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

Will you marry me?

 by Tony Vidler.

I have no idea what the actual statistics would be, but I am willing to wager that the success rate of popping the question "will you marry me?" onto a prospective partner who you have not yet dated is probably pretty low.  

If you've dated for a bit, the odds get a bit better, though only marginally so.  If you've been engaged for a while and everyone knows what the end game is, then the odds are pretty good that you will get a "yes" to "will you marry me?".

How does this apply to financial advice?  Well...the biggest problem with financial adviser marketing is the tendency to pop the "will you marry me" question to people who haven't decided yet whether they want to spend a Saturday night with you. 

This lies at the heart of dealing with a common adviser question: "How can I make my marketing more effective?"

Before answering this question though it is important to understand a more fundamental question: What is the difference between marketing and selling?

Many advisers seem to think that these are one and the same thing.  Or, if pressed a little further, "marketing" is often confused with "advertising".   Marketing does include advertising... as it also includes having a clear value proposition, understanding the target market, the branding of the individual and the branding of the business entity, and a number of other things.

Thinking bigger picture though; marketing is really about creating opportunities to gain a client or some new business.  Selling is the process of converting that opportunity into an actual piece of business that your accountant can see.

To answer the question posed at the outset then, one has to understand that while there may be many components that go into creating really effective marketing, the underlying question that the adviser is really asking is "how can I create more opportunities to engage with people who would be willing to take the actions I would recommend"?

The part that really matters in this underlying question is "opportunities to engage with people".  THAT is the piece that you must concentrate upon to create "more effective" marketing.  This revelation is the point where advisers often say "aha, I get it" and their marketing efforts lift as they begin to focus upon creating new opportunities to generate future new business.  It makes sense to them that if they are able to attract attention, and engage with people, then they begin to establish a relationship of trust. Surely having done this the prospective client will take my advice and work with me?

It is at this point though that the bulk of such marketing efforts fall down in a heap.

The reason?  Lack of patience and understanding of the engagement process.  It's akin to having a couple of Saturday night dates and then wondering why the dream date doesn't want to marry you yet.  A lot of adviser businesses at this point are creating a lot of Saturday night dates....but there's no follow through.  It's just lifting the initial activity level really.

Engagement (in this business sense) is really about inter-acting with people on a regular basis in a way that they feel comfortable with until they decide they want to be with you.  Your marketing purpose is to get, and then hold, their attention and build their level of interest in what you have to offer in the way of valuable advice and solutions.  At some point in the engagement process you - or more likely some other event unrelated to your marketing and positioning - will trigger "desire" on their part to act.

That is when the marketing process is finished, and selling begins.  Although, if your marketing and engagement process is done well, the reality is that there is very little selling involved. 

The necessary level of trust and credibility in you as the right adviser has already been established.  The rest is process and technical competency being applied to the clients' need.  

The reality for a financial adviser business though is that engagement is forever.  The actual marriage part - your client buying you or your solution at some point - is actually just a moment in time.  It is a purchase. A transaction.  A fait accompli....if the engagement was a fulfilling one.

Engagement with clients, for the successful advice business, is long term.  Once you have them as clients, then the engagement and ongoing interaction becomes even more important, as they can add significant value to your business if you can move them from supporting you to the point where they are advocates for your business.

To make your marketing more effective - to get better results for your business - stop asking the marriage question.  It's not about the big moment and the big "sale".  Build systems and processes to engage people in a way they feel comfortable with, and share information and insights, and help them help themselves.....and they will want to take it further!

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Hustle while you wait!

by Tony Vidler.

One of the constant themes that comes up in coaching advisers to greater business performance, is the little matter of "hustling".

I'm not referring to getting out and pulling fast cons and sharp card tricks on unsuspecting folk of course...but the really simple and somewhat unpalatable fact that a seriously large part of any business persons success can simply be attributed to their ability to hustle while they wait.

It's about a work ethic.

As a general rule, very few advisers can afford to simply wait for the right, well qualified, potential customer to come walking through the office door announcing "I am ready to engage in a comprehensive financial review process - who wants to serve me?"

