Using Stock Market Sectors To Spot Trends

October 8th, 2013

by Bob Simpson, Synchronicity Performance Consultants

2013 has been a great year for equity ownership … if you were in the right stock market sectors.

In this article, I am going to review sector performance and how relative strength can help you position in the right sectors for optimal performance and how to avoid weak sectors to minimize losing positions.

To begin, let’s look back at the beginning of January 2013 and how the sectors have performed.

The graphic below, shows the relative strength ranking of the 31 stock sectors in the SIACharts Stock Sector report for January 2, 2013.


Based on the SIACharts methodology, the top 25% of the sectors are highlighted in green to identify the Favoured Zone, the next 25% are yellow to identify the Neutral Zone and the bottom 50% of the sectors are red to identify the Unfavoured Zone.

These sectors are equal weighted with approximately 50 stocks in each sector.  The stocks in each sector tend to be the more recognizable names and are chosen if they trade in excess of $5 million per day in trading volume.  The sectors are overweighted in US stocks but do contain Canadian names where applicable.

By taking a look at this report, a few things jump out at us.  The Metals and Mining sector is ranked in the number 30 position, Energy is in the 29 spot and Banks are ranked number 26.  If we were to take a quick poll of Canadian advisors, we would probably find that these are the traditional sectors of choice.

On the other hand, the sectors at the top of the list lead me to think that the market is being driven by the spending of the children of the financial advisor community.  Think back to when we (assuming baby boomers here) graduated from university and had to buy cars and furniture, etc. – Consumer Non-Durables, Leisure, Specialty Retail, Internet and Food and Beverages would be a pretty good list of the sectors where our kids are spending money.

The table below shows the performance of the 31 sectors for the past nine months.

Over the first three quarters of 2013, the Favoured Zone Stocks averaged 25.53% compared to the IVV ETF (S&P 500) which returned 15.9% or the XIU ETF (TSX 60) which returned 4.22%.

It is little wonder that Valeant - Drugs (90.49%), Magna – Automotive (72.78%), Gildan – Consumer Non-Durables (31.38%), CGI Group – Internet (61.23%), Canadian Tire – Specialty Retail (35.97%) and Tim Hortons – Leisure (23.32%) have been the big winners on the TSX 60 this year.

Looking at the Canadian “darling” sectors, Banking has produced acceptable returns of 14.53% but the Canadian banks have lagged – Royal Bank (12.02%), National Bank (14.14%), TD (13.98%), BMO (15.83%) and BNS (6.94%).

Energy has produced similar returns (14.84%) but Metals and Mining has been the “killer” sector declining 31.77% over the past 9 months.

Nine months is too short a period of time to gain statistical significance but relative strength has been around for a century and has been very helpful to many advisors and investors around the world.

2013 has provided investors with strong returns and it is important to monitor changes in markets, sectors and individual positions.  By using sectors as one of your starting points, you can simplify your decision-making process and drill down to security selection, whether you choose to work with individual stocks, mutual funds or ETFs.

SIACharts can give you the tools to do at-a-glance technical analysis and spot the trends.

If you are interested in learning more about SIACharts, please call me at 905-502-0100, e-mail me at or use the “Book Online” link to book a one-hour demo of the program.

Bob Simpson, Synchronicity Performance Advisors, Synchronicity Business Coaching Inc., and specifically represents that it does not give investment advice or advocate the purchase or sale of any security or investment. All information contained in this article and website is intended exclusively for financial advisors and not the public.  Please contact your financial advisor or a licensed financial services professional before making purchases.  None of the information contained in this website or document constitutes an offer to sell or the solicitation of an offer to buy any security or other investment or an offer to provide investment services of any kind. Bob Simpson, Synchronicity Performance Advisors, Synchronicity Business Coaching Inc. (FundCharts Inc.) nor its third party content providers shall be liable for any errors, inaccuracies or delays in content, or for any actions taken in reliance thereon. Back tested performance is hypothetical (it does not reflect trading in actual accounts) and is provided for informational purposes to indicate historical performance had SIA Report portfolio(s) been available over the relevant period. Past performance does not guarantee future results. Investment returns and principal value will fluctuate, so that investors’ shares, when sold, may be worth more or less than their original cost. Investing in any investment process, does not guarantee that an investor will make money, avoid losing capital, or indicate that the investment is risk-free. There are no absolute guarantees in investing so when reviewing any back tested performance information on the or website, email content, or other materials, ensure that you do not use it to make investment decisions.


