5 steps to playing it safe

By Tony Vidler

 

How does an adviser play it safe when it comes to proving that they have acted in the best interests of the client?

There are 5 key things that the adviser must do - and be able to evidence afterwards - to show that they have worked for the benefit of the client, and not acted out of self-interest.

It comes down to being able to show that you "know your client".

Knowing your client (as a principle of regulatory testing) is about understanding the clients situation and needs in order to provide suitable advice that is most likely to help them achieve their objectives.

The 5 things an adviser must do in order to play it safe, and be able to show they have been working in the clients interests, consist of 3 process steps and 2 ethical considerations.  They are:

1.  Identify the objectives and needs of the client, together with showing they know the clients financial situation

2.  There must be clear instructions regarding what advice is being sought, or offered.

3.  The relevant client circumstances need to be understood and documented.

Gathering the right information and having clear understanding with the client, as outlined in these three steps, will go a long way towards satisfying future critics.  However, to ensure that you are REALLY working in the client's best interest, two further tests can be applied.

4.  Did the adviser to attempt to find out more information regarding the client's circumstances if it could be considered "reasonably apparent" that the information provided by the client was inaccurate or incomplete?

5.  Does  the adviser have the competency and expertise to provide the advice required?  This is effectively a self-assessment on the advisers' part - but hey, we know whether we know enough to do the job properly really don't we?   

In reality, the ethical tests are never applied - unless the regulator comes knocking for an audit, or a customer expresses dissatisfaction.  Both of those circumstances can happen at any time, so you do have to apply these tests.  If you find yourself as an adviser thinking "I don't think I have the knowledge to do that really well"....then you really should decline to try and provide the advice.  Otherwise you are inviting future dissatisfaction and problems.

One of the key things that is often misunderstood by financial advisers is that you will rarely be playing in terribly unsafe territory because of product non-performance (e.g. problem insurance claims, investment market losses) - IF your process is sound.  The adviser will be judged primarily on the basis of the processes they can prove to have used, and the extent to which they have demonstrated the principle of "the clients interest first".

To play it safe as an adviser therefore there are 2 big things to do:

* have a process showing you understand your client, their circumstances, and objectives

* conduct yourself honestly - especially in assessing your own competency

further reading:

Best Practice: ASIC doesn't expect perfection

http://www.professionalplanner.com.au/regulators/best-practice-asic-doesn’t-expect-perfection/

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Some customers you don't want...

by Tony Vidler.

Understanding the needs of different types of customers is essential in order to get your value proposition, service offering and process as RIGHT as you can to attract the right types of customers for your business.

Broadly speaking there are two groups of potential customers; 

1. Transactional focus

2.  Relationship based

The engagement, or "sales", process is quite different for each group.

Traditionally most advisers have been trained to deal with the transactional customer - which is hardly surprising.  Most of today's advisers were trained by product manufacturers in the past whose sole concern really was selling products. Today's professional adviser sells their expertise and time, and while there are often product solutions involved in the process they are not at the center of the advisers' value to the customer.

The customers with a transactional focus are pretty much focused on short term decision making.  They are essentially driven by price, or immediately perceived value for the price they have to pay.  In the absence of exceptional value in relation to other potential suppliers of advice or product solutions, they will focus on price alone.

Their greatest concern is paying more than they think they should right now.  As such, they will compare potential suppliers, or advisers.  They will haggle and express dissatisfaction at ANY price in a bid to get the best price-value they can.  They will question every recommendation, conduct their own research, ignore the commercial value supplied to them in time and effort by advisers, and be swift to complain of any perceived shortcomings.

Why would you deal with them if you are a professional adviser?  The very thing that differentiates you and adds value lies within your expertise and skills.  The core adviser value is not in the products you happen to suggest at any given time - and it is certainly not in the price of those products (which you cannot control much of the time in reality anyway).

The customer with a relationship focus may not articulate their needs in this way - they don't look for an adviser they can have a relationship with as such.  They do however understand that today's advice or product solution is simply a step in a much longer or larger process for them.  That is, they anticipate needing ongoing advice, service or solutions.  As such, their greatest fear is making a wrong choice.  That is quite a different motivator - and therefore underlying need that must be addressed and resolved - than the transactional customer.

The entire emphasis of your process is fundamentally different with each type of customer.

Traditionally trained advisers that retain an emphasis upon product as their core offering will naturally attract transactional customers - with all the haggling, stress and tyre-kicking that comes with that.  Advisers do so because the focus of their marketing and advice process is on that non-consumer-friendly process of "selling & closing". 

If you shift the focus of your marketing and positioning to one of engagement and building trust with customers you will attract those who value your ability to help them avoid making wrong choices, and with whom you will have much longer and valuable relationship with.