The unpalatable fact is that in the financial services business, advisers are usually as busy as they want to be.  There is a definite correlation between getting stuck in with a strong work ethic, and getting good business results.

As the diagram above shows, you have to be willing to make a good effort on the basic activities that generate results in your business, AND you do have to get stuck into it as quickly as possible IF you want to put the odds of success in your favor.

Make a little bit of an effort....eventually....and you cannot really expect great results can you?   You will probably get some results if you make a massive effort eventually....or perhaps put in just enough effort right now to get by.

Fantastic results come from getting into doing what you have to do as soon as possible, and putting maximum effort into it at that point.  

Not every week in business goes according to the grand plan...in fact, usually no week actually works out the way we imagined it would (or should).  That elusive customer who is going to walk in demanding your services at a premium price may well be coming, but in the meantime you have to get busy if you want to prosper.

Good things come to those who hustle while they wait.


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It's not about you...it's about the value.

by Tony Vidler.

Financial advisers often struggle to create a value proposition that accurately expresses how they work differently, or what makes them special compared to others.

It isn't that they don't have points of difference, or that they struggle to put ideas into words...generally they are very good at both. Each adviser has a unique way of interacting with customers, and maintains relationships a little differently, and has slightly different views of how and where product solutions fit in, and what the relative strengths and weaknesses of different strategies are.

Despite that, a room full of advisers when working through the process of trying to articulate their value proposition, almost always come up with the same line of thought (and often use the exact same words) to try and describe themselves and their businesses.  

It ends up sounding something like this:

"you should do business with me because I am honest, trustworthy and a nice person. I care about people and am very good at my job. I am clever and have qualifications and you will have peace of mind if you work with me"

This is the very simple summary of the typical statement advisers first come up with - as a customer might hear it.

So what's wrong with it? Well, pretty much everything....So let's pull it apart.

1. Honest, trustworthy, etc...these personal attributes are simply expected. There is no value-add here - customers expect this as a minimum standard of integrity.

2. Nice person...of course you are. If you weren't you would have no customers, in fact, you'd have no business if you had no ability to relate well to others and be a decent human.

3. I care....well, once again, you are expected to aren't you? If you did not actually care about others you would not be in a profession of trust where an essential component is the ability to think of the other persons objectives and be willing to work with them to get them the results they want.

4. I'm clever & have qualifications, etc....of course you do. Otherwise you shouldn't be in the business of advising people about money.

5. You will have peace of mind. NOW....the big problem with this is no customer actually believes it, and not very many advisers can actually deliver it.

So let's recap....5 parts to the typical value proposition statement designed by most advisers and 4 of them are "hygiene factors", and one is frankly unbelievable in the minds of the customers.  By "hygiene factor" I mean it is a given in the customers mind...as in any hospital will be hygenic.  It is not in itself a point of difference for hospitals.

In a previous post I outlined the formula, or the questions that must be addressed, to come up with a genuine point of difference that really means something to a customer.  

( http://tonyvidler.blogspot.co.nz/2012/05/3-questions-you-must-answer-to-define.html )

Basically when trying to create an articulate value proposition it falls down in 2 key parts:

• The adviser doesn't think of how different they are to other advisers. They think of how different they are to the customers. So the proposition ends up sounding the same as all other advisers' value propositions...hardly a unique point of difference...and simply highlights the distance between the customer and the adviser. 
• Secondly, the value proposition doesn't really capture what benefits the adviser actually delivers to the customer.

And that is the core objective of it:  articulate the benefit to the client that cannot be obtained from someone else.

Here are some general areas where you might be exceptional and doing unique things, and are able to do what customers value:

• Customisation:  using the masses of data and information in a highly personalised manner, or perhaps providing service or advice that is tailored to highly specific customers.
• Risk Handling:  taking away risks for customers; transferring responsibilities; removing the need to consider specific risks - making their world less risky than it was.
• Convenience:  being able to combine things in a way others can't; getting access to what customers need and value faster, easier, and so on; being there - instead of them having to initiate action, etc.