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Why Selling Positions Should be Welcomed by You and Your Client

June 6th, 2013

Why Selling Positions Should be Welcomed by You and Your Client

By Brian Livingston, General Manager of SIACharts

One of the hardest issues that an advisor has to face when making investment selections for their clients is to decide when it is time to exit a position. More often than we care to admit, it is the lack of being able to mentally accept selling a position that does the most damage to a portfolio. Whether it is ego by being unwilling to admit that we were wrong, afraid of the forthcoming conversation with your clients, perhaps you have no sell discipline, or maybe there is that nagging feeling in the back of your mind that keeps saying “but what happens if it turns around tomorrow?” Whatever that reason may be, and only you can truly know which reasons they are, being able to sell a position in a consistent rules based fashion is one of the most important things that you the advisor will ever do for a client.

(Some of the most successful investors in the world are more often wrong than they are right with their stock picks. However, the difference that separates these investors is they are able to minimize their losses on their wrong picks by getting out of positions quickly admitting that pick didn’t work and also stay in their winning picks for long periods of time.)

At SIACharts, we use a relative strength based approach to help our advisors determine from a macro to micro basis where they should be best placing their client’s assets. We define relative strength as “a technique that compares the performance of an asset class or holding against other asset classes or holding(s).” Relative Strength calculates which investments are the strongest relative performers by comparing each asset class or holding against the other available choices. Relative strength between asset classes gives us insight into money flow on a large scale. By understanding where money flows are moving, we can assess Risk vs. Reward for any asset class, sector, or group of investments. SIA’s database includes over 60,000 stocks, ETFs, Canadian and U.S. mutual funds, commodities, currencies, etc. which are analyzed daily to help understand these money flows.

With being able to see where the current strength lies, by default we also know where the current weakness is. Advisors are then able to exit positions as they start to exhibit this relative weakness and as a result they are capable of mitigating the damage before it potentially blows up the portfolio. As an advisor, you must be capable of getting beyond your personal biases and realize that the ability to sell positions is a healthy thing to do for a portfolio. Do not get married to a position. A true self-analysis will likely show that the most damage you have done to your client was your unwillingness to sell. By selling weakness and staying in strength, our advisors have been able to successfully see a reduction in drawdown for their portfolios helping to improve their performance. Combining risk reduction and improved performance with a defined rules-based approach has also helped our advisors gain an advantage in gathering new assets.

Let’s look at an example:

A typical Canadian advisor is usually over-weighted in Precious Metals, Energy, and Banks because that is what has worked for them historically and where a large part of the Canadian industry is focused. But with relative strength, we can help identify when we should be trading these sectors and when we should stay away from them. With the recent drop in Gold and Silver, let’s look back and see if we can find any relative weakness that may have hinted at an exit point that would have prevented the nasty hit those Commodities took that were possibly in your portfolios, from a macro to a micro level.

MACRO Outlook

In the SIA Asset Allocation Model, Commodities were our top ranked asset class for part of 2011 and they moved down to the very bottom of our rankings at the end of September of that year and staying at the bottom ever since then. So from a macro asset class comparison, Commodities have been the weakest asset class that an advisor could have been in for the last 20 months.

From a sector comparison, at SIA we rank 31 different sectors each night to once again show you where the strength and the weakness may be within the North American market. The chart below is what we call a Relative Strength matrix position chart, and in this case, we are looking at the Metals and Mining sector. On May 11, 2011, the Metals and Mining sector moved from the Favored zone (the strongest sectors) into the Neutral zone and soon after into the Unfavored zone (weakest sectors). This was the indication of weakness against the other sectors that our advisors would be seeing that would be telling them they needed to be exiting out of that sector and moving into something stronger. We can see this sector continued to move down to the bottom of the rankings where it has stayed for over a year and a half.


The next screen cap below shows the bottom ranked weakness right now in our sector analysis comparisons. Banking, Energy, and Metals and Mining are all down in the bottom 5. How much better off would your client’s portfolios be right now if you had sold out of that weakness and returned that capital back into something that is stronger and healthier?