In the group of customers that seek relationship-based advice, there is significant lifetime customer value (which is a separate article in itself) for the the adviser business.  Those who seek transactional solutions focused on price are not really the clients for individual advisers of the future.  They will be the customers of the institutions that specialise in providing mass-market, not overly personalised, product solutions at the cheapest price they can get away with.

The business future for the professional adviser of tomorrow is in letting the transactional customers go to the institutions, and focusing on those who are more concerned with making wrong choices.  THEY are the ones who will value expertise and advice.

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Consider the context!

by Tony Vidler.

Watching how the market regulator manages change in a principles-based regime is revealing, and highlights the difficulty in implementing the principles.  

That is; the very act of raising questions and seeking submissions from industry provides useful information about the most difficult and dangerous areas for advisers.

Yesterday the Financial Markets Authority (FMA) issued a guidance note to assist the market in putting forward submissions to the regulator on how to interpret a key part of the (relatively) new financial advisers legislation.  (The link to the full guidance note appears below).  The guidance note itself is very helpful in outlining the current thinking and expectations of the FMA, and is worth reading for that reason alone.

The critical question that is being addressed in this guidance and submissions request process is, what constitutes financial advice as far as the advice industry thinks?

The FMA put forth a view which basically suggests there might be broadly three forms of interaction between an adviser and a consumer.  They are:

1.  No Advice. Information only is provided - essentially just facts are given.

2.  Class Advice.  Information, opinion, guidance may be provided by an adviser to a group or collective (e.g. via seminar).  No personalized advice is provided however as the individual consumer's situation is not considered at all.

3.  Personalized Advice.  The clients situation is considered and advice is provided that addresses their needs or desires.

The Financial Advisers Act itself provides some clear definitions, though not drilling down to the detail that provides explicit guidance.  Personal financial advice is essentially a recommendation or an opinion (whether express or implied) to act, or not act, upon financial information and the clients circumstances (and which is also NOT specifically class advice).

Where this all gets tricky - and provides the entire reason for the FMA seeking input from the advisory sector - is that the national retirement savings scheme is a product that not all types of registered advisers are allowed to advise upon.  Only some are allowed to provide "personalized advice" on savings and investment products (of which KiwiSaver is an example).  Yet, with over a third of the country now enrolled in KiwiSaver and an express desire on the part of government to have ALL of New Zealand enrolled in it eventually, clearly it is set to become a significant factor in the financial planning of every citizen some time.

Add to this that a primary objective of the Financial Advisers Act was to promote greater confidence by the public in the use of financial advice and financial services.

So we have a situation where most of our population will one day be involved with the national retirement savings scheme, yet not all financial advisers can talk to them about it even though a prime policy objective is for consumers TO get good financial guidance and use such products.

It is an awkward situation for a market regulator to try and resolve without doubt.  Equally, it is undoubtedly an awkward situation for many financial advisers and institutions to try and work with. 

The extremely valid point raised in the guidance that lies at the heart of the need to consider how to implement the law, is that the "context shapes the customer's expectations" as to what is personalized advice.  Logically, you cannot disagree with this argument.

Look at the picture below for a graphic example of how context shapes precisely the same thing.

 

A financial advice example; if there are (say) 50 different KiwiSaver scheme providers that a consumer might choose from, and a financial adviser gives the consumer a single investment statement from a provider, is it reasonable to think that the consumer could consider that a personal recommendation?

The answer is "maybe". Which is not helpful at all is it?

Scenario 1:  Consumer says: "have you got anything you can give me on KiwiSaver?".  Registered (but not Authorised) Financial Adviser replies: "here's one provider's investment statement".   It is hard to imagine somebody perceiving that to be personalized advice.

Scenario 2:  Consumer says: "I think I should be in Kiwisaver and need to know which one to join".  Registered (but not Authorised) Financial Adviser replies: "here's one provider's investment statement".  It's hard to imagine that not being perceived as a type of advice.

Exactly the same response each time from the adviser - yet the context is substantially different.

Only 1 provider was offered to the consumer out of the full range of possible choices in this scenario.  The advisers genuine belief may be that by providing an investment statement they have merely provided factual information on a particular scheme.  This does not necessarily constitute a recommendation that the particular provider is better or worse than any other - it is just information on a KiwiSaver scheme.  "Frankly they are all much of a muchness and it doesn't matter who you pick" may well be what is going through the advisers mind.

To a consumer though the context is quite different.  Certainly in Scenario 2 there is a real risk that the Consumer's perception is "I told the adviser I wanted to join KiwiSaver and the adviser gave me this particular statement, therefore it is the one they recommended".