This is just a short collection of concepts to highlight that creating a value proposition is not about you.  It is about the end result for the customer - the thing they value.  When you get that, and are able to express it succinctly, then they will get you and the value you bring.


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Danger: Great Expectations Ahead!

by Tony Vidler.

Nearly everyone agrees that good customer service is good for business.  What is "good customer service" though?

It can be made up of a lot of things, but let's focus on one simple attribute of customer service - time.

Speed is of the essence to consumers.  Speed IS service.

This is a simple concept, but it creates difficult performance targets. 

Some quick statistics:

• over 80% of customers want the phone answered within 4 rings.
• over 80% of customers want the phone answered by an actual human.
• over 65% want the person answering the phone to be able to deal with the problem.
• over 65% are dissatisfied if they are transferred and have to wait more than 30 seconds to talk to the next human.

It is important to bear in mind that these are desired service levels from most consumers across a range of industries, which is not the same as "adequate" service levels for any particular industry or business.  Which of these two levels of service you provide depends on your overall value proposition to consumers - and not all business models depend upon excellent service.  If one is in the business of providing lowest cost goods or services, there is an inherent consumer expectation that service levels will be compromised.  There is still an expectation that service must be adequate, but there is little more expectation than that.

If at the other extreme you are looking to command premium pricing in your business model, then there is a consumer expectation of excellent service.  Excellent becomes the new "adequate" benchmark, and nothing less than excellent will do. If you are promising to bend over backwards for your customers, you had better be able to as that will be their expectation of minimum standards from the outset.

There are many variables that can go into the overall service offer of course, but in virtually every type of service offer in the professional services firm, speed plays a part in the consumer perception of quality.  This is especially true with accessible internet at broadband speeds now being available on people's mobile phones.  The consumers perception of speed has changed...

Think about this:  15 years ago we were delighted if a computer worked.  5 years ago we were delighted if the computer and the line connection worked long enough for us to finish booking a hotel room.  Now over half of consumers are dissatisfied if a web page takes 3 seconds to load. What is their expectation of speed in a years time?

So what is your speed promise?  What is the "adequate" level of service that your consumers expect?

To determine how you might create superior service, and a superior value proposition, you need to know where the minimum performance benchmark is.  

Be aware though: there are great expectations ahead.  The consumers' perception of speed is changing faster perhaps than we can change speed of service.  Are you promising excellence, or acceptable and adequate standards in this area of your customer service proposition?

Whatever the level of service is that you promise, be sure to include a reliable performance level for speed of response.  It matters to your customers.


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Why merge? Is buying to grow worth it?

 by Tony Vidler.

Last week I wrote about things to think about in valuing an agency business if you wanted to "buy to grow", and also listed 5 main reasons that advisers suggest as their reasons for acquisition of another business.  They were:

1.  Get new clients

2.  Increase business turnover

3.  Increased cost efficiency

4.  Diversify business lines

5.  Enhance market position

(http://tonyvidler.blogspot.co.nz/2012/06/you-need-to-know-if-youre-going-to-buy.html)

Now let's consider some of the common thinking around the rationale for buying another practice to fuel your own business growth.  

Before you read any further though, allow me to say that ALL of these reasons offered CAN be perfectly valid and logical moves for a smart business owner....

BUT....there are many occasions where some simple questions can head of a purchasing (and financing!) disaster too as growing through acquisition will compound problems, rather than lead to a better business.

So here's a little list of testing questions around each reason offered:

Get New Clients

The one question that I ask immediately when encountering this idea for acquisition is "what's wrong with the business you have?"

It may be that there's nothing actually wrong with your existing client base, maybe you just don't have enough of them to have a viable business.  If that is the case, then perhaps your business model needs reviewing, rather than simply throwing more damp wood on the smouldering "fire".  

