Single, and loving it.

 by Tony Vidler.

I'd best let you down gently right at the beginning - this is not a gleeful little tale of a single persons interesting life. It is about the possibility of one type of "singledom" for an industry, that can result in more people loving it.

With all the change and raising of standards in financial services in recent years there is a mood that finally financial advice is becoming a profession in NZ. When you drill down into the reasons why people think that is so it becomes obvious that there is a wide range of views on precisely what a profession is.  It seems to be a bit like the Yeti....no-one has actually seen it, and everyone has a slightly different mental picture of what it might look like, yet everyone agrees that they'll know it when they see it.

This begs the question:  How will we know when financial advice has become a profession?

The answer is "when consumers believe it to be".  That may be many years after a profession has actually been created though - attaining market acceptance and associated prestige only happens after the high standards have been adopted and demonstrated continually and unfailingly.

We should acknowledge (and to a degree be pleased with) the fact that in the last 10 years the industry has evolved incredibly swiftly.  In the last 3 years the rate of change and elevation of advice quality, ethical behaviors and fiduciary standards has been remarkable.  Big ticks to everyone involved for that. It is premature for us to claim professional status on an industry wide basis however.   While full professional status has not been achieved yet, the shape and form of the profession IS becoming clearly visible.  That in itself is progress.  But is it yet enough?

Of the many definitions of a profession that one can find, I quite like this:

"A profession is a vocation founded on specialized educational training, the purpose of which is to provide disinterested counsel and service to others, for a direct and definite compensation, wholly apart from expectation of other business gain. This definition implies that, for a profession to be recognized as a profession, it first must be organized within a professional body".

This comes from a paper entitled "The Professions in Society", by Clare Bellis (a senior lecturer in actuarial studies).

If this is correct as I believe it to be, then clearly the industry still has further evolution to work through. Consider the key points, and then assess them against our world today.

Specialized educational training.  Well, to be a profession clearly this area cannot be something which is voluntary.  It is a "ticket to the game".  Everyone has to be at the same standard to be allowed entry to the profession.  We aren't there yet in NZ.

Disinterested counsel. Let's not even go here yet....but as an industry we remain some distance away from universally providing disinterested counsel to all comers.  In time, many issues surrounding potential conflicts, contrasting remuneration models, blatantly vested self-interest - all have to be addressed, and removed or resolved.

Direct & Definite Compensation.  Hhhhm....another one we maybe shouldn't go near yet.  Definitely cannot tick this box as an industry though.  Too closely tied to the "disinterested counsel" issue I'm afraid.

Organized within a professional body.  Aaaah, one of my soap box issues!  How can any profession have a multitude of "professional body's"?  Surely if it is truly a professional body then it exists for the entire profession.  The same standards of behavior, ethical standards, practice standards, educational expectations and so on would apply equally if it is genuinely a "profession".  Once again, in NZ we cannot tick this box at this time.

Yet this last item is the one box that the industry could tick if it chose to.  It is within the control of the industry itself.  Of the 4 core elements to becoming a profession there is one clear path forward - organizing a single professional body.  Any adviser who cares about their professional standing, aspires to have a valuable business in years to come, and wants to contribute to creating better results for consumers generally should be working within their own spheres of influence to bring this cohesion to the industry. 

It makes no sense to leave your own professional standing and brand entirely in the hands of other people.

It makes enormous sense though to work towards "singledom" as an industry.  There is not one adviser out there who wouldn't love it if they were held in full professional regard by the community - even those consumers who had never met the adviser, but respected them simply because of their profession.  Get the industry single, and (folks) loving it.


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What's in a name?

by Tony Vidler.

...that which we call a rose by any other name would smell as sweet.

Shakespeare raises an interesting line of thought with that quote:  something is called a particular name only because that is what the majority of humans agreed to call it.  A rose could just as easily have been called a "hippo" couldn't it?

What triggered this line of thought on the matter of naming things, or labeling, was an interesting little article about some research done by a firm called Cerulli in the States.  The key finding of this piece of research was:

59%of Advisors perceive themselves as Financial Planners, but only 30% truly offer planning services.

