Should we care about the public interest?

by Tony Vidler

Should financial advisers care about the public at large?  The people who are NOT our clients?  Those who don't pay us anything?

Absolutely.

When one considers "professionalism", and the attributes that define a professional, you quickly come to the conclusion that a unique characteristic of the genuine professional is a commitment to the public interest.

If you are a financial adviser who is committed to being a professional, you have a social responsibility that extends beyond just those clients who can afford your services.  In plain terms, you have a responsibility to make available your professional expertise to members of the public who have genuine need of your knowledge, but who cannot necessarily afford to access it, in order to improve the standing of the profession itself whilst rendering service to society.

It is a principle of professionalism....one of the hallmarks that define a professional.  It is referred to as pro bono, or more correctly:

"Pro bono publico (English: for the public good; usually shortened to pro bono) is a Latin phrase generally used to describe professional work undertaken voluntarily and without payment or at a reduced fee as a public service. 

It is common in the legal profession and is increasingly seen in marketing, technology, and strategy consulting firms. Pro bono service, unlike traditional volunteerism, uses the specific skills of professionals to provide services to those who are unable to afford them."

(source:  http://en.wikipedia.org/wiki/Pro_bono )

One would like to think that all good citizens care about the public interest, and will do something to benefit wider society generally with the donation of their own time and expertise.  A huge part of our society does exactly that - contributing their time and effort to coach sports teams, raise funds for disadvantaged members of the community, work together to build facilities for the common good and so on. 

Undoubtedly our society would be a far more difficult environment, and less pleasant to live in, if it wasn't for the good citizens who donate their time and effort to making their part of society a better place by looking beyond their own immediate needs and pleasures.

Many financial advisers have contributed to their society in the same way over many years - they too coach the kids, fund raise, provide foster homes, mentor troubled youth and everything else that solid members of society do.

We have the ability to provide practical help however that not all other caring members of society can do however.  By sharing our knowledge and skills with those who might never be able to access good financial advice, we can create inter-generational change.

Helping a family with poor financial literacy to learn how to create assets and self-sufficiency, or escape crippling high cost debt, or understand how to create a dignified retirement for themselves....these are things which not only change the lives of those you help, but also the lives of those who they in turn influence and are responsible for.

Sharing our skill and knowledge in this manner is very rarely done by the financial advisory industry - and for many good reasons.  It does cost the adviser personally to provide such service - even if that is only in an "opportunity" cost.  There is the potential for public cynicism and cheap accusations of the adviser engaging in such programmes as a "marketing exercise".  The adviser potentially incurs the regulatory risk despite the absolute not-for-profit nature of the work being provided.

However, the potential benefits to financial advisers collectively of creating - or enhancing - public confidence through providing pro bono assistance to those in need are worth these risks. 

The elevation of the professional standing of those who commit to the public good over and above their own commercial objectives is satisfying and personally fulfilling at the very least.  The difference you can make in people's lives though - and ultimately in the lives of their dependents - is incalculable.

A word of caution though:  the same duty of care and professional diligence obligations must be taken when providing pro bono advice.

Apart from the very obvious need to minimize the business risk to the adviser, there is a higher level of public scrutiny placed upon the actions of the professional when engaged in providing such service.

Demonstrating your professional expertise and professional conduct while working in the public interest is what actually defines the Professional in the eyes of the public.

Financial advisers should grasp such opportunities to work together on pro-bono projects.  It's what separates the really good advisers from the rest.

Like this?  Then share it with others...or visit www.strictlybiz.co.nz for loads more useful and interesting information.

P.S.  Here is a blatant plug for a campaign being run by the Commissioner for Financial Literacy and Retirement Income here in New Zealand, that a number of professionals have agreed to assist with by providing pro-bono advice to members of the public during Money Week 2012.  

(Disclosure of interest: I have volunteered, and I would dearly love to see a thousand advisers participating!)

 

 http://moneyweek.org.nz/

For Consumers:  If you want to talk to a professional adviser for free during Money Week you can call the IFA on 0800 404 422 or go to 

 http://ifa.org.nz/professionals/events/eventdetail.php?eid=564

Why Dirty Harry wouldn't win a Gold Medal

by Tony Vidler.

One of the great movie lines spoken by the character Dirty Harry was "a man's got to know his limitations".  A line which always seems to apply to financial advisers.

But this doesn't apply to Olympians does it?  

I am captivated by the incredible achievements of humans that is demonstrated at the Olympics, and their ability to continually re-define their (apparent) limitations.  

You cannot help watching them, admiring them, and then wondering how you can apply what they know and do, to the non-Olympic and mere-mortal world we live in.

At the London 2012 games 2 athletes standout for me personally, on the basis of how they continually have re-defined their own expectations (or self-limitations).  

Michael Phelps must be considered one of the greatest athletes of all time, and his record is remarkable.  The second athlete to stand out for me is also a swimmer - who did not win a medal.

Lauren Boyle, from New Zealand. What a remarkable young lady - and the epitome of a "champion".

She came 4th in the 800m freestyle final.  But to get there she had to continue, race by race, to swim faster than she had ever swum in her life.  Breaking her own national records to get to the final, and then under the immense pressure of the final of an Olympic glamor event, she lifted another notch again.   And at the end of the race, was she upset at getting 4th?  Not on your life...she recognized that she had challenged her own beliefs, re-defined her apparent limitations, and found a new confidence and performance level.

So what do Lauren & Michael Phelps have in common?

Well, they both have a coach that they listen to and learn from.  They apply process and systems to enhance their training and "professional development".  They take advice from their mentors.  It is up to them to put that advice into action and performance though.

According to a study of Olympic Champions here are their common denominators for success:

Characteristics of Champions

  An ability to cope with and control anxiety.