Regardless of the outcome of the submissions process just initiated by the FMA here, there is a long-term lesson for advisers that is immediately apparent:

Consider the context. It is the difference between whether you are well on the right side of the battle line, whether you just strayed into no man's land, or whether you have gone into territory that is not yours.

http://www.fma.govt.nz/media/887945/guidance_note_-_kiwisaver_sale_and_distribution_june_2012.pdf


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How going Low-Tech is best!

by Tony Vidler.

As advisers become more compliance-focused, and attain more technical expertise, there is a real risk of getting too clever - and clients not understanding what you are talking about.  It is helpful to have some simple techniques that cut through to the heart of the matter and show them precisely what you are suggesting, and how that benefits them.

Often the best way of explaining in simple terms what you are recommending is to go really really low-tech.  Use a blank piece of paper, divide it into 2 columns and put each "parties" part on either side of the page.

It captures precisely what you are suggesting; what the clients commitment is; and; what the other parties commitment back to them is.

People get it, and it is a lot more helpful than the 40 page detailed report with pie charts and graphs.

For Example:

I am not suggesting ignoring the technical information, or the necessary detail of your recommendation.  The detail is essential from many perspectives.  However, technical information should be supporting your recommendation - it should not BE the recommendation.   GREAT advisers are able to take complex technical information and deliver it in a way that clients can grasp quickly.

As Albert Einstein so famously put it:

"If you can't explain it simply, you don't understand it well enough"

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How to spot a Dinosaur.

by Tony Vidler.

I have wondered if, with all the changes in financial services over recent years, any of the dinosaurs survived our own dramatic financial ice age.  "Surely not", I thought.
But they ARE still out there!

Over a period of some 6 months I have observed a dinosaur up close as I attempted to change its DNA to ensure its survival after the big thaw of the current Ice Age.  Despite (logically) knowing that it was a virtually impossible task, as scientific intervention doesn't change the DNA of the living creature and nor is the creature able to change its own essential nature in its own lifetime, you fool yourself into thinking it just might be possible.  I was plain silly, what can I say?  Mea Culpa!

I did however learn a lot about the topic though from close observation, and there are some lessons here for everyone who ever has anything at all to do with financial services.  We shall begin by identifying the stock standard carnivorous dinosaur (and bear in mind everything I know about dinosaurs has been learned from watching all the Jurassic Park movies - twice.  I am therefore something of an authority on this topic!)  The dinosaur I refer to has the following characteristics:

• it is programmed internally to hunt for every meal.  That is its base instinct.
• it simply eats whatever it kills.  It is not a particularly discerning diner, as long as it gets meat.
• if it cannot catch and kill new prey, it will resort to cannibalism and attack its own kind
• it cannot be tamed or domesticated.  It will always be a wild creature that will turn on any other.
• it has a poorly developed mind.  Logic, rational thought, understanding of consequences are non-existent.
• it has very basic emotional development.  The entire set of emotions consist of "happy" ("have just killed and eaten something"), & "angry" ("have not killed and eaten something").
• it is noisy and attempts to impose its presence with sheer volume.  Of the roaring kind.
• it stomps about crushing things underfoot willy-nilly. It's environment exists solely for its own benefit in its mind.

Comparing this to the small and dying breed of Financial Adviser Dinosaurs (FAD's) - of the sort I inspected closely for a little while - you find distinct parallels.  I provide this list of identifying traits as a matter of public service.

• The FAD has no concept of investing in future food sources
• The FAD lives sale to sale.  Often it spends its commission twice - the day a sale is "made", and then again the day they actually get paid for the sale they made.
• The FAD has no target market (preferred prey?).  If it is still breathing it is prey.
• The FAD will cannibalize its own business for another sale.
• The FAD cannot be improved through regulation and rules.  Like a leash, they are effective only when directly applied to the beast in question and under the watchful eye of a handler.  The leash in itself does not change the animals behavior.
• The FAD has no technical qualifications at all.  Nor does it really want any.
• The FAD operates at the barest minimum legal standard, hovering just on the barely legal side of business. Mostly.
• The FAD has no aspirations for self-improvement, professional development or for achieving any of the higher purposes in life.  The mindset is consistently narcissistic - focused only on what makes them feel good in the moment.
• The FAD has limited emotional development.  Whilst they cover the stock standards set of human emotions, they have not quite evolved to the point of having innate sense of fairness or justice, and the emotional set does not include "guilt".
• The FAD is consistently upbeat and positive and talking enthusiastically - about themselves - to any audience.  A mirror is of course an audience to a FAD.
• The FAD is not interested in creating legacies or thinking of tomorrow.  Bulldozing is a method of movement for the FAD.