Looking at it now from an individual prospective, back on April 8, 2013, SIA did an analysis on Eldorado Gold (ELD.TO) showing roughly where the position was stopped out and how it had moved subsequently. As you can see below, by having the willingness to sell this stock and move on to a new position that was relatively stronger, this would have saved an approximate 40% drop (as of the time of writing this article ELD.TO is up approximately 1.5% since April 8, 2013).


Performance is a great thing to have, but the ability to not lose money for your clients is just as important or even more important. Being proactive in your approach to selling positions when necessary should help you minimize losses, improve returns, and most importantly increase the confidence that your clients have in you.

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Making Mutual Funds Perform in Your Portfolios (Livingston)

April 4th, 2013

Making Mutual Funds Perform in Your Portfolios

By Brian Livingston, Vice President,

Whether you are an IIROC or an MFDA advisor, you are most likely holding mutual funds in your client’s portfolio. Some of you focus heavily on Mutual Funds in your practice while others simply receive them as legacy funds when they assume a new client’s portfolio. According to research from the Investment Funds Institute of Canada, there was almost $850 billion invested in Canadian Mutual Funds as of December 2012, which was a 10.4% increase from December of 2011. In other terms, mutual funds and mutual fund wraps now account for about 30% of Canadians’ financial wealth. No matter what your exposure is to the industry, knowing how to properly handle your client’s Mutual Fund portfolio can assist in the value added proposition that you need to present to your current and potential new clients to help grow assets in your book of business.

In order to really grow your book as efficiently as possible, you need to be spending the majority of your time in client facing activities. So, if we want to continue on with this business efficiency, how do we find the time to do research and make sure your clients are getting into the best mutual funds? If advisors are honest with themselves, they usually do their initial due diligence and find out the risk profile of the client and then place them into some funds based on their risk profile but not necessarily based on market conditions or performance. Advisors then lock themselves into this mentality that those funds will suffice in all market conditions because they have them “diversified” with everyone ending up in similar funds. This method unfortunately fails to address changing market conditions, not to mention the fact that the funds they may be choosing could be underperforming relative to their peer group.

I was speaking with a mutual fund wholesaler recently who told me that his average client is working with approximately 25 different fund families, but not necessarily by choice. Often, an advisor will receive a portfolio from a new client and they include funds from a company that the advisor is not familiar with. But if the advisor moves the funds to a company they are familiar with, the client may end up having to pay a substantial penalty. So, how do we solve the various issues that advisors have with Mutual Funds? Whether it is being overwhelmed with thousands of choices, unfamiliarity with a company outside of our normal core group, moving the clients into different products based on market conditions, or finding the funds that are performing well right now, we need a solution to help answer these problems.

The good news is that there is a Canadian investment tool to help you answer these problems, save you valuable time from doing research, and help you pick the best mutual funds for the future changing market conditions. was created to answer all of these issues and more. SIAFunds currently takes 35 of the largest fund companies in Canada and ranks the funds using relative strength technology from each company on a nightly basis from strongest to weakest to help you narrow down your investment choices. You can pick and choose the fund companies that you want, so you only work with fund companies that are relevant to your business. SIAFunds also helps with Asset Allocation rotation, Mutual Fund sector rotation (see screenshot below), and combined with their proprietary Equity Action Call tool, SIA has helped their clients avoid market disasters like back in 2008.

Screen Shot 2013-04-04 at 9.29.12 AM

Mutual Funds have kind of gotten a bad rap over the last while, as they carry a much higher MER than ETF’s do. But, with a well-managed portfolio of mutual funds, advisors using SIAFunds have been able to successfully outperform the benchmarks and lower their drawdown risk while reducing their time spent on analysis. The chart below shows the performance of the mutual fund companies SIAFunds currently ranks, using a quarterly reallocation process.

Screen Shot 2013-04-04 at 9.39.22 AM

*Data was calculated as of the close of March 31, 2013. Numbers above reflect the outperformance as compared to the TSX Composite benchmark.

As you can see, the 5-year numbers show that 97% of the fund companies SIA covered outperformed the TSX Composite benchmark and this includes staying fully invested in funds back in 2008, even though the Equity Action Call and the Asset Allocation model had our clients in cash back then.

With over three quarters of a trillion dollars invested in mutual funds in Canada, you need to be able to sit down with a potential new client, look at their funds and explain to them that you have a defined process to be able to help them through various market conditions and a clear selection process going forward for their funds. SIAFunds can help separate you from the herd, help you gather new assets, and help your current clients meet their investment goals. offers a free one-week trial to their service, so try it out for FREE and start redefining your investment process today.