  Confidence

  Mental toughness/resiliency

  Sport intelligence

  An ability to focus and block distractions

  Competitiveness

  A hard-work ethic

  An ability to set and achieve goals

  Coachability

  High levels of dispositional hope

  Optimism

  Adaptive perfectionism

Source:  Psychological characteristics and their development in Olympic champions.

Gould, D., Diffenback, K., & Moffett, A.

If you want a self-improvement checklist of things to work upon, you will not find a much better list than this one.

On this basis, would that excellent pistol shooting Dirty Harry have got a gold medal?  

I don't think so...at the very least because he wasn't too "coachable", or open to learning.  There are a couple of other attributes that he didn't share with the Olympians either, and we can't overlook his tendency to adopt a cynical "me versus the world" attitude combined with a mindset of "my way is the only way, and winning is everything".  Brute force as a method of problem solving also has its limitations too I guess.

What led me down this line of thought in recent days is the realisation that there are more business owners like Dirty Harry than there are business people thinking and behaving like Olympians.

Champions challenge themselves, and are continually focused on incremental improvement, open to new ideas and learning, and reinforce all they learn with sheer hard work.  

Any professional advisers or professional service firms looking to develop or just get business ideas and inspiration should think about adopting the mindset of an Olympian rather than Dirty Harry. 

You don't have to actually get a gold medal or be first in the world to be a champion.  You only have to have seen Lauren immediately after NOT winning a medal to realise that.

 http://www.3news.co.nz/No-medal-but-still-glory-for-record-breaking-Boyle/tabid/1706/articleID/264158/Default.aspx


Like this?  Then share it with others...or visit www.strictlybiz.co.nz for loads more useful and interesting information.

Re-kindle the (almost) forgotten art of selling!

 by Tony Vidler.

Advisers: Good advice process is not enough. Being technically competent is not enough.

You have to sell.

There, we said the dirty word out loud. "Sell". You have to sell if you are going to be effective at your job as a professional financial adviser.

Over the last couple of years there has been a shift in emphasis to providing advice that is centered upon "good process". In fact many advisers have become so focused upon the process that the advice itself to the consumer is almost hidden somewhere deep in the bowels of the process.

More importantly though, "selling" has become an ignored (or forgotten) skill....sales are deemed to almost be a bit grubby, and not worthy of professionals.

Too many advisers have erred so heavily on the side of deploying professional process that they have forgotten that one of their primary roles is to help facilitate a change in behavior, or habits, for their clients.

Think about it: if most consumers knew what was required to achieve their financial objectives, and had the ability to determine the optimal path, and had the will to create the necessary change by themselves, then there would be little need for financial advisers at all.

As an adviser you can have the strongest technical skills and knowledge base in the world, and it is almost totally useless if you never use it for the benefit of a client. You can have the ideal best practice advice process and standards of documentation - but never have the opportunity to display it.These elements are critical of course to acting professionally, and providing your services in a manner that is aimed squarely at doing the best work you can for clients.

However at some point in the relationship or engagement with the client, you have to get selling. You have to convince a client to take a particular course of action - naturally the course of action that is best for them. To do that effectively the adviser must utilize sound sales skills. On that basis I would argue that it is imperative for a professional to have strong selling skills - and to know when & where to use them.

During some recent discussions with a number of advisers it became obvious that for many who have entered the business in the last 5-10 years there has been little emphasis upon this aspect of their professional development. It truly has been treated as a "dirty word", and those advisers (and their clients) are the poorer for that lack of training and development.

For example, I have found myself explaining the very fundamental concept of the emotional buying cycle that most humans move through - and it has been a revelation to a number of very technically competent and highly ethical advisers. the oft-used acronym A.I.D.A. to describe this process that consumers move through emotionally is largely unknown to the new adviser generation.

A quick recap for readers: essentially the position you have with a consumer (who is not yet a client in the sense of having followed your advice) is that they begin from a place of blissful ignorance. They are not perhaps even aware of a particular problem or issue that you are aware of, let alone how it may impact upon them or what they can do to manage it. At the end of the process you are wanting them to act upon the logical advice to solve their problem. In between those two points though there are a series of steps that the consumer has to move through in logical sequence, if the advice is to be acted upon. It is this sequence, that is firmly in the realm of "selling skills", that many advisers seem to be oblivious to. The steps are:

• Awareness
• Interest
• Desire
• Action

First the consumer has to become Aware of the particular issue. The adviser uses sales skills at this point to create that awareness and get their attention.

Once the issue is firmly raised and on the consumers radar screen, then you have to create Interest on their part in the issue. Again, sales skills are essential in doing so successfully. You are wanting them to engage with you and the process of problem solving, and they have to be interested to do so.

At some point that Interest has to be converted into Desire on the consumers part to do something about it. They must want the problem solved, or the proposed solution that will bring the benefits they had not previously thought of. Transforming the consumers attitude from a place of being engaged (Interest) to one where they are assuming ownership and wanting it fixed (Desire) is pure sales skill. Technical competency is merely supporting the logic of the decisions during this process.

Finally, you need to just get on and do it - put the solution in place. Action must be taken to complete the advice process. Once again, this is the domain of pure sales skill.

The critical point of course is that "sales skills" and "professional advice process" are NOT mutually exclusive. In fact they are both essential components if one is to be an effective professional adviser who is actually providing practical solutions that lead the client to better outcomes.

Selling is not a dirty word. As a professional you have an obligation to have and maintain strong sales skills - and to use those skills effectively and wisely in the interests of the client.


Like this?  Then share it with others...or visit www.strictlybiz.co.nz for loads more useful and interesting information.

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.


Like this?  Then share it with others...or visit www.strictlybiz.co.nz for loads more useful and interesting information.