Now I really should stress that these FAD's are increasingly difficult to find, there are less and less by the week.  Speaking personally, as a person who has watched Jurassic park movies from under the blankets the first time around, it is not a good thing having dinosaurs roaming freely amongst humans and their pets.  Fortunately for us, there is little doubt that the dinosaurs are totally hopeless at breeding and raising the young - in a purely commercial sense that is.  

They simply cannot build successful businesses with their inherent characteristics, and nor can they congregate successfully for commercial gain with other dinosaurs - or even other non-dinosaur-creatures.  That base instinct of killing to eat, combined with nonchalant cannibalism whenever hunger demands it, puts paid to their commercial prospects.

Regardless of your place in the financial services life - be it a consumer, potential business partner or ally, consultant or coach, or just someone with a spare seat at a conference - it is worth being able to identify a FAD as quickly as possible.

Should you hear one coming (and you usually do hear them first), then spot the predatory look as they size you up as a potential meal while they bulldoze their way into your conversation/life/spare seat, then run.  Quickly.  It is the only safe course of action.

The good news though is that these dinosaurs are dying out.  And if you can stay out of their kill-zone, they will die out even quicker.


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The 8 steps of a great sales script

 by Tony Vidler.

 One of the most under-rated tools for success in any sales-orientated job is "scripting"...actually writing down the words you are going to use - in advance - and thinking about how those words work together.

Unbelievably though most sales people seem to prefer to pick up a phone, or make a call on a prospective client, and basically just work it out on the fly. 

They say they want to sound "natural", or don't want to sound "canned"....and after a little role play I can often assure them that their natural and un-canned approach to a prospect certainly doesn't sound like a rehearsed spiel at all. 

It usually sounds more like a spluttering teenager hesitantly asking a shotgun-armed father if he can take his daughter out....

The same salespeople then ask for help with improving their conversion rates....improving the proportion of the people they talk to initially wanting to talk further with them.  But they want to be natural while doing it.

So why bother scripting out what you are hoping will sound natural and easy?  Well, it is so you can be natural and easy....while being effective.

In any presentation, whether it be over the phone to a stranger or in an auditorium of attentive acolytes, you will be far more relaxed and easy with your audience if you know precisely what you are going to say and do.  Practice really does make perfect in this regard...rehearsing and practicing to get the right words in the right order and with the right inflection and impact makes a massive difference to your conversion rate.  It follows of course that a big difference in that conversion rate means far more effective advertising and marketing spend, and a far healthier bottom line for your business.  And you annoy less people.

What goes into a good sales scripts?

1.  The clients name.

The one thing guaranteed to get someone's attention is their own name, and it is a basic courtesy.  Try and use it 2-3 times early in the script as it gets their full attention on what you are saying.  You are also being courteous and polite in doing so, which creates a positive impression.

2.  Pauses.

Especially when engaging with a prospective client on the phone and they have no non-verbal clues to help them, you have to give reasonably frequent pauses.  It is difficult for most people to follow a conversation with someone they do not know well when they can only hear them, so you have to slow down and give them time to process what you are saying.

3.  Tone.

The tone can in itself make or break any approach - we all know that.  Think beyond the obvious though - it isn't just about being friendly and professional, but where you put inflection on particular words, and how fluidly you move through what you want to say can also make a huge difference to how positively it is received.  And a light mildly humorous tone can be magic - if you (or your line of work) can carry that off.

4.  Brevity

Life's short. Keep it brief.  Make it as short as possible - but no shorter.  One of the real advantages of scripting and role-playing is that you can actively refine what you want to say to get that optimal balance of brief, but detailed enough, to get the point across.

5.  WIIFM.

Every prospective client has Radio-WIIFM playing in their own head the whole time you are talking to them.  What Is In It For Me?  That's the question in their minds that MUST be answered sufficiently for them to agree to go further with you.  It is at the core of your script.

6.  Minimal choices.  

Too many choices confuse people, and their instinct is to either find a middle ground or refuse to choose anything.  The simple act of providing many choices creates a barrier for many consumers - it all gets too hard.  If for instance you are asking for an appointment, then just give them a choice of 2 times.  If you don't provide any choices, and leave an open question for them to solve, it just becomes too hard as they have to think of too many variables.

7.  Ask.

Seems obvious, but you actually have to ask for what you want at some point.  Clearly it is not appropriate asking for what you want before you've gone through the previous steps, however you do actually have to ask for the order, or the next step, or the appointment, or whatever.  This doesn't have to be complicated - in fact you are more likely to be trusted if it isn't some cunning "closing technique" - just simple and open, asking for permission to go to the next step, is very effective.