I have no idea of the size of the research group, or whether it checked beyond American borders or anything else, however my guess is that this finding would be largely accurate here too.

In essence, the research asked advisers to classify themselves and their practices on their own perception of the services they offer the market.  The researchers then reviewed those answers against what the adviser practices actually were, and the work that had actually been done with their clients.

Several interesting conclusions arose.  Most advisers seemed to offer some of the elements of financial planning, but then focused nearly all of their efforts on asset accumulation and/or wealth management work.

Also, it is strongly implied that many advisers aspire to provide in-depth or comprehensive planning services, but the majority of their retail clients are not necessarily in need of such services.

Thirdly, it highlights the ongoing confusion amongst clients AND advisers over the industry terminology and titles.

Certainly there is nothing inherently wrong or unethical about calling oneself a financial planner (for example), if one is qualified to use that label and is offering financial planning services to consumers.  That is not at issue at all.  It is irrelevant whether the consumers use the full range of such expertise or not really, if the adviser has the expertise and is offering it.

I do wonder though whether an adviser is giving them-self the best chance of capitalizing on their core value proposition in the consumer minds?  That is, in their branding are advisers linking their expertise and value to what the consumer thinks they want or need?

The essence of appropriate labeling, or naming of anything, is surely to convey an image which is immediately understandable to the target audience.  We continue to call a rose a rose simply because that is accepted, understood by the majority, and instantly conveys an image to the person we are communicating with.

In other words, it works as a form of communication.

So professional advisers might need to re-consider how they label - or brand - themselves.

Despite the many years of work that may have gone into earning the right to be called a Financial Planner (or any one of a number of other suitable professional qualifications), and how much distinction there might be within the industry in using such titles or qualifications, it may actually be largely meaningless to the target market.

It is all well and good to comprehensively explain to an audience that this pretty thing with a nice aroma is a typical example of the Rosaceae family.  It is completely accurate, clearly imparts that you have some specific knowledge of the subject, and sounds very clever.  

But do people get it?  More importantly, will they want one?


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WOMBAT is the word!

 by Tony Vidler.

A couple of recent conversations reminded me that there is one single thing that is continually forgotten, or under-utilized, in the marketing efforts of professional advisers - TESTIMONIALS!

You may well ask what this has to do with a Wombat - you may even wonder what the heck a Wombat is.  Humor me for a few moments though, and all will become clear I hope.

In literal terms a Wombat is a native Australian animal, renowned for its tough, resilient, plodding approach to life.  Even their metabolism is remarkably slow - some 8-14 days to digest their food.  Slow and steady is their way.  In colloquial terms the acronym WOMBAT is often used to describe a human that is rather useless really - a Waste Of Money Breath And Time. 

That observation has nothing to do with anything really, but is perhaps a useful or amusing piece of nonsense - you may know a wombat or two, and now have a useful label for them that is not openly offensive. I know some wombats for sure.

From a sales and marketing perspective though WOMBAT stands for Word Of Mouth Beats Any Thing.

Word of mouth advertising is the best there is.  Referrals and endorsement from happy customers, who advocate for you to other potential customers, produce the best new customers.  Cost of acquisition for the new client is generally one of the lowest of any marketing methods.  Ease of business in terms of gaining rapport and establishing trust is superb.  Your expertise and value is largely accepted by the potential customer before you even meet.

Everyone knows this of course, but few generate enough referrals to be able to rely upon them as the primary constant source of new business.   There are a number of reasons why that is the case, not least of which is the reluctance for professionals to beg their clients for the names of others.  That is something which nobody feels good about - especially your customers.  The extremely basic concept often touted is to ASK!  Ask and all shall be delivered!  Well...it IS true that if you ask often enough, you'll get something from enough people, so that it is sort of effective I suppose.  Truth be told this method usually results in obtaining little more than a list of the client's B-list acquaintances, and they are barely qualified at this point (if at all).  The result is effectively a new list of cold-calling candidates for you, and a nervous new client wondering what the heck they have just done. Brilliant.

