4-8 Build great relationships on the foundation of love and they will endure the test of time.

Principle 23: Do Good Work, Note the File

Risk is Spelled L-O-S-S

I once had a conversation with someone close to me who needed to invest $50,000. He explained that he really wanted to “stretch his legs” (my term) and seek a higher return. He was willing to take more risk than normal. I had an investment that seemed to suit the need and explained its features and risks. He said it sounded great and wanted to move forward. Sensing that he had not fully understood the risks of the investment, I said, “You realize you could lose money in this, right? He said, “What do you mean?” I said, “It could go down instead of up. Risk is spelled L-O-S-S.” He replied nervously, “You mean I could lose it all?” “It could happen,” I said. He said “Forget that. I don’t want to lose my money. I’ve worked too hard. I want something safer!”  Less than a year later, the investment was exposed as a Ponzi Scheme. The principals went to prison. Needless to say, I was thrilled that I went the extra mile to ensure proper disclosure of the investment’s risks, and that the client (remember, someone close to me) had made an informed decision and was spared a nasty loss. Instead of ignoring the signals that the client might not really understand the investment’s risk, I chose to circle back and revisit the issue one more time for my own satisfaction. It is easy to suppress these kinds of concerns or take the position of “let the buyer beware” in order to make a sale. But, the client has come to you for advice.  You are going to get paid for it. Using unsuitable investments, or investments that clients don’t understand is not necessary. Get paid for using the right investments. Do good work.

Sooner or Later

Someone is going to complain. Let’s face it. Things don’t always go perfectly in the markets and the economy. Despite your best due diligence efforts, you can’t see the future. Every portfolio is going to have a dud investment or two. Some investments lose money. Everyone suddenly has a lower tolerance for risk once something loses value. Clients’ memories can fade over time. Client relationships can deteriorate, and become strained, or even adversarial. What you remember about specific meetings, disclosures, and recommendations may not always match up with your clients’ recollections. You should take notes at every meeting, whether in person or over the telephone. File notes are your friend, not your enemy. Your notes should tell the story of each meeting: what topics were discussed, what decisions were executed, and what disclosures were made. Notes should be written legibly and be well organized.  Your notes are not only for your and your clients’ benefit, but also for the regulators as well. Keep that in mind. I once received a formal complaint from a client who decided that she was not as risk tolerant as she had originally indicated. An investment had turned out poorly, and she suddenly claimed that she didn’t understand real estate and oil and gas investments. From my file notes, I was able to show regulators that she owned an oil and gas service company, and that she was a commercial real estate developer. My notes clearly showed how I had reviewed the investment risks, given her the proper private placement memoranda and prospectuses, and allowed her ample time to review the investments and make an informed decision. Regulators denied the claim. Note the file.

One Final Thought

Some advisors are afraid to give certain advice or make some recommendations. But, our objective is to help our clients. The best way to live without fear is to do good quality work, and then note the file. You have nothing to fear if you have given quality advice with adequate disclosure. Just make sure there is a good record of what you’ve done. Do Good Work, Note the File.

Principle 22: Steady as She Goes

Keep Client Interactions Calm and Focused

Whenever I sense that a client is starting to get stressed in a meeting, I know that I must take action. I imagine, for my own amusement, that a small pressure relief valve is protruding from the side of his neck. In my mind’s eye, I reach across the conference table and gently turn the valve to back off the pressure until I sense that the client’s stress level has dissipated and his demeanor has returned to normal. This is is my cue to find a way to relieve his stress. If we are discussing the proposed allocation of his portfolio, I will say something like, “We are not making any decisions today. We are just talking. I will send you home with some materials to review on these investments and then we will get together again to make decisions. If you have objections to any of these recommendations, we will set those investments aside and keep working to find the right solutions. You are in the driver’s seat.” The client immediately relaxes, and I can see that we were moving too fast in making investment decisions. Communicating to the client that I was in no rush let him know that he was in charge, and that we would move at a pace that was comfortable for him.