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Why Buffett is Bullish on Stocks: A Q1 letter to clients

April 2nd, 2013

Why Buffett is bullish on stocks: A Q1 letter to clients

by Dan Richards,

Monday, April 01, 2013

Since 2008, I have posted templates to serve as a starting point for advisors looking to send clients an overview of the year that just ended and the outlook for the period ahead.Advisors have told me they’ve received a great response to these letters and the templates rank among my most popular articles – that’s especially the case given today’s uncertainty.

This letter has three components:

1. An update on performance
2. Perspectives on today’s macro challenges from Warren Buffett’s most recent letter to investors
3. Your recommendations for the period aheadUse as much or as little of the content as is appropriate for your approach. And a reminder that if you’re going to use this letter, customize it to reflect your own language and approach.

The first quarter in review: Why Warren Buffett is bullish on stocks

As we enter the second quarter of 2013, I’m writing to summarize markets developments since the start of the year and to share my thoughts on positioning portfolios for the period ahead. First though, a quick recap of the first quarter of 2013.

At the end of March, U.S. stock markets crossed the all-time high reached in October of 2007. This was due to an exceptionally strong performance to start the year following the agreement by U.S. Congress in early January to avoid the “fiscal cliff” that would have required dramatic reductions in spending and risked throwing the U.S. back into recession.

Three things worth noting about first quarter performance:

1. Driven by a strong start in January, global markets were up by almost 9% in the first quarter, led by gains in the United States of over 10%. One word of caution: Last year global markets were up by 12% in the first three months before giving back almost all of those gains in the second quarter, in large measure due to concerns about Europe.

2. On the topic of Europe, in spite of recent headlines about the bank crisis in Cyprus and continuing issues in Greece, the European market was up by 7% (in local currency) in the first three months of 2013. While Cyprus and Greece got the headlines, the large bulk of Europe’s economic performance will continue to be driven by the larger countries.

3. Canada continued to underperform the United States and global markets. Since the beginning of 2010, the Canadian market is up by about 15%; in that same time the United States is up by roughly 50%.Here’s how first quarter performance looked:

Monthly Returns – Local Currency Canada U.S. Europe Emerging Markets World Markets
January 2013 2.2% 5.3% 5.1% 1.0% 4.9%
February 2013 1.5% 1.3% 0.9% 0.0% 1.2%
March 2013 -0.6% 3.8% 0.9% -0.8% 2.3%
Q1 2013 3.1% 10.7% 7.1% -0.2% 8.6%

Returns to month end, all in local currency, including dividends

Warren Buffett’s view: Stocks still offer value

Warren Buffett is generally considered the greatest investor of all time. From 1966 when he began running Berkshire Hathaway to the end of 2012, the overall U.S. stock market (including dividends) has returned an average of 9.4% annually. That means that $1000 invested in the US market in 1966 was worth just over $74,000 at the end of 2012. During that same time, the book value of Berkshire Hathaway increased by almost 20% per year, twice the U.S. market return. The result: That same $1000 invested in Berkshire Hathaway’s book value would have grown to over $5 million. That’s why Warren Buffett’s views are worth heeding. And that’s also why his annual letter to investors is awaited each year with such anticipation. Three key messages in this year’s letter:

1. Invest in “wonderful” businesses

Buffett is known for saying that he’d rather buy “a wonderful business at a fair price than a fair business at a wonderful price.”

He’s written in depth about the competitive insulation that makes for a great business. (In another well-known turn of phrase, he’s said that he wants to buy businesses “so wonderful that an idiot could run them, because some day an idiot will.”In this year’s letter, Buffett touched on Berkshire Hathaway’s investment in American Express (of which he owns just under 14%) as well as Coca-Cola, IBM and Wells Fargo, his other three big holdings in which he owns between 6% and 9%. In all four cases, he increased his stake in 2012; he quotes the Mae West line that “too much of a good thing is wonderful.”