Let's face it, it is poor form and a bad look (especially early in a business relationship) to put somebody on the spot and bluntly ask them for a bunch of names.  Do you really expect that someone who is still only beginning to trust you will deliver your next wave of super clients?  Just because you asked the magic question do not expect your new client to open his contacts list and electronically transport his entire social network to your I-phone, with the ringing endorsement that everyone they know should place their faith in you. The chances of that are nearly as good as playing Lotto.  You'll perhaps win plenty of small prizes if you play this game often enough, but you'll still be losing money overall and missing out on the big money.

Word of mouth though is where it is at.  Constant streams of referrals from satisfied customers ARE possible.  However, like the wombat you have to be prepared to plod along, and understand the slow metabolism at work here.  

You do have to be referrable to begin with of course.  That is, be someone professionally who is easy to trust, and easy to recommend because of your expertise, enjoyable manner of doing business and interacting with customers, and because there is a bit of a WOW factor in the customer's mind.  You do things that exceed their expectations, and impress them enough that they are confident to share their positive stories with others.  And people actually like telling others about their good experiences, so give them the chance to do so by being a good experience.

Clients also have to know that you actually want new clients.  Now that sounds really basic, but it is amazing how many customers believe you are successful, and busy - too busy in fact to take on anyone new.  Incorporate the message into your entire marketing and client engagement process that your business depends upon doing such a good job that clients introduce new clients.  And you have to keep reminding people that this is still the case.  It should be part of your marketing process that you are continually conveying this message.

There is a huge difference too between asking for referrals, and asking to be recommended.  The first is usually an uneasy process, the second is usually a comfortable process for the clients.  Asking to be recommended might not generate new leads immediately, it is a bit more passive than that.  It is however the road to repeated referrals from satisfied clients.  It is where clients become advocates for you and your business.

One of the simplest methods of all for generating awareness is to actually ask a question that invites criticism.  Of course you have to comfortable enough and confident enough in your relationship with the client that you are prepared to take that risk, because the last thing you can afford to do when asking the question is defend a position.  Whatever the clients answer is, is valid to them. Their perception is the reality of the relationship.

The little chat, and key question, that is often very effective in opening the recommendation discussion and positioning for it is:

"You know that we enjoy working with you and you are exactly the type of client we are focused upon helping, but I am a little worried that we might not be quite up to the mark in your view.  You see, clients that are really happy with us and think we are doing a good job generally refer others to us - that's actually how our business grows; through word of mouth from satisfied clients.  I am not aware of us being recommended by you to others, which makes me think we haven't got it quite right.  Can I ask what we need to do that would make you happy to recommend others to us?"

The objective here is to actually find out what you need to do in order to become referable.  then you have to be prepared to act upon that feedback - if it is reasonable & fair.  If it isn't reasonable, you were probably having the talk with the wrong sort of client to begin with, and probably don't want more clients like that. You do only want to ask those who can refer you to the right sort of clients for your firm.

Ideally what you also want from this chat is endorsement from the client.  That may come in a number of forms - perhaps they are comfortable with you being allowed to refer to them as one of the clients of your firm.  No details of their business with you of course, but a simple acknowledgement that you provide advice to them and they are comfortable with others knowing that.  In itself, that is powerful to other prospective clients, particularly if the endorsements are from well known people or businesses.   

Testimonials are gold.  Brief and to the point (50 words or less are best) - about why they think you are excellent, and hopefully why you WOW'd them.  Put the testimonials on your website, your brochures, and any marketing material you can.  Put them everywhere it makes sense, and where other potential customers can find them.  If you find yourself in a situation where you have a delighted customer for some reason, definitely ask them for a testimonial while they are delighted.

These days many potential customers will check you out before even meeting you.  Give them something positive and powerful to check.  Google rules!  So feed Google....Customers gain confidence from realizing others have positive experiences with you.  It takes away some of the risk for them in deciding to engage you.