If we are discussing our fee arrangement, and it is clear the client is getting uncomfortable, I will say something like, “I realize that you may not be used to paying an advisory fee, and if this type of arrangement doesn’t work for you, I will understand. I may not be a good fit for you, and that’s okay. There are other good advisors out there, and many of them do not charge a fee. Take some time to think it over, and let me know if you would like to proceed.” I am giving the client a way out. This relieves the immediate pressure so he can evaluate the merits of working with me and my staff in an atmosphere free of stress. When people are under pressure they make poor decisions. Stress can produce indecision and paralysis. My job is to help my clients make good decisions. If I create a high pressure environment, I am going to destroy my ability to help them make good decisions. If I am oblivious to the stresses they are under, I will plunge headlong into a morass of hesitation, suspicion, and doubt in the client’s heart. Once I have created those emotions, I will likely never turn them around.

Develop an Affable Bedside Manner

Never lose your temper with a client; no matter how justified you deem the provocation. Keep your demeanor deferential, polite, and courteous at all times. There is no place for arrogant pride, condescension, or intemperate behavior in your client relationships.  Rather, work hard to display humility, professionalism, and self-control in every client encounter. Some clients are hard to love, but love them we must. In our practice, the majority of our clients are in retirement.  At that stage of life, we see our clients struggle with frequent and significant loss: hearing, memory, spouses, and sometimes even children or grandchildren. We need to be sensitive to the challenges our clients are facing. Clients need our friendship, and they need our reassurance and support. We must be willing to forgive their quirks and small offenses as we hope they will forgive us. Working with clients, especially older clients, sometimes can be frustrating. Communication between people is always a potential source of difficulty. The Apostle James gave some great advice, “Be quick to listen, slow to speak, and slow to anger.” – James 1:19. The onus of good communications is upon us as the advisors. We must take responsibility for ensuring that our clients’ communication challenges are overcome. When we as advisors take the lead and treat our clients with dignity and respect, our staff members will follow suit. Set the best example and lead from the front.

Principle 21: Goals vs. Dreams

They are Not the Same Thing

A goal is a tangible, measurable, attainable objective for which you have developed and implemented a reasonable plan to achieve. Otherwise, it is merely a dream. Dreams are what you hope for, but goals are what you actually achieve. Focus on establishing and achieving goals. Through the years, I have had more than one employee tell me that they had a goal to earn a college degree.  When I have offered to fund it, they have either backpedaled or dropped out after a semester or two. I have had financial advisors declare their goals to make a certain amount of money, but then renege on the plan I helped them develop to get there. These were not goals, these were just dreams. Dreams are nice, but we tend to keep them at a safe distance. Goals are what we fight for, lose sleep over, and skin our knees trying to reach because we can’t imagine living life without having achieved them. Dreams are risk free.  Goals are fraught with fear, setbacks, and potential calamity, because they are real. Dreams occupy idle brain time.  Goals consume us. Dreams require luck. Goals require skill, determination, and sacrifice. Dreams are ethereal. Goals are concrete.

Some Basic Rules

Set only a few. Don’t start the New Year with a long list of hope-tos and want-tos. Choose two or three specific things as goals, develop a plan for each, and then go to work. Words like more, less, better, lower, be, have, want, hope, think, and become, cannot be used to describe a goal. “I want to become a better golfer.” is not a goal. That is a dream. “I have hired a chipping and putting coach and scheduled 8 lessons on Saturday mornings over the next two months with a golf pro to shave 5 strokes off my game.” is a goal, and one that will likely be achieved. Goals have a time limit, a specific quantitative objective, and a reasonable chance of achievement. Write them down and share them with others , especially with those who will hold you accountable and help you stay focused. Review your progress regularly. If you determine halfway through that the goal just isn’t possible, revise it so it is possible, and then keep going.

Everyday you should take steps toward your goals. Take big steps when you can, but keep taking steps.  Never stop progressing. Never stop moving forward. If you work at your goals, you will eventually achieve them. It took me 10 years to complete my undergraduate work in my mid 40s, but I kept enrolling, semester after semester.  Sometimes, I only took one course at a time, trying to balance it all, but I made it. I am in my early 50s now, and I have nearly finished a master’s degree. I will begin a Ph.D. program in the fall of 2015, and by 2018 my friends will have to call me Dr. Noel.

Now, Get Started!

Start turning your dreams into goals. Start right now. Don’t procrastinate. Remember, the longest journey begins with the first step. What are your dreams? How can they be turned into real goals? Which ones should you abandon, and which ones should you pursue? Is it a college education, or a master’s degree? How about getting into shape and losing weight? Maybe you want to get married and need to find the right mate.  Whatever your dream, turn it into a goal by writing it down, setting a schedule, developing a plan, and getting started. What do you have to lose? The satisfaction of accomplishment has few equals in life. I don’t want to look back at the end of mine and see a rough draft or a life that resulted from the sum of my stupid choices, laziness, procrastination, and happenstance.  I want to see a masterpiece. Design and build yours.