2. Look past today’s uncertainty

Buffett addressed the uncertainty that preoccupies many members of the media and which has dampened the willingness of American business to invest. He points out that uncertainty has been a constant in the United States since 1776; the only variable is whether people ignore the uncertainty (which typically happens in boom times) or fixate on it.Buffett continues to express confidence in the resiliency of American business, just as he did in his famous New York Times article in the fall of 2008 titled “Buy American I Am” that appeared close to stock market bottoms during the uncertainty in the aftermath of the global financial crisis.

3. Stay in the game

In this year’s letter, Buffett addressed the temptation to, in his words “try to dance in and out (of the stock market) based upon the turn of tarot cards, the prediction of so-called experts or the ebb and flow of business activity.”

He went on to say that since the long-term outcome of investing in stocks is so overwhelmingly favourable “the risks of being out of the game are huge compared to the risks of being in it.”In an interview that followed the release of his letter, Buffett reiterated his view that given that at some point interest rates will inevitably rise, stocks of quality businesses continue to offer good value relative to bonds, even in the face of the run-up in equity prices since last summer. He also repeated his skepticism about owning bonds saying that today “the dumbest investment is a government bond.”Click here to read Warren Buffett’s letter to investors.And click here to watch a nine-minute excerpt of the television interview that followed the release of his letter:

What this means for your portfolio

In my email at the end of last year, I outlined some guiding principles in my approach to building client portfolios, three of which I repeat here.

I’d be pleased to discuss these guidelines at our next meeting.

1. Time to rebalance:

Adhering to your planIn light of stock valuations and the risk in bonds, early last year we recommended that clients increase equity weights to the upper end of their range. Given strong stock performance since the mid-point of last year, that has worked out well and we continue to advise that clients hold their maximum equity weight.

But strong performance by stocks means that today some clients are above the top of their equity allocation. In those cases, we have been recommending reducing equity weighting to bring portfolios back within their guidelines. Regardless of what happens to markets in the short term, barring a significant change in your circumstances, you should stick to your investment parameters.

2. Diversifying portfolios

When building equity portfolios, I’ve always advocated strong diversification outside Canada. This helped my clients through most of the 1990s, then hurt them in the decade after 2000, then helped them again in the past three years.Going forward, I have no idea whether the Canadian market will do better or worse than global markets, but I do know that we represent fewer than 5% of investing opportunities around the world. In addition, because of our resource focus Canada’s market will tend to be more volatile over time than those of the U.S. and yes, even Europe. For those reasons, I continue to recommend geographic diversification of stock portfolios.

3. Focus on dividends and cash flow

The final principle relates to the role of cash flow from investments. Amid the uncertainty surrounding economic growth and equity returns, I continue to place priority on the cash yield from investments. While the headlines talked about US markets hitting new highs in March, investors who reinvested their dividends saw their account values exceed the 2007 peak significantly earlier.

Dividends on stocks in selective sectors continue to make these stocks attractive. When it comes to equities, we do have to be increasingly discerning, however; in some traditional high-dividend sectors stocks that pay steady income are expensive by historical standards and show signs of stretched valuations.I hope you found this overview helpful. Should you have questions about anything in this note or about any other issue, please feel free to give me or one of the members of my team a call.And as always, thank you for the opportunity to serve as your financial advisor.

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Do You Have the Elements of a High-Performing Business?

March 13th, 2013

by Norm Trainor, The Covenant Group

March 7, 2013

Do You Have the Elements of a High-Performing Business?When surveying your business, do you assess the individual components of operations, marketing, sales and client relationship management? Or do you simply look at it as a whole?To get a clear sense of which aspects of your company are performing well and which ones need to be closely monitored and improved, it is better to inspect the five elements that create a high-performing business. As I explain in The Entrepreneurial Journey, these are your vision, strategy, structure, systems and skills (the people who make the business run). It is vital that you understand the interdependent relationship of these five elements and that you give them all the attention they deserve.Without vision, there can be no direction