Naturally I follow my own advice in this respect, and gather testimonials from happy clients and business colleagues.  You would not believe how many people refer to the Testimonials page when they meet with me.  Seriously - more than half refer to it at first meeting.  They have not necessarily read everything, in fact mostly they are looking at the names of the people who provided the testimonials and forming a view on that basis alone.

The key to a successful and perpetual stream of the right sort of new clients is to be referable, ensure people know that you rely upon it, exceed client's basic expectations, and seek their testimonials.  It is about generating Word Of Mouth.  It really does Beat Anything Else.

http://www.strictlybiz.co.nz/testimonials


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Eliminate tyre kickers, and value expertise.

 by Tony Vidler.

One of the most common dilemma's for financial advisers is how to make a transition from purely commission-based remuneration to generating fee-paying work.  

It is more simple than you think - though not necessarily a swift process. 

There are several critical decision points for the adviser to work through when considering how to do it.   Most importantly though, you need a framework or process to explain your methodology to clients in a way that makes sense to them, and gives them confidence that your business approach is in their best interests.  I shall explain how to do that in detail shortly.

Before moving to the process and client conversation in detail, let's review the decisions you have to make to transition to fee generation in your practice.  The first is to decide, and commit, to the process of valuing yourself appropriately.  For many advisers this represents a paradigm shift, and having to move from the mindset of "competing for every potential client" to "choosing who to work with".   We should not under-estimate how big a mindset shift that is either...it is the critical element, and major step in business thinking.

It is a given that you have to establish an appropriate fee level, though some advisers seemingly struggle with this.  Doing so though is actually just a simple mathematical process of determining what your own cost of time is, together with your desired income rate, and allowing for expected downtime (or non-income generating work you have to do).  Having said that, there is still the need (regardless of your desired income level for example) to take into consideration other market forces - what the usual rate is in your field, consumers expectations, particular expertise you may have or services you might provide, and so on.

Next there is a decision as to who you will be trying to move to a fee-based relationship.  All existing clients?  Just some of them?  Only new prospects you see?  There is no right or wrong answer, though there are clearly some risks in trying to change the existing adviser/client remuneration basis, so careful thought is needed.  Let's assume though for this example that you have decided to maintain existing client relationships & remuneration agreements as they stand, and you are looking at how to bring in fee's for new client work in the future.  A gradual transition to fee generation in other words for a purely commission-based adviser.

The most simple method of doing so is to consider your advisory work as a "project".  Or rather, a potential series of projects.

The conventional best-practice advice theory holds that we undertake a 6-step process with every client, every time.  The theory holds true IF a client actually wants that - and some don't.  But even if the client does want the full process of engagement, data collection, analysis, recommendation, implementation and monitoring/review, then there is no reason why this cannot be broken down into different projects with different client choices at different stages.  Remember, clients like some choices - and committing to the entire 6-step process up-front is sometimes a barrier to gaining a new client.  If you can give them some choices and remove some barriers, that has to be better for everyone.

Moving to a fee-generation model can be as simple as having a conversation with prospects that essentially goes like this (though this is a VERY abbreviated version):

"there are three parts to engaging an adviser that you might consider:

1.  Planning

2.  Implementing

3. Reviewing

The first part of the project is to provide a PLAN.  During this stage I gather all the pertinent facts, analyse the possible solutions, and provide you with a recommended course of action.  That is all done on an agreed fee basis, and on completion you have a plan which you are free to do as you wish with.  You can ignore it, or implement it.  If you decide to follow the advice (which we call implementation) then you are free to take that to another adviser, or buy online, or direct from a product provider, or you can talk to me about implementing it for you. It is your choice.  My role as the adviser here is to provide you with the best objective advice I can, so you are simply paying for my time and expertise in providing you with good advice.  It is like having an architect draw up plans for a house - you don't have to commit to building the house with him, but drawing up the plans is a significant piece of work that you must pay him for.

