Advanced Diploma of Financial Planning

1. Advanced Diploma of Financial Planning

2. Clients • Clients are obviously key to the survival of any business. • This presentation addresses the various techniques that are utilized for acquiring and retaining clients, letting some clients “go” and effective customer service techniques employed in the financial planning industry. We also look at issues pertaining to “How do you categorize clients?”

3. Acquiring new clients is often the hardest task in financial planning. Clients • Financial advisers expend a considerable amount of time and resources networking – joining organizations such as Business Chambers or Lions or Rotary clubs • Others “buy” clients, by purchasing registers, orphan books or acquiring another adviser’s practice. • Others focus merely on referrals either from existing clients or from accountants, lawyers, mortgage brokers and other professionals. • Lets look at each of these in turn.

4. Clients • Business Chambers are an excellent means of networking with other professionals in your area or a specific area of interest. • However, given that most members are also trying to attract their own clients (i.e. sell something to you, or make you their client), it is often not easy to attract new clients • Membership fees could add up and a considerable amount of time is spent in attending events and meetings

5. Clients • Buying a book of “orphaned” clients could be a quick and relatively cheap way to acquire new clients • Large and established financial services institutions have tens of thousands of “orphan” clients on their registers and tend to hand over or sell a block of these to their in-house or aligned financial advisers • However, orphans are orphans for a reason – • i.e. they could have had a negative experience with an adviser in the past and preferred to deal directly with the company, or

6. They could be in old style policies and products and it could involve considerable time and effort to “migrate” or move them to newer products, for not much tangible benefit, either for the client or the adviser Clients • Advisers would have to be experienced and skilled communicators, as often, the “orphan” client is wary and suspicious about how the adviser got their contact details and why a person is getting in touch with them after so many years of “no contact” from the company • In some extreme cases, it could be akin to stirring up a “hornets nest”....

7. Clients • Other professionals such as accountants, lawyers, real estate agents or mortgage brokers are good sources of leads for financial advisers • However, most of these professionals have been approached repeatedly by numerous advisers in the past. • Furthermore, some of these professionals have been “burnt” as the client has complained that the adviser has not been to their satisfaction and this creates an unnecessary burden for these busy professionals

8. Clients • Notwithstanding this, they can be a good source of quality leads – traditionally accountants for income protection, lawyers for advice for one part of a couple that has recently divorced or for estate planning purposes; • and real estate agents & mortgage brokers for personal insurances (life, TPD, Trauma and Income Protection. • The number and quality of leads can be enhanced, if the adviser enters into a commercial revenue sharing arrangement with the referrer • This should always be in writing and should always be disclosed to the client in an appropriate format (FSCG, FDS, SOA etc)..

9. Referrals from existing clients Clients • This is the #1 best way to acquire new clients! Why? • Because the trust factor has already been established • If you’ve done a good “job”, with the existing client, then they would be advocates for you and verbally advertise your expertise to their friends and family. • The client who is referring to you has no expectation of re-imbursement and therefore the referrals are usually more easily converted to clients.

10. But, be choosy with who you accept to be a client…..! Clients • Most planners are so focussed on acquiring new clients and conversion rates (i.e. number of referrals supplied to number of referrals converted to clients) , that they lose track of profitability – this is key! • If it has cost you $1000 in time and money to acquire the client and costs you $600 to service the client each year, and you only earn $500 (or even $700 per year) on this client, is it commercially viable? What if you had 300 clients in this category…? • Whether you earn $0 or $10,000 per year on a client, you still need to provide them with appropriate and compliant advice and documentation.

11. Some planners have upwards of 3,000 clients, managed by just 1 principal and 2 or 3 junior planners Clients • Bizarrely, these planners are still chasing referrals sources for more referrals! • It is almost physically impossible for just one or two licensed advisers to appropriately & compliantly service this large number of clients, given the complexities arising from changing legislation, fast moving markets and changes in each clients personal circumstances and goals! • So, at the same time that the principal is “signing” up new clients, a large number of existing clients are walking out of the door, due to lack of contact or dis-satisfaction with service.

12. Therefore in relation to clients, advisers should focus on primarily on quality & not quantity Clients • Existing clients should be “touched” (i.e. communicated with, either in person or via newsletter, mail, e-mail etc) at least 3 to 6 times each year. • At least 2 of these communications needs to be personal – i.e. a telephone call or a personalized letter or e-mail • It costs up to 3 times as much to acquire a new client, as it does to retain an existing client

13. So, to recap, resit the temptation to convert each referral, rather, analyse whether or not that person would fit your criteria – would you enjoy working with them and would you earn an appropriate profit. Clients • Clients who are profitable to you, will generally have an appropriate amount of discretionary income and/or assets. It stands to reason that a CEO or General Manager will tend to have friends and colleagues who will also be at broadly similar positions – hence their referrals to you could also tend to be profitable • Deena Katz provides the example of a secretary who approached her wanting financial advice – Deena politely explained that this client did not fit the practice’s criteria, since she did not have the minimum $300,000 to invest. Some months later the same lady referred her father to Deena – the father was a CEO of a major corporation and did fit the minimum criteria

14. Don’t focus on performance – focus on assisting the clients to articulate their goals and on achieving these goals. Clients • The focus is goals and not financial goals – i.e. the goal could be to retire earlier and spend more time doing what they enjoy (playing golf, for instance) – the planner can then work towards ascertaining what is required from a financial perspective in order to achieve this…. • 80/20 rule – some planners still spend 80% of their time servicing clients that generate only 20% of the revenue.

15. The Ideal Client. Clients • Meet the criteria for on-going profitability • Be comfortable with being educated, but acknowledge that the adviser is the expert • Have realistic expectations. • Possess a pleasant personality.

16. Client Categorization/Segmentation. Clients • Large practices usually have to segment their client database, to turn the 80/20 rule the right way over – i.e. ensure that the 20% of the client providing 80% of the revenues also get 80% of your time! • Can be A, B, C, D etc. • Platinum, Gold, Silver, Bronze

17. The planner can become the “go-to” person for their clients - i.e. they may not necessary be able to provide them with advice on areas outside their expertise, but they could refer them to other professionals. Clients • This is broadly similar to a doctor (i.e. GP), whom a patient trusts and uses the expertise of the doctor to be referred to other medical professionals • The most successful practices have a relatively small number of clients – i.e. 100 clients only, each with a minimum $1million to invest (or each providing a minimum of $20,000 per annum in revenue to the practice)

18. In conclusion, effective client management is essential if you wish to be successful in almost any business. Clients • In financial planning, this is even more relevant, as we are not providing a homogenous commodity, but providing a complex advice based service, that could vary from client to client, depending on their requirements – it could also vary for the same client over time, as their progress through various life stages (accumulation, retirement etc) • Almost keep the best interest duty uppermost in your mind and remember that you have a fiduciary responsibility towards your clients