Laying out your vision for the business will give the company a focus but will also give you a greater purpose to work every day than merely making money. Greed is not a healthy or sustainable motivator. When you have established the picture of what you want to achieve through the organization, you will be able to make all future decisions in context of that vision. Each time you face a major choice, you will weigh it in terms of how it advances or detracts from your mental picture of the business.The vision will serve as a foundation on which you build strategy. What will you have to do to achieve what you want the business to become? What resources and skills do you have on hand in order to execute the plan? The answers to these questions will help you create a business plan.As you gradually execute each point in your strategy, you will see your company begin to grow. Expanding from a business of one to an organization of many different employees and moving parts will require you to create a structure and a hierarchy. Define every role within the company and map out how each person’s responsibilities relates to those of other team members.With the increased number of people and processes, it will be necessary to adopt systems that support the various functions in the company. Eventually, you will have a set of policies and tasks related to hiring, training, client service, information management, billing and much more.The final element, skills, will develop and become stronger as you hire more people and begin to narrow your practice’s areas of specialization. Recognizing the intricate relationship between all five of these components will help your business grow and enjoy long-term success.As founder, president and CEO of The Covenant Group, Norm Trainor is often seen as the face of the company and its leading financial advisor training programs. He has penned several best-selling books, articles and other works with entrepreneurs and financial advisors to show them how they can become more valuable to their clients, boost productivity and, ultimately, achieve the success they desire.

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How to Warm Up Your Prospects

March 13th, 2013

by Shauna Trainor, The Covenant Group

March 13, 2013

Warming up Your Prospects

To advance prospects through the marketing pipeline and eventually guide them to the sales process, salespeople in any industry need to keep their targets “warm.” Do you have a strategy for how you ensure you are at the top of prospects’ minds? What have you done to guarantee that they associate your name with a particular service or product? Maintaining contact is only half of the sales process – you also need to constantly evolve what you are offering the prospect, adapting the package as you learn more about him or her.Communication is a two-fold process. First, you must collaborate with the marketing function in your organization to determine the best schedule for contacting prospects. Decide if it is more effective to send monthly newsletters, periodically call your prospects to check in, host educational seminars, or a mix of all these tactics and more.

Next, you must analyze these conversations and your prospects’ responses to identify his or her goals, using that feedback to tailor the way you communicate in future interactions. When you finally get to the stage of asking for a prospects business, the strategy that you present will be the condensed version of the months or years of interactions.

Take what you learn to heat up the sales cycle
In the financial services world, this is known as goal-based financial planning, but the model is applicable in a variety of industries. There is no set model for meeting clients’ needs, so salespeople need to take the suite of products or services that their companies offer and then put those into the context of the prospects’ needs. Do not attempt to force a prospect into a pre-fabricated profile.

Start conversations with your prospects that encompass their needs and desires. Ask questions or present materials that are thought-provoking and will inspire them to reflect on what it is they really want. Do not be satisfied with vague answers – press for responses (and provide more educational material if needed) that will give you insight into what products or services you can recommend. View your prospects’ stated goals as the framework to which you will market, and eventually, around which you will build their individual service strategies.

Prospects and clients alike look for reflections of their past feedback in the service you deliver now and in the future. Prove to them that you are listening by using their comments and asserted needs to create a goals-based solution.

Shauna Trainor is The Covenant Group’s Marketing Manager. She focuses on The Covenant Group’s own marketing strategy and also helps entrepreneurs through financial advisor training to leverage social media and other technology to spread the word about their services and practices and build relationships.

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How to Show Up at the Top of Google Searches

March 13th, 2013

More and more investors are conducting google searches as part of their purchase process  – and not just for restaurants and car dealers but also for professionals such as lawyers and financial advisors.

And while conducting google searches for advisors has not entered the mainstream among older investors it is becoming increasingly common-place among clients in their 30’s and 40’s.

Today features a 32 page report from Google on how to maximize the chances of showing up first on searches for financial advisors in your communities.

The report provides tips on:
• Accurate page titles
• Improving your site structure
• Optimizing content
• Making better use of images
• Using header tags
• Making your site mobile-phone friendly
• Promoting your site effectively

Click here for the full report.

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What to Say When a Friend Doesn’t Want to be Your Client

March 13th, 2013

by Dan Richards,

Many great client relationships emerge from friendships.

That said, some investors are uncomfortable working with advisors with whom they have close friendships – something I was  reminded of last week by an email from a veteran advisor in New York City with a question that many advisors grapple with – how to respond when a good friend eliminates the possibility of working together, precisely because of your friendship.

Here’s the email:

“I wonder if you have any suggestions on how to respond when a close friend confides to you that they are looking for a financial advisor but prefer to keep business and friendships separate?

For years now I’ve periodically been in this situation but have not had a comfortable response.”