If you decide you do wish to IMPLEMENT any recommendations from the plan with me, then that is fine.  I will do that on a commission and/or fee basis (insert you own preference here).  That means I will do (explain in detail the work you will do for them, showing what a headache it is for them to do themselves of course) to put any recommendations in place and ensure you have as few hassles or headaches as possible - my team & I will take care of it for you.  This part is like appointing the building project manager if you decide to build the house the architect drew up - and it is you choice who you appoint to do that.

Once any recommendations are put in place, it is your choice as to whether you wish to work with me on an ongoing basis.  That is what we call the "REVIEW" phase - and it means that each year (?) we will review the previous recommendations and (explain in detail your ongoing value and advice process).  As a client you will also get (explain in detail your service proposition) each year.  We charge clients commission/fee for this ongoing service and access to advice reviews.  Once the house is built you can decide on who services and looks after everything you put in it"

Now this has been a quick gallop through the positioning talk - but sufficient to convey the principle of it hopefully.

The key benefits of adopting such an approach is that it actually positions the adviser to be able to give good honest objective advice at the front end - and be valued and compensated accordingly.  The client has clear choices as to how much work they wish to engage the adviser to do, or not do.  The client has choices about how and where to implement any advice.  The adviser can work fee-paying work easily into their business model with new clients.  

Perhaps most importantly though, it is a wonderful screen for eliminating the tyre-kickers who were never going to buy the car.  The good adviser has expertise and knowledge that is valuable, and that should be valued by both the adviser and the prospective client.  If a prospective client does not value objective advice sufficiently to pay for it, then don't work with them.  They tend to be consumers who purchase based on price, and no price is ever low enough.  Those who come to you for low prices, will leave you for lower prices.

Value yourself appropriately, and then position yourself accordingly.  In doing so you will begin the transition to generating fees and moving away from purely commission (at risk remuneration!) only work.


To see (or download) a graphic explaining this process to clients, click on

http://www.strictlybiz.co.nz/uploads/tools%20docs/Building%20an%20Advice%20Business%20-%20edited.pdf

or go to
http://www.strictlybiz.co.nz/tools#fees


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Anchors away! How to work out who to drop...

 by Tony Vidler.

Let's begin the new year by challenging the number 1 Myth pervading professional service firms - Big is good.  Big is NOT necessarily good when it comes to an ideal sized client base.  A big client base can simply be an anchor.

Most professional service firms seem to feel that there is strength and better profitability in achieving a bigger size.  More clients equal more success.  Continually adding new clients adds more profitability.  Well that wasn't my own experience, and nor is it the experience of many others I work with.

Yet the myth persists, that getting more clients fixes everything.  What's wrong with the ones you have?

Maybe there is nothing wrong with your existing clients.  But then again maybe there is something wrong with some (many?) of them.  There might not be anything "wrong" with the people themselves - it is just that they are not the right fit for you and your business.  One of things we never speak about in polite business society is "not all clients are good clients".  There are some clients you just shouldn't have. 

A respected adviser once said to me when he was reviewing his business model, "I decided to go through my 400 clients and only keep the ones who trusted me, actually followed my advice,  and would never sue me".  He kept 8 of them, and sold the rest of the business.

That is too difficult a move for most advisers, however it graphically illustrates the point that not all clients are ones you should be working with.  If you know who is the right sort of client, and focus your attention on those ones, then not only do you build a better business over time, but you have a far more fulfilling and enjoyable life I'd suggest.  That same adviser had rebuilt his business over a 3 year period to about 170 clients, serviced by himself & 2 other advisers, and with an unbelievably high turnover (we are talking many millions in revenue in that business).

Clearly the business referred to is an exceptional one, operating in a particular niche and providing the very highest possible range of personalised service and expertise.  It is not a typical advice business in other words.  But it did start out as a fairly normal type of advice business.

Small can be very good.  Big can be very good too of course - but it should not be thought of as an automatic path to business security.  While it is true that many fixed costs inside a professional service firm are reasonably static, or not proportionately related to number of clients one has, there is usually some sneaky overhead-creep that goes along with increasing the size of the client base being serviced.  The variable costs directly related to marketing & servicing naturally go up with increasing client base size.