Principle 20: Vendors, Bless Your Hearts!

Working with Investment Sponsors

Relationships are key. Investment sponsors issue securities and raise investor funds for same. Build great relationships with your sponsors.  Not only do they create and manage the investments you place into your clients’ portfolios (you should have a voice in how those products are structured), but they can be a terrific source of financial support for your marketing efforts. Most investment sponsors set aside a predetermined percentage of your sales of their investment products which is allocated to help support your marketing efforts. We have used these funds to cover food costs at our public seminars, prospective client direct mail campaigns, charity fundraising event donations, and costs related to special client appreciation functions, to name several. Most sponsors are thrilled to help you with your marketing expenses.  You need only ask. Direct investment sponsors (REITs, BDCs, etc.) are perhaps the most well funded, but many insurance and annuity carriers, and even some mutual fund families, are also happy to participate in your marketing budget. You should take advantage of these available funds. Contact your investment sponsor wholesalers for details on their respective policies.

The Cold War

I have made some pretty derogatory remarks about external wholesalers over the years.  Wholesalers are those fine people that investment sponsors hire to get out in the trenches, zigzag the country, meet financial advisors, live out of suitcases, and promote the sale of their investment products. An honest enough proposition. But, I have said things like, “Wholesalers are of the devil.” and “I don’t trust them as far as I can throw them.” I have banned wholesalers from my offices, denied them access to my advisors, and refused their phone calls for years. I personally approve all wholesaler visits to my office, including lunch and dinner invitations for my advisors and staff, and most requests are not approved. I could literally eat an upscale steak lunch or dinner with a wholesaler every week. Mind you, these folks are some of the hardest working, and well paid, people in the industry (if they’re any good).  And, their capacity for hospitality and their thick skin endears them to us all.  But, like the Cold War, working with wholesalers can be a clandestine affair full of misdirection and subterfuge. Cute, cuddly snakes-in-the-grass, they are.

Now, allow me to put some of my somewhat tongue-in-cheek remarks and attitudes into perspective. I consider a number of these people to be my friends. Most of them are decent folks.  But, one must remember that investment sponsor wholesalers are essentially sales people. They are NOT financial planners.  They are paid to raise money for their sponsors’ investment funds, not give advice on your clients’ accounts. Their goals are not necessarily in line with your goals or those of your clients.  I was recently speaking with a wholesaler who was trying to get me to offer more of his various products to my clients. When I said I would offer this one, but not that one, he replied that he was pleased and that my strategy would not “hurt” him since he needed more sales of this rather than that. I was not taken aback because he did not do anything unexpected.  It is his job to raise money for his sponsor’s funds.  But, it is my job to manage my clients’ money. The two responsibilities somewhat overlap, but they are decidedly not directly correlated. Keep wholesalers in the proper perspective and at arms length. And keep your clients’ best interests clearly in focus and close to your heart.

For Straight Talk, Go Straight to the Top

Fact-checking is a must. Never trust a wholesaler when it comes to anything related to risks, performance or anything else under the headings of due diligence or regulatory compliance. Get your facts from the top. If it isn’t in writing and if it doesn’t come from printed and approved sponsor materials, then it has to come from the executives.  I have learned that the clearest picture of an investment’s risks and outlook will come from the top. Executives (Presidents, CEOs, CFOs, COOs, VPs, Fund Managers, etc.) tend to be more concerned with forthrightness and disclosure because their compensation and futures do not rely directly and solely on how fast money is raised for their funds. Wholesalers, on the other hand, are paid exclusively in direct proportion to how much money they raise. This doesn’t mean that executives always tell the truth. In the past few years, financial industry executives have been imprisoned at an alarming rate for their dishonesty with investors, and the trend doesn’t seem to be losing any steam. But, when given the choice between getting your information from wholesalers or executives, choose the latter.  The odds will be in your favor.

