"Until you excel in delivering a consistent, high-quality investment consulting experience, the likelihood of affluent prospects converting blindly is minuscule."

The Successful Switch to Fees

By John Bowen

Making the switch from financial planning to fee-based asset management is difficult enough, but some advisors unintentionally set themselves up for failure. The biggest mistake new investment advisors make is trying to immediately convert their most difficult clients or largest prospects.

Initially, it may be tempting to attempt to convince large prospects to convert, but the amount of persuasion, hand-holding and cajoling a retired tycoon with $12 million in assets and unlimited time to watch the market requires is hardly cost-efficient. More importantly, you need to perfect your investment consulting process first with those individuals who already trust you: your clients. By working with your existing client base you will not only refine your processes so that you can work effectively with qualified affluent prospects, you will be improving the services you offer your existing client base.

Until you excel in delivering a consistent, high-quality investment consulting experience, the likelihood of new affluent prospects converting blindly is minuscule. Instead, refine your approach with this step-by-step strategy that will induce a high percentage of clients to convert:

Step One. Identify the clients you want to convert. Sort them into three different groups: those with a minimum of $100,000 in liquid assets such as individual stocks, bonds, mutual funds and money market funds; those with assets in semi-liquid form such as annuities and CDs; and those with illiquid investments, such as limited partnerships or real estate.

Step Two. Set up a one-on-one fact-finding and educational meeting with your client. If you have not met with your client recently, there may be substantial change in the client's particular investment situation. It's important to know exactly where the client is financially, and where they want to be.

Step Three. Prepare an investment policy statement (IPS) for each client that accurately reflects that client's specific wants and needs. The IPS is a personalized document that specifies what the client wants to achieve by working with you. Create the document after your first meeting with the client. Walk your client through their personal IPS in the second meeting. It should show them where they are now and where they want to go. Then show them your gap analysis of how you would achieve their goals if you were in their shoes. Schedule the third meeting to allow them time to review your recommendations. Do not rush them. You are looking for a lifelong client so another week is not going to make a difference.

Step Four. Hold the third meeting with the client. It is during this "if appropriate" meeting that you ideally will convert the client. To prepare for this meeting, complete all needed paperwork on the assumption that the client will be ready to move ahead. At the meeting, review the investment management process and the IPS and answer any questions that arise. If the IPS is satisfactory, then ask your client to acknowledge the beginning of your new relationship by signing the paperwork you have prepared.

Step Five. Schedule quarterly meetings with your client. These meetings become an opportunity to resell the investment process, as well as show how the investment process is working. This can also be an opportunity to uncover new changes in his or her financial situation and make adjustments as needed. Do not forget to ask for referrals. Your strategy should be to "wow" them with your service so they become marketing apostles for you.

If you follow all of these steps, you'll find that converting your existing clients and prospects to money management clients can be a very smooth process. It's a win-win situation for both your client and yourself. Follow the steps, go slowly, and you and your clients will feel confident each step of the way.

Reprinted from: FINANCIAL PLANNING