Mixing business and friendships

It’s not only clients who have concerns about mixing business and personal friendships – I’ve talked to advisors who make a conscious decision not to market within their personal network. In some cases this is because of concerns that marketing to friends will be seen as intrusive and position you as a salesperson, in other instances it’s because advisors don’t want to jeopardize friendships should people feel let down during choppy markets.

When friends say they’re uncomfortable mixing business and friendship, you have three alternatives:

1. Try to change your friend’s mind
2. Suggest that they consider working with another advisor on your team (depending on the size of your team)
3. Offer to introduce them to other advisors, either at your firm or at other firms.

Note that your response here is very much one of personal preference – and in some cases may depend on your relationship with the person you’re talking to.

Option 1: Changing your friend’s mind

This would not normally be my recommended course of action – I believe that as professionals we all have to respect the stated preferences of our friends and family, no matter how much we might want to work with them.

That said, if you want to try to change your friend’s mind, start by defusing the tension they’ll often be feeling, with a response like:

“I appreciate your sharing how you feel. This is very much a matter of personal preference, many people are comfortable working with friends, others aren’t. And on this kind of decision I really think you need to follow your instinct. So I’m absolutely fine with your decision here.”

Pause to allow your friend to respond, then you could continue with something like:

“Just so I understand this better, I wonder if you could help clarify the background to your decision. Have you had bad experiences in the past with friends with whom you began doing business?”

At this point, you need to sit back and listen and concentrate on acknowledging what your friend has to say. I don’t suggest that you try to change their minds in this initial conversation, rather make a mental note of the conversation for future reference, for a time when you’re talking to your friend in a context that lends itself to comfortably raising this topic..

At the end of your friend’s answer, I would conclude the conversation unless they truly seem to want to discuss this further – you don’t want to appear to be beating this topic to death. You might consider, however, closing by asking your friend if they’d like to stay on your email list, perhaps with a sentence like:

“Thanks again for your honesty about this. Please let me know if I can be of assistance at any time – in the meanwhile, would you like to stay on the distribution list for my emails and invites to the lunches I hold, this is entirely your call, I’m happy to leave you on but am equally happy to take you off the list.”

A word of warning here: Don’t try to suppress your friend’s objection with clichéd objection handling techniques like “Feel, Felt, Found:”

“I understand how you feel.”

“I’ve talked to friends in the past who initially felt the same way.”

“But what they found once we dug into this further is that we were able to come to a working relationship that fully met their needs and with which they were completely comfortable.”

Lines like this one work because people feel under pressure to conform to the experiences of others. And in fact, on occasion you may have success with this approach for that reason. Ultimately, though, you haven’t addressed the concern, you’ve buried it – and it’s unlikely that this addresses your friend’s nagging doubts in the long-term. Meanwhile, any interaction where current or existing clients feel undue pressure undermines your relationships, rather than enhancing them and risks positioning you as a product-pushing salesperson rather than a professional advisor.

Option 2: Working with other advisors on your team

The advisor who sent me the email is one of three wealth managers with a 12-person boutique firm.

Again, first acknowledge the concerns that your friend has expressed:

“I can sympathize with your point of view here. This kind of decision is very personal – while some good friends have become my clients and some clients have become good friends, you should absolutely go with your instincts here.”

After pausing for a reaction from your friend (chances it will be one of relief for your understanding), this advisor could continue on.

“There are a couple of options here, if you’re interested. First, I could introduce you to one or two advisors at other firms that I have respect for and confidence in. Alternatively, I could introduce you to one of the two other wealth managers at my firm who might be a good fit for you.  These are outstanding colleagues who I’ve got a lot of respect for, I’m confident that one of them could fit your needs. Just to be clear, you and I wouldn’t be working together directly but you’d still get the benefit of my thinking.”

Having said this, again sit back and listen. Note that phrasing this as you have you give your friend a comfortable option should they feel that not only don’t they want to work with you, they don’t want to work with your firm.

The key is to put this in your own words, so that you can deliver this comfortably. One suggestion – do try to keep your answer as short as possible.
Option 3: Making a referral to other advisors

In many regards this is the most comfortable response for both advisors and people in your network – all you’re doing here is offering to help friends connect with someone who can meet their needs, with no vested interest on your part.

Again start by validating your friend’s concern:

“I can sympathize with your point of view here – you’re not unique, I run into quite a few people who feel the same way.”