Principle 19: Advisors Don’t Do Paperwork

 

The Paperwork Reduction Act

When I launched my practice ten years ago, I lived in a vicious, relentless cycle. It was like the film, Ground Hog Day. Do a little marketing, then win a couple of clients, then do the planning work, then process the business, then work to get paid on it, and then start the process all over again. I was a one-man show, and I was meeting myself coming and going. I was only actually producing new business about every 3 or 4 weeks.  The rest of the time I was either marketing or processing paperwork in one form or other: ordering forms, filling out forms, copying forms, filing forms, mailing forms, tracking forms, etc..  It was madness.  I knew there had to be a better way, but I didn’t want to pay someone else to do something I could do myself.

Over time, I began to realize that I should only have one job: seeing clients. Every moment that I spent outside my conference room was costing me money. Big money. I learned that I needed to pay other people to do anything and everything that took me out of the conference room. My notions about efficiency were simply off base.  Doing work myself so I didn’t have to pay others to do it was a false economy. Since I was the most financially valuable person in the practice (I brought in the accounts), the real economy was in my avoiding anything and everything that took me out of the conference room. It was a tough habit to break, but I have fully recovered. Now, I am like one of those reformed smokers who can’t stand second hand smoke of any kind whatsoever. I can’t stand paperwork of any kind whatsoever. I am allergic to it.  It makes me nauseous. The slightest whiff of it can send me into a panic attack or a stress-induced coma, really.

One Exception

Advisors don’t do paperwork. That’s the policy.  Of course there are exceptions to every policy.  As an advisor, I am not above doing the work.  It is a matter of profitability and efficiency.  That said, new advisors are allowed, in fact required, to do their own account and investment paperwork at the beginning of their careers, and for two reasons. First, they need to be able to fill in for the operations staff in a pinch if they have a client emergency, such as a last minute, unexpected drop-in or a late appointment with a client who has an urgent transaction that needs processing. Second, they need to understand the basics of how our operations department works, if for no other reason than to become sympathetic with the struggles and challenges the department faces each day in support of the advisor staff. The more everyone on the team knows how everyone else works, the more efficient we will be. And, this promotes esprit de corps (a team spirit of enthusiasm and camaraderie, for you rednecks). Now, there limits to this exception. New advisors may only do their own paperwork up to a point.  Once they no longer have time to do it, because they are too busy (and valuable) seeing clients in the conference room, their pencil-pushing days are over.  Paperwork is just a part of their initial training, and nothing more.

The Efficient Document

In today’s technological world, there are service providers that can map the data fields (name, address, Social Security number, date of birth, beneficiaries, etc.) from your client resource management (CRM) data base to digital web-based investment, account, and service forms.  These systems are brilliant at pre-populating your client documents from the information in your own database.  Virtually all broker-dealer, clearing firm, investment sponsor, and insurance carrier forms are available through these service providers. LaserApp and Quik! are two such providers. For a nominal fee, you can subscribe to one of these services and virtually eliminate filling out forms by hand. Once populated the forms can be printed or emailed directly from the application. If you are not using one of these services, you simply don’t understand them.

Principle 18: You Can’t NOT Do It!

Staff Get Overwhelmed

No matter what the size of your practice, things can get hectic for your staff members.  They are human.  In the hustle and bustle of everyday office life, it is easy to start feeling overwhelmed and set something important aside with every intention of returning to attend to it later. We’ve all been there. One thing leads to another, and the matter is forgotten. In too many cases, the higher priority item gets neglected in favor of a lower priority one. Higher priority items are often quite involved and require more time and concentration. Thus, they can quickly get moved to a back burner where they languish until they become urgent because someone has gotten upset. Staff, like everybody else, enjoy a sense of accomplishment.  Quickly tending to the smaller insignificant items gives that sense of accomplishment, and the undisciplined staff member will fall into this trap every time. Sometimes, there is just too much work, no matter how a person prioritizes, and yet the work must get done. The point is that you can’t NOT do something. Everything must get done; no exceptions!

Only Two Options

We train our staff to operate under the principle that they only have two options when it comes to handling their responsibilities: either get the job done or ask for help.  Not getting something done is not an option. Getting them to ask for help when they truly need it is a tough one. We all have our pride. We want to be able to handle our own work. But, being overwhelmed and neglecting top priorities doesn’t help anyone. As the leader of the team, you must create and cultivate an atmosphere where staff are comfortable asking for help. There are a couple of things you should regularly do. First, ask. And, keep asking. Are you getting things done? How much work are you leaving each afternoon for the following morning? Is business coming in and going out the same day? If you had another pair of hands, what would you have them do? Second, encourage your staff to be honest. Explain how much you value them and how you don’t want them overworked or overstressed. Make sure they understand that you are not asking them to be super heroes. Help them realize that if they over do it, their work product will suffer.