8.  Back-up.
No matter how good and polished your script and you are, there will be people you are talking to where they haven't quite got it and are hesitating.  Usually when they are hesitating or non-committal - but haven't hung up on you or thrown you out - they are saying inside their own minds "you haven't convinced me yet".

You have to be prepared with a back-up...something which cuts straight to the heart of the WIIFM again and helps them understand what the benefit is to them of doing what you ask.  It is not "objection handling" of the old fashioned variety where you supposedly will cunningly maneuver the prospective client into saying "yes" to something they will later regret.  This is your best shot...your key proposition put into words that show them how they will gain from doing what you propose.

There will still be people who don't go with your recommendation - and for lots of good reasons that they don't want to share with you.  But if you do construct a great sales script, and rehearse and polish it, at least you won't lose good people just because they couldn't understand you or thought you a bumbling fool.

A great sales script is founded on elemental psychology and an acute understanding of what is likely to be happening in the other persons mind.  The right words, put together in the right order, and then said the right way, and all done with conviction and certainty make for success.


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Financial advice less beneficial than prostitution?

 by Tony Vidler.

The latest financial services regulation development in New Zealand has an interesting twist.

One has an immediate sense that somehow financial advisers have just swapped places with the prostitution business.

By that I do not suggest that now financial advisers are trading in sexual favours of course, or that sex-workers are offering financial advice. But which of them engages in acceptable business practices does appear to be shifting it seems.



You see, soliciting for sex on the street is a legal and regulated business activity in New Zealand. Clearly it is an acceptable business practice to regulatory decision makers, and no problems are caused to society at large from allowing those in the business to hawk their wares to unsuspecting passers-by. I am confident there will be rules prohibiting them from soliciting near schools or something (which would be quite ridiculous as I am confident their target market are not to be found in schools), but by and large they are allowed to ply their trade openly in the street. Fair enough I suppose, and good for them.

However, we have a new piece of proposed law (the Financial Markets Conduct Bill) which says soliciting for financial products is something which should be stopped.

It's an interesting contrast don't you think?

Without meaning to be disparaging in any way to sex-workers (who by all accounts are prospering in the regulated world), it would be fair to observe that their trade would set off alarm bells on more moral radar screens than, say, a chap wandering around offering life insurance. I have no doubt the wandering insurance sales person (if they still actually exist) will upset someone whilst going about their business. But then, there is a proportion of society who clearly subscribe to Big Brotherdom in most aspects and are able to move to immediate moral outrage and indignant huffing and puffing at the suggestion that some people don't care about carbon footprints either.

So we have a proposal which basically appears to want to banish "unsolicited offers" made by financial advisers.

But what is an unsolicited offer? Conceivably it is any offer to provide financial products or solutions which a consumer did not actively seek out.There's a problem in itself. In 22 years I could count on my hands the number of consumers who have apparently woken up one day and decided that was the ideal time to contact me and put in place a financial solution - unsolicited.

In financial services, where the benefits or the products are primarily intangible in the first instance, most consumers are not alert to the benefits of taking particular courses of action. To help consumers understand what their possible courses of action may be the financial services industry engages in a significant amount of advertising, marketing and - for lack of a better word - soliciting.

Advisers talk to people, and in a sense "hawk their wares". Just like most other businesses. Plumbers do it, and painters do it, and prostitutes too.

Why would it be that it is not acceptable for financial advisers to talk to people and offer their expertise, or products, or particular solutions?

In this country we have a recognised issue with low financial literacy across society; we have a recognised problem in under-insurance (and therefore over-reliance upon the state to put matters right); we have a looming issue with retirement funding for an aging demographic.

The proposed solution?

Don't let those who might be able to help address these issues actually go out proactively and talk to consumers.

It is, in a word, farcical.

Professional advisers are universally in favour of laws and regulation to protect consumers from the unscrupulous. We have those laws already in fact.

Suggesting that the country requires a further piece of law-mongering that will undermine the public participation in the use of financial services and financial products, and relegate an entire industry to a position where it has less ability to market itself than prostitutes have, is simply irresponsible.

Doing so suggests that financial advisers provide less benefit to society as a whole than the streetwalkers, which I am willing to contest.


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When is the best time for honesty?

by Tony Vidler.

I have found myself talking to several advisers recently about "disclosure" - not a scintillating topic, and one which I'd prefer to not talk about. There are many things far more interesting in life on which you can spend your time.

The disclosure talk has arisen though because it is still apparently confusing, and advisers continue to ask questions on what they actually have to do.  One thing I am sure about though, is it is not a good strategy to try and find a clever line that is just on the "right" side of the law (you hope), and then try to make the case later on that you are an honest person.  

Honesty in the advice relationship is there right at the beginning, or it is never there at all.