Even if the business is fundamentally fine though, generally the desire to simply add more warm bodies highlights that there are some likely problem areas already within your business:

1.  Poor or inadequate marketing (which may be a wide range of things such as branding, positioning, value proposition, etc)

2.  Poor engagement (you're generating leads and business opportunities, but not engaging or converting enough of them)

3.  Inadequate sales skills (people in your business are blowing the good work done by your marketing perhaps)

4.  Poor business systems (inadequate information and data management; poor advice processes; etc)

5.  Providing the wrong thing (amazing but true!  often advisers with a business problem are simply not giving their natural - or target - market what it is they actually want and are willing to pay for)

Often there is a belief amongst advisers that simply having more people to see, or "fresh" clients to wheel out a tired old story to, will somehow transform their business.  What was that line about "doing the same thing but expecting different results...."?

Increase Business Turnover

No doubt, adding more paying clients will increase turnover, or gross revenue. 

As if that really matters.

Two simple starting questions here:

1. How much extra turnover, or gross revenue, will the new clients bring in?

2. How much of that gets to your bottom line?

The financial focus must be on profitability for the business, rather than turnover.  This is business 101 really, and is a simple (but often ignored) point.  This piece of rationale quite often highlights an existing business that has little internal financial knowledge or systems...in other words, a business where just adding bulk may well compound any existing problems.

Improve Cost Efficiency

Potentially a really good reason for acquisition, particularly in businesses that have relatively high proportions of fixed overheads and relatively low service delivery costs per client.

Two simple Questions:

1.  How does it improve your cost efficiency?

2.  So, how much do the anticipated cost savings add to the bottom line?

The first is a really big question that reveals very rapidly the level of understanding that the existing business owner has of their own business fundamentals.  Asking them to think through the areas where costs may be saved, and then identify the details of those theoretical cost savings, is illuminating.   It is also usually seriously over-estimated.

Most financial advisers (despite their personal financial literacy!) do not appear to have a clear picture of their own client profitability with their firm - how the different types of costs are allocated across different types of clients within the firm; what the marginal cost of each additional client will be in servicing or efficiency within their business; how the fixed costs will be affected by additional capacity requirements and so forth.

Diversify business lines

This is a particularly interesting piece of thinking...Generally this means "I will have access to new products or advice lines".   

When this is provided as a reason for acquisition it is a clear sign that there is a complete lack of strategic clarity and planning ability - or (at the opposite extreme) there is very good strategic thinking at work.  Business owners looking to acquire for this reason are either thinking "I need more stuff to sell", or, they have a clear idea of where their business wants to be positioned in the future and have decided logically that it is cheaper to purchase the next piece that moves them closer to the goal, rather than to spend the time and money in development themselves.

It is just a matter of working out which of those two conditions are prevailing....and once again a fairly simple question gets to the heart of it:

"how do the new business lines lead you more quickly to achieving your vision?"

You'll know soon enough from the answer to this question which end of the spectrum they are at.  However....it still has to make commercial sense, which takes us back to the points above.  Some further questioning is often required - even if the strategic thinking is good it may be that this particular purchase is not the optimal choice financially.

Enhance market position

Ah...the "bigger willie" syndrome.

Or is it?

It may be an egotistical drive or need of course, however it may be a very calculating and logical move that is fundamentally sound.  Bigger can certainly be more valuable sometimes.  

One of the best examples I have heard of was a financial adviser whose business had grown fairly large organically over many years, and after some sound strategic thinking they decided that "get big quickly" was the right way forward.  The reason?  To sell the business at a premium price and retire.  A series of rapid fire small acquisitions, a re-branding exercise across all new purchases, implementation of some standardized systems...and 6 months after all of that sell the lot at a vastly higher price then they could otherwise have done.

As an exit strategy it can be risky - but very worthwhile.  Whether it is worthwhile really does come down to that clarity of vision once again though.

In conclusion...

Buying another business to grow your own can be a great move without doubt.  But, one should really question the motivation, the rationale and understand thoroughly and logically what the benefits from acquisition are.  

If you do so, then there is a very good chance that the pieces will fit together well for you.


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