We are Anti-Overtime

Dedicated staff will always want to work overtime.  Overtime is a patch; it is not a solution. When staff work late, it masks another problem, namely, that of being understaffed. If your people are simply working longer hours each day to get the day’s work done, how are you ever to know that you need more staff? Moreover, when staff are overworked, they can feel unappreciated, become exhausted, and develop resentment and bitterness. Head this off with a fanatical anti-overtime policy. Nights and weekends are strictly prohibited. If we can’t get the work done during normal hours, then we need to add staff.  Your business is going to grow. Your client base is going to expand. Your production is going to increase. Keep close tabs on the needs of your staff, and plan ahead to ensure that your support staff grows along with your business.

 

Principle 17: Likeability, Trustworthiness, and Competence

Three Essential Attributes

Unless you are prepared to either manipulate and cajole people into doing business, or drown in hapless mediocrity, you must master this principle.  Every potential client needs to answer in the affirmative the following three questions: Do I like him? Do I trust him? Do I find him competent? It is rare that a prospective client will move forward and hire you without going through this mental checklist. And, even if they do, the relationship will be weak and flimsy, collapsing under the weight of the slightest suspicion or mishap. Your job is to recognize that every prospective client needs to follow the same three step decision-making process, and then determine to help them walk through that process. Whatever system you are using to win new clients, it must incorporate a methodology for getting these three questions answered “yes” in the client’s mind.

Likeability

Everyone wants to work with people they like. Adopt a positive and soothing “bedside manor.” I once had an advisor working for me that was very bright. He was as quick a study as I’d ever met. His tenacity was unmatched. And, he had an interesting story. A wounded Viet Nam War veteran, private aircraft pilot, and father of six. But, his clients didn’t like him. He was abrasive and condescending, dismissive of their concerns, and he often brow beat them into submission. Eventually, he lost his securities licenses due to client complaints. It is not that hard to be likeable, but some people do need to work at it. Develop good listening skills. Smile warmly and often. Take a sincere interest in the people you are helping.  Put them at ease in your presence. Keep your humor respectful and in good taste. Be deferential, gracious, and hospitable. Don’t rush things. And, never use foul language. Remember, you may have all the skills to manage their life savings, but if you’re a stinker, you may never get the chance.

Trustworthiness

By far, the quickest path to earning trust is being open and forthright, telling the truth, and keeping your promises. From the very first encounter with a prospective client, use candor and forthrightness in your interaction. Don’t be flippant. Be sincere. Be sure that what you are saying is accurate and that you follow through on every commitment, no matter how insignificant.  Prospective clients are grading you on everything. They come in your door for the first time looking for a reason not to do business with you. Don’t give them one.

Disclose, disclose, disclose! I once worked alongside another advisor who asked me to join him in a client appointment.  He presented an investment, and the client made the decision in the meeting to make the purchase.  After the meeting, the advisor told me that the sale wouldn’t stick.  He said that he had not done enough disclosure of the investment’s features, benefits, costs, and risks.  He sensed that he had short-changed the process and that the client lacked the trust to move forward.  That afternoon, my colleague received a call from the client cancelling the transaction.

Don’t make the mistake in thinking that when a current client refers someone to you that there is a built in trust factor. A referral is merely an introduction to an interview, and you are the prospective employee who is being interviewed by the employer, the prospective client. You will need an approach for developing new client relationships that takes time and allows trust to develop.  If you move too fast, even with a referral, you will lose the chance to show your competence and win the account.

Competence

You must have the planning chops to win and sustain good client relationships. Competence requires training and experience, and for these there are no substitutes. An aspiring advisor should consider working in the practice of an experienced financial planner. Young advisors need mentoring, and they especially need training in the technical skills of financial planning. Earning professional designations such as Certified Financial Planner (CFP) or Chartered Financial Consultant (ChFC) are excellent paths to technical competence. But, the freshly minted advisor will still require experience, and this is best gained under the tutelage of a mature professional. Competence is not only technical skill, but it is also the ability to understand current economic trends and help clients navigate them. Financial advisors must have technical skill and the wisdom to give sage advice. Your opinions must be cogent, relevant, timely, and well presented. It is one thing to be competent, but it is quite another to communicate competence. Credentials alone won’t do it. Competence must be demonstrated.