A quick recap on adviser disclosure, as a principle here in New Zealand.  Full disclosure applies to Authorised Financial Advisers only, and most are apparently meeting their requirements with a 2-tiered system.  They provide a Primary Disclosure Statement when first meeting with a client, which details qualifications and licensing status, and provides general information on how they might be remunerated and what conflicts of interest might arise.  Following the specific advice being determined for a client, they then provide their Secondary Disclosure Statement.  This secondary statement is where the bulk of the confusion lies, and where there is a tendency for some to still get it wrong I feel.

The rules are actually pretty straightforward.  The Secondary Disclosure Statement must (and these are highlighted pertinent points only): 

•  "set out the prescribed information clearly, concisely, and in a manner likely to bring the information to the attention of the client".  (surely there is no confusion as to what this means?)
• if charging a fee, then the adviser must specify the basis on which the fee will be charged, a reasonable estimate of what the fee is, and when the client must pay.
• provide details of financial interests and relationships that "a reasonable client would find reasonably likely to materially influence the adviser"
• provide "details of all remuneration....that the adviser.....has received, or will or may receive

Further guidance is provided by the regulator:  "the intent of the secondary disclosure document is to describe the specific nature.....you should do this clearly and concisely and in a manner that brings the required information to the attention of your client".

So with such abundance (and I think clear) guidance why would an adviser have a secondary disclosure statement that is generic, templated and holistic information that clearly is aimed at being provided en masse to anyone they deal with?

For example, statements provided following specific advice to a specific client say things like "I may charge you a fee, or I may charge you a commission.  There may be bonuses, and I might receive incentives.  There might be conflicts of interest, but maybe not....."

How would an adviser, let alone a reasonable client find this sort of statement to clear, concise and specific?  Clearly it isn't any of those things - it is not clear what is actually being charged; it is not clear what material influences are actually at work here in this piece of advice; it does not specifically draw the client's attention to conflicts of interest.

Perhaps it is because some advisers are confused over what their obligations are.  Perhaps it is because some advisers feel uncomfortable spelling out their cost or remuneration.

Whatever the reason for not providing specific disclosure at the appropriate time, I am reasonably sure such behaviour will be severely frowned upon by regulators.  It is also very highly likely that any disputes resolution or legal intervention in the future would place some weight upon the fact that the disclosure was not of an appropriate standard (perhaps bordering on misleading?  oooh, there's a nasty thought....).  It will be difficult for an adviser to make the case at that junction that they are in fact an honest person who was operating in a professionally transparent manner.

Most importantly though, how can it build trust in the adviser-client relationship if one is not willing to be direct, specific and transparent from the beginning?

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3 questions you must answer to define your Uniqueness

by Tony Vidler.

The difference between a good (but not spectacular) salesperson, and a truly magnificent salesperson is the ability to succinctly articulate what makes them special. 

This is often referred to as having a "Unique Selling Proposition", or USP.
 
A good USP is the thing that in a moment makes a potential customer think: "Aha! - I am interested in talking to YOU".

That moment can be the difference between merely making a living, or making a mint.

So how does one go about defining their USP?

Well, it's hard work. You have to think honestly about what makes you different, and how you deliver value, and then be able to capture that in a simple statement that people can get, or get intrigued by, in moments....it is not a 5 minute job to work out for most people.  In fact it is something that you might be constantly thinking about and working on for many many months.  

To get on track with defining your own USP there are just a few questions that you need to be able to answer.  So here are the questions you have to answer in order to distill the essence of what makes you special, and why somebody should deal with you.

1. What do I really do?

(Note:  not what are the mechanics or functions of my job, but what things do I achieve for others)

2. What am I genuinely passionate about? 

(Note: "passionate" is an over-used word, but think about what you would do for no financial reward (if you could), because you genuinely love doing it)

3. How does what I do, and what I am passionate about, combine to make a fantastic difference to another person?

(Note:  This is the toughest one to work out - and is the essence of a great USP)

Some good (but not GREAT) examples:

"what makes me unique is my ability to grasp complex technical information REALLY quickly, and provide practical simple solutions straight away that clients can benefit from."

"what makes me unique is my ability to positively influence people to change their thinking on how their financial future can be, and then help them make it happen the way they want it to."

"I am great at being able to to stay focused on the end goal for my clients, and to be able to adapt their plan for them as the world changes so they are always on track to achieve their big goals."

There is a common structure here in articulating the USP.   Identifying immediately that you are able to describe something different about you in comparison to others, focusing then  on the key function that you perform better than others, and then translating that into the core benefit for the client.

Simplistically, the formula for a great USP could be described as:

My brilliance + my passion = Your gain

a final example....