One of the more interesting and worthwhile things an adviser business can ever do is to spend some serious effort analyzing the business they have.  Work out what your servicing costs per client are each year for example.  Work out what the overheads per client are.  Understand what your clients cost you - and not just in hard cash, but in support personnel time and in adviser time.  If you go through the exercise I would venture that you will be quietly amazed at what you are spending on average per client.  And we haven't discussed the lost opportunity costs....

A quick example to make the point.  Let's say you send a greeting card 1 x p.a, a couple of newsletters p.a., review letters and reports mailed 1 x p.a., disclosure 2 x p.a., maybe a seminar 1 x p.a. for clients, and perhaps one invitation to a function each year.  These things are pretty typical and can easily add up to a cost per client of $150-200 in direct servicing costs.  Apportion out your fixed costs amongst the clients....often another $150/head fairly easily.  Staff time dealing with a couple of calls and emails a year?  Another $50-75.  Adviser time?  Another 2 hours a year - call that a minimum $300.

So, the client is costing you perhaps $800 a year to keep.  (Can you AFFORD to bring on more?)

The really interesting part though is when you begin the process of segmenting your client base and working out what each segment brings in revenue each year.  Your very top end clients, that follow your advice, and think about their affairs will be presenting you with average revenue of $1,200-$2,000 p.a. on a reasonably consistent basis.  Every 2-3 years there will be a big bit of work done with them that provides a lot more.  And they will, if the relationship is nurtured well, provide you with more clients of that type.  The lifetime value of these clients can be immense.

Clearly a good investment.  Get more of them.

However, at the other end of the scale I regularly witness advisers holding on to smaller clients.  Perhaps they purchased something from the firm 9 years ago, or sought some advice and paid for their plan 4 years ago, or were handled as a bit of a pro-bono exercise.  When you drill down and look at the ongoing value these "clients" present the numbers are startling.  It is not uncommon to see an average revenue per client below $100 p.a. at this end of the client base.

Yet advisers think that those clients should receive the same "basic service" (albeit without the function invite) as every other client.  Result?  They cost you many hundreds of dollars a year to keep.

The primary rationale for keeping these types of clients is flawed.  It is usually "I don't have to spend money marketing for new clients - these are my new business opportunities for years to come".  Sorry, you've already had them for years and haven't been able to make inroads yet, so what are the chances that will change in the next couple?  Really?

Some advisers take it further and actually go out looking to buy client bases of this sort - so you get to pay a lump sum in today's dollars that represents some multiple of anticipated future earnings for people that cost you money to keep right away.  I may not be a great businessperson, but that one doesn't look like a good deal.

The reason for outlining this is to simply challenge the accepted wisdom that "big is good" when it comes to running a professional services firm.  Big MIGHT be good, but it might not either.  A big revenue base is certainly good.  A big fistful of profit each year is good too.  A big reputation is good.  But a big "client base" that is predominantly low-value transactional customers is not a good client base at all.  It is a prospect bank perhaps.  In reality, it is rarely even that.  Such customers who do not value advice, or the adviser, or place any significant store on the service they receive are not worth keeping.  They are an anchor preventing, or slowing down, your ability to sail for new worlds.

If you do nothing else in your professional service firm this year about your back office, do this one thing.  Analyse your client base.  Segment it, and decide logically what each segment represents in terms of current and future value to your business.  Understand what each segment costs you to maintain.  Understand the risks of continuing to be seen as the possible professional adviser to apportion responsibility to, for people who do not actually value the advice or the adviser, and who are a drain on the firms resources.

It may be that providing different service or support offerings for different classes of customers is the way forward.  Perhaps some simply need to be culled.  Some will undoubtedly benefit from your increased attention and move up the value chain...but not everyone.

Working out who to drop is often the best way forward.  It is not a quick process, but it will be one of the most beneficial things you can do for your firms future. Drop the anchors, and get going.


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