"How do you re-establish the trust and emotional bond you once had with your clients in order to motivate them to follow your advice now?"

Consult to Win

By John Bowen

The prolonged downturn in the market presents financial advisors with a great opportunity to expand their businesses dramatically—if they can assist their clients and prospects in meeting the challenges of this market. The difference between advisors who excel during difficult times and those who struggle will be based on how well they focus and execute their business plans.

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Investors today are scared and unsure of what's around the corner. Before the market sell-off, it seemed that anyone could make money by aggressively investing in the stock market. In light of that, they felt, why would they need you?

Today all that is being reconsidered. Investors recognize that market conditions have changed, and now they want to work with a trusted and competent financial advisor to review their existing portfolios and keep those portfolios on track as they march toward their goals. Your opportunity now is to position yourself as this valuable financial resource and not just another financial services vendor.

How do you re-establish the trust and emotional bond you once had with your clients in order to motivate them to follow your advice now? By developing an effective communication process that will "wow" them. When you use the investment consulting process as the foundation for your communication, you will differentiate yourself from your competition and grow dramatically. In every segment of the marketplace, we consistently see that advisors who employ a consultative approach enjoy significantly higher long-term profitability than those who focus on a transactional or product-sales approach. Independent financial advisors are much more successful when their client delivery system is consultative as opposed to transactional. Their intimate knowledge of the client enables them to position their advisory services better.

According to CEG Worldwide's research, 72.2 percent of independent financial advisors earning net incomes greater than $150,000 used a consultative delivery system. In our findings, no advisor with less than $75,000 of income used a consultative approach. Among registered investment advisors, we find that only 18.7 percent are consultative in their approach. However, these 18.7 percent represent a substantial percentage of advisors who have assets under management greater than $100 million. Making the transition from pushing products to taking on a more consultative role with your clients is essential to becoming an elite financial advisor.

During the bull market our clients were asking us why we had any fixed-income investments in their portfolios. Today, many are asking why they have any equity investments. As an advisor you will always have your performance judged against the best performing asset class of the day.

It is your job as a trusted advisor to contact your clients and review with them why you advised them as you did. If their portfolio was properly allocated for the long term, they should not make any changes unless their personal circumstances have changed. Help your clients understand the short-term volatility of the market. Act as a calming influence to counteract the noise they hear around them daily. Affluent clients can acquire investment services and products anywhere. What they are really looking for are long-term relationships with trusted, expert advisors who can look at their "big picture."

By using an investment consulting process you'll systematically build trust with your clients; you will accurately determine their true financial goals and appropriate investment programs; and you will be able to differentiate yourself clearly from your competition.

In our research, we found record levels (90.2 percent) of affluent clients who want to work with financial advisors. More importantly, we found that a significant percentage of affluent investors (27.6 percent) are dissatisfied with their advisors and are contemplating finding a new primary financial advisor.

With the investment consulting process you will be able to deliver a consistently high-quality client experience that differentiates you from the competition. The investment consulting process combines a series of scheduled meetings to foster trust and delight your clients from the very first meeting. Given the market slump, you will not only increase their level of satisfaction but systematically drive new client referrals.

Following is a brief overview of our seven-step consulting process:

1. The presentation. Your goal at the first meeting is to qualify your prospect by determining if he or she is a good candidate for your services. During this meeting, you'll uncover the values and concerns of your prospect and decide if you have a basis for working together. If so, use this meeting to explain the key aspects of your investment strategy and how its implementation will meet the prospect's needs. This step in the investment consulting process qualifies new prospects and lays out their expectations for your service.

2. The discovery meeting. At the second meeting you will define the prospect's financial needs, goals and current position, gathering all the information you need to construct an investment policy statement (IPS).

It's also important to complete a discovery meeting with existing clients. Their financial situations may have changed in ways you are unaware. You will be judged by the quality of the questions you ask. Develop an interview guide of questions to ask during the discovery meeting. These questions will allow you to complete their new IPS.

3. The diagnostic meeting. This meeting is optional and is used only when you are working within a strategic alliance, such as with an attorney or CPA. At this meeting, you will present your diagnostic of the investor's current holdings along with a summary of your repositioning recommendations. Typically this will include a "gap analysis" of where the client is today and where he or she wants to go, along with specific recommendations.

It's particularly important to use this meeting to establish general agreement between the prospect and strategic partner before presenting a completed IPS at the next meeting.

4. The IPS meeting. Here you will present the entire IPS, a detailed document that describes the investor's needs and risk tolerances and provides benchmarks for tracking progress toward the client's goals.

A well-drafted IPS will meet the fiduciary responsibilities between advisor and client, address prudent investor guidelines and reinforce the client education process. It should provide clients with the sense that they are making smart decisions about their money.

5. The "if appropriate" meeting. At this meeting, the prospect will ideally become a client. To prepare for this meeting, assume that the client will want to move ahead and have all paperwork completed and ready to be signed. Review and answer any questions regarding the IPS, and ask the client to acknowledge the beginning of the relationship by executing the paperwork.

6. The 45-day meeting. The focus of this meeting is to help your new clients get organized with the new account paperwork you've sent. Show the client how to read the various statements and provide a notebook where they can be filed. After this, schedule quarterly meetings.

7. Quarterly meetings. At these meetings you will ask about changes to the client's personal or financial situations; review and explain portfolio performance, contrasting the actual performance to the IPS expectations; and answer any questions your client may have.

Many advisors are hesitant to have regular or systematic meetings with their clients. Not only do they miss the opportunity to assist their clients in keeping their financial plans on track, but they also lose the chance to expand their business through referrals.

There has never been a bigger window of opportunity for you to grow your business. Ultimately, it's your choice whether you will become overwhelmed by the challenges you face or rise to the occasion by serving your clients as best you can.