"I am the best in the business at taking complex financial problems onboard, and delivering simple solutions that work for my clients.  I make their financial issues easy for them to fix."

It can be very hard work distilling all that you know, and all that you can do, into a simple sound-bite that people can grab, and understand, in moments.  If you are able to though, you will find that more prospective clients engage you.


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Underwrite at proposal time, or claim time?

 by Tony Vidler.

When does your client want to have the drama with their insurance company? At underwriting time, or at claim time?

An confusing facet of the life & personal risk insurance business is the perception that some companies are easier to do business with than others due to underwriting processes....and while that is true to a degree, it is not always as simple as it seems. To be sure, different insurers have different retention levels, make some different morbidity and mortality assumptions occasionally, and they definitely target different parts of the consumer-market with their pricing and underwriting terms. These factors undoubtedly make a difference to the underwriting process for any personal risk proposals.

However, regardless of different insurers views of the variables to be given particular weight during the underwriting process, there remains a comprehensive underwriting process that will be employed. The question is simply whether the risk will be fully underwritten at proposal or at claim time.

We have seen in recent years some insurers remove the barrier to business for advisers by streamlining the underwriting process - some even going so far as to do extremely simplistic underwriting of perhaps 5-10 questions. That type of underwriting effectively identifies only immediately impending claims, which of course are risks that are not taken on by the insurer. The insurer simply avoids taking on those immediately impending claims and declines the proposal outright. What about all the other policies it does accept with minimal underwriting though?

The reality is that the majority of the easily underwritten cases will be medically underwritten in the event of a claim. That of course is just the time that a client or an adviser doesn't want problems.

Contrast that with the philosophy of fully underwriting and assessing the risk in full at the time of proposal. In the event of a claim most of those types of cases do not require full medical underwriting to settle the claim - it has been done at the outset, the risks appropriately weighed up and priced, and a high degree of certainty provided to the client. Sure there will often be some medical evidence required to validate the claim, but the claims managers are not going through the entire medical history looking for problems to include in the decision on how to process the claim.

The difference between the two philosophies is a fairly stark one: higher claims certainty versus higher immediate convenience.

It may be that a client, or an adviser, will knowingly decide that immediate convenience is preferable to higher claims certainty, and therefore work with minimal underwriting to put some cover in place. They take their chances at claim time of course, but it makes doing the business easy.

For most clients, and for their advisers, there is greater merit in working with a full underwriting process at the outset despite the time it takes and the hassle it causes, and the difficulty in obtaining the required information or even reasonable terms for the client. Because in doing so right at the outset, before a contract has been entered into, the client can create greater certainty that the product will perform at claim time as expected. It makes doing the business harder, but will usually make handling the claim easy.

For the adviser, there is far greater certainty that their advice and process will stand scrutiny well with a full underwriting process at the outset.

In the underwriting battle between claims certainty or immediate convenience, The better bet is on taking the inconvenient path at the initial underwriting stage for better long term business relationships and product performance at claim time.


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The 6 P's of sustained peak performance

 by Tony Vidler.

How to stay on top of your game, get the results that you want in business, and maintain peak performance....it all comes down to having a system, or a process.

The formula is - like all good things - a simple one. 6 P's become your process, and lead to sustained performance, instead of the frequent ups and downs of business that can be so demoralizing and stressful.

It all begins with marketing of course - and marketing is the main thing. I recall hearing from Winston Marsh once that "you have to be a better teller of what you do, than a doer of what you do". He is right - it doesn't matter how good you are if nobody knows it. And they won't necessarily come and find you just because you are great - unless you are one of the absolute elite at the top of the game with a truly international reputation and strong personal brand. But even those people are constantly marketing...

The point of this system is to stay focused on the daily activities that create value and generate business. It is a cycle that doesn't stop. And it all begins with marketing - every day.

Promote:
Marketing should be a daily activity, not just an annual think-tank & planning session. Apply the strategy daily, and keep sending the message out to your target market continuously. For example: if your primary marketing strategy is to establish credibility and authority in a particular market niche and dominate that niche, then they need to see and hear from you continually - you have to be the voice that is listened to. A daily routine of providing content via Twitter and Facebook (both aimed at your target market), supporting your content and positioning on LinkedIn, might be your daily "promotion".

Produce:
The next most important thing is to generate revenue. Constantly. It is the next most important focus, and you must be doing that, and working upon doing more of it, daily. No matter how nice the fee or commission for any particular piece of work, it will be gone in no time. (I've seen many spend it twice - the day they make the sale it is often spent in anticipation, and then again on the day the revenue actually arrives). You have to keep selling. Marketing isn't enough, as that just provides the opportunity to sell. Selling gets the dollars in the door - it needs constant focus. You might do this by ensuring that you are in front and presenting to "x" number of people per day.