Principle 16: Beg, Borrow, and Steal

I Owe it All to Others

When I was 20, I was working my way through college at a large printing company. I worked the night shift because it paid 15% more than the day shift. After three years there, I saw what was happening to the older employees.  Once they got five years in, they had three weeks of vacation and a nice annual bonus. They owned company stock and bought new cars. Many of their spouses and adult children got jobs there. One big comfy family. They stayed in their hamster-wheel jobs, content, but oblivious to the future. It wasn’t for me. One night, I was inking up my printing press on the production line, and someone called out to me up the line, “Hey, Noel, isn’t that your cousin coming in the back door?” It was. He worked the day shift, but was transferring to nights for the slower pace and the extra pay. In that moment, I saw myself working there the rest of my life, my dreams reduced to whatever happenstance would bring me on the expedient path of least resistance, the comfy but unimportant blue collar life. I panicked. I shut off my press, hung up my apron, and walked out. My supervisor, Kenny Upton, knew exactly what was going on. He drew up alongside me, and tried to tell me that the only way I would ever make anything of myself was if I invented something, received an inheritance, or won the lottery. I knew deep inside that he couldn’t be right. From that brief exchange, I learned a principle that has continued to grow in my heart and has been proven time and again, I don’t have to invent, inherit, or win anything. I can find out what successful people have done and model it.

Pretty much everything I know about being a good advisor and businessman, at least the technical aspects, I stole from someone else. I didn’t invent any brilliant, new how-tos. I learned them from others. An old colleague and friend, Ernie Koster, used to say, “There isn’t any original thought.” In business, I think he is right.  Yes, you can innovate, you can improve on the ideas of others, and you can even do a better job of implementation, and these you should. But what is tried and true is, well, tried and true.

Don’t Reinvent the Wheel

My first business was investment-related, but focused on retirement plans for employees of school districts, universities, and non-profits. I had no mentors, and it was a lot of trial and error trying to figure out how to build and run a business. I wasted an enormous amount of time learning the basics. It eventually grew to about 70 employees in offices around Texas, and we had 120 independent advisors. We were making it, but it was a high volume, low profit business. I never had the confidence that I was doing things right. My wife came down with a serious illness, and after 15 years in business, I sold it and retired to care for her and our two small children. When the money ran out from the sale of the business a few years later, I had to go back into business. This time, I decided to build a financial planning practice, but keep it relatively small. I started traveling around the country, visiting the offices of successful financial advisors. I would attend financial planning symposiums and conferences where top advisors were speaking. I was a sponge. I copied their filing systems, their financial planning strategies, their marketing programs, and their bedside manor.  Soon, I was out producing most of them. In ten years, we had built one of the most profitable and efficient practices in our market. To this day, I still try visit 2-3 colleagues around the country each year, looking for ways to improve our operations, our investment results, our relationships, and our bottom line.

Adopt and Adapt

Someone once said, “If you want to be successful, find out what unsuccessful people are doing, and don’t do that.” Somewhere, someone else said, “Successful people do what unsuccessful people are unwilling to do.” Both of these adages are fairly accurate, but they are in the pejorative. Focus on what successful people are doing, and find ways to adapt their systems, technologies, procedures, and methods to your own practice. Adopt and adapt. One visit to the office of a colleague in Evansville, Indiana revolutionized our client filing system.  Another visit to a colleague in Hartford, Connecticut changed all my thinking about asset allocation. A visit to a colleague in Memphis, Tennessee put me on the path to buying our first tax practice. In the case of the filing system, it was as simple as using color coordinated file folders.  But, we expanded and improved it. On the asset allocation model, we refined it and perfected its presentation to clients. On the tax practice, we learned to make it more profitable, instead of just a loss-leader.

Get on the road and find out what your colleagues are doing well. Commit yourself to learning from others. Invest in your own training, but learn from the best.  Not the so-called “experts,” who write books and give talks but aren’t in the trenches everyday.  Seek out the best active advisors that you admire and respect, and learn from them. This requires humility and a teachable spirit, but it is the only way to get to the top. You have everything to gain and nothing to lose.