Pitch:
You have to continually top up that sales funnel. There is no point in having a heap of well qualified prospects that you are not doing business with, and there is even less point in not doing business just because you are worried you will use up all your prospects. At a personal level - the prospecting part of any sales process - you have to be pitching daily. Pitching just means "tell your story" to people - not corner them, or try and sell them straight away. You know that the best clients come from a well established, trusted relationship, and that can only be built over time. Take the pressure out of the business by ensuring that you are talking to people each day who will be future clients - not today's sale. You might do this by ringing and talking to to "x" people per day who are at different points in the sales or relationship building process.

Process:
Look for an area to create just a little efficiency within your business each day. aim for 1% improvements daily - not giant leaps forward. Incremental process improvement is easy, and far more quickly than you would think it leads to a very efficient business machine. It is the same approach as the ant trying to eat the elephant....just one bite at a time. You might do this by standardizing one letter, or paragraph for reports, each day that you can use continuously to save time or make the job easier in the future. Keep building and refining proceses for a more efficient business.

Perfect:
Work on the business, even if it is just a little, each day. Some time with the staff, the key suppliers, the centres of influence, the financial management, analysis of marketing efforts - there are so many things to do and continually work on in building a great business. Work on it constantly in easily digestible chunks (remember the ant and the elephant? it is the same principle). The goal her is not "perfection", it is about continually perfecting and refining.

Plan:
Every day, review the activity plan. Not the business plan as such, but work the diary for the days, weeks and months ahead. schedule the work, know who you are going to call, know where you are going next.

...then get on and promote....

This simple daily routine will keep the wheels turning in your business, and ensure that all the important components in building a great business are being worked on - while keeping the revenue coming in the door.

Attaining peak performance is simply a matter of having a good process that focuses your time and effort in the right proportions on the right things. Then being able to get into the routine (habit) of applying it.


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The Adviser as an Artist.

by Tony Vidler.

There is an area of financial advice which is subject to perpetual testing - suitability of the advice given.

WHY was a particular piece of advice appropriate? What factors were considered, or even discarded, that led to a particular recommendation as being the right advice?

It is an area that holds the attention of litigators, regulators, the judiciary and disputes resolution case managers, and of course advisers themselves. This is largely because it is a subjective matter, in a field where you will often receive half a dozen opinions from half a dozen well qualified people - all using the same underlying facts.

Of course one of the major difficulties for advisers is that when the advice is provided they can only take into account known circumstances and factors - and there are always more new dangerous unknowns lurking about that nobody thought of, or which were not recognised as dangerous things at that moment in time. No advice is ever really totally circumstance-proof. Nor is advice in itself something which removes risk for clients.

Market risks & contractual interpretations play very significant parts in product performance. The performance of a financial product is generally the trigger event that raises the issue of whether the advice itself was suitable. That is, when a financial product does not perform as the consumer expected, the bulk of the suitability testing falls on the advice component, rather than the product. Not terribly fair, but that is our lot in life it seems.

As an adviser how can one go about determining "why this advice is appropriate"?

Especially knowing full well that the adviser cannot control actual product performance - and that is equally true of investment, mortgage or insurance products. Nor can the adviser remove market risks, or even necessarily begin to cover all risks for a client by transferring every conceivable negative outcome to another party.

Providing suitable advice for a particular client situation is an art form, make no mistake about that. The beauty is going to be in the eye of the client beholder, and that critical inspection may take place a very long time after the advice was given.

The real art of providing suitable advice is to form a professional recommendation as to what is "most likely" to be the optimal solution. Then very carefully conveying precisely to the client that this is "most likely" - not foolproof, not guaranteed, and not a certain outcome. It is "most likely" to work, and that message carries the weight of any future suitability testing.

In forming the recommendation it is vital that the clients needs are identified. There has to be substance to the recommendation, and that is founded upon knowing the key facts of the client situation and therefore what needs are to be addressed.

The next part is the area that many advisers do not think through, or do particularly well - prioritization.

This is THE essential step in providing advice that is most likely to be most suitable for the client's situation. The client will often have multiple (and sometimes competing) needs, and it is critical to establish a priority list - something has to be more important to get right than another thing. The something else is second in importance, and so on.

Identifying the needs, and then prioritizing them, are the canvas and the oils. The artist then goes to work with these ingredients to create something unique for the client. The artwork is not the underlying ingredients, it is the image and end result created from them.

Provided these two critical steps are undertaken AND the client understands that the recommended advice is suitable as it is most likely to produce the desired result, then it should result in advice suitability rarely being seriously challenged.


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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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