Then go on to say:

“The good news is that I’m not the only good advisor in this community, there are lots of excellent advisors. Let me know if at any time you’d like me to introduce you to one or two advisors who you could sit down with to get a sense of their approach, these could be other advisors at my firm or advisors at other firms.”

And then leave it at that – at this point you’ve made the offer, now let your friend decide how to proceed.  That said, if friends do take you up on your offer and you introduce them to other advisors, there’s nothing wrong with letting these advisors know that you’d welcome reciprocating introductions should they run into the same situation that you did.

One of the reasons that advisors are unhappy with their response to a statement like “I want to keep business and friendships separate” is that they haven’t thought their answer through beforehand. Even if you haven’t run into this situation in the past, chances are you will in future – consider taking time to rehearse how you’ll respond. Chances are a two minute rehearsal will pay dividends in a much stronger answer when you do run into this comment.

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Ten Minutes that Uncovers What’s REALLY Important to Prospects

February 27th, 2013

by Dan Richards,

It can be incredibly hard to get prospective clients to let down their guard and talk openly about what really matters to them.

And this isn’t just limited to prospects – some particularly private clients can be slow to share the non-financial aspects of their lives.

That’s why a 10-minute Priorities Exercise can be an essential tool in your conversations with potential clients.  Using a list of 20 possible priorities as a starting point, the exercise quickly homes in on the most important issues in people’s lives in a comfortable, unobtrusive fashion

Note that this is not designed for the initial conversation with a prospect, but rather is something to use on the second or third meeting. That’s because you’re asking people to share very personal information – and you haven’t typically earned the right to ask for that information on the first meeting.

Setting up the conversation

The best way to introduce this is during the wrap-up to an initial meeting with a potential client. If they agree to a follow-up conversation, whether in the immediate future or down the road, say something like:

I look forward to talking further. When we meet, I’d like to spend 10 minutes on a short exercise that will help me better understand your priorities and the most important things you want to achieve. I’ve done this myself and have conducted it with my clients and both they and I have found it useful.”  

Asked this way, there’s a high probability that when you call to set up a follow-up conversation and remind the prospect of the exercise, they’ll readily agree to it include it in the meeting.

This exercise would fit well into the early part of  that follow-up meeting. First, give the prospect 20 cards with one priority per card, explaining that they should define the priorities in any way they wish; the priorities are listed at the bottom of this article. Then ask them to put the cards  in order with the priority that is most important to them first and the least important last.

Explain that this list can help bring clarity when faced with any important decision, whether on a new job opportunity or entrepreneurial venture, buying a vacation property, relocating to another city or deciding when or where to retire. It can also shed light on how their investment decisions interact with  their key goals

Note that you can give prospects the priorities on a piece of paper, but the cards make it easier to quickly rank the priorities. Give your prospect three minutes to complete this ranking. If you’re doing this at your office, you can step out to get coffee for the two of you or excuse yourself to check with your assistant on some paperwork. While you want to avoid having prospects feel that you’re looking over their shoulder, neither do you want to be checking messages on your IPhone while they do this.

Translating priorities into action

After your potential client  has ranked their 20 priorities, divide  them into the four categories below

Priorities 1 to 5                                    ”Must-haves”

Priorities 6 to 10                                 “Important”

Priorities 11 to 15                              “Nice to have”

Priorities 16 to 20                              Not important

Then ask prospects to walk through their thinking for at least the five “must-haves” at the top of the list, although the conversation may often extend to the next five “important” priorities as well, starting with #1 and working your way down the list. For each one, ask them to explain why that priority is ranked where it is.  Be sure to make this a conversation rather than an inquisition – you may mention how your priorities relate to theirs or ask if they were surprised by where any of the items ended up on the priority list.

You don’t have to restrict this to prospects; this can be equally illuminating with existing clients, especially if a couple completes this separately and then compares their results. And don’t forget to do this yourself and ask your team to complete this; you may be surprised by what you learn.

Every successful advisor knows the importance of developing a deep understanding of what really matters to your clients and that getting a better sense of prospective clients’ true priorities can be instrumental in bringing them on board. As you think about your upcoming meetings with potential clients, consider whether the 20 Priorities Exercise can help create the kind of open dialogue that makes those conversations productive ones.

And below are the 20 priorities:


The 20 Priorities

Contribution to society / legacy                                                                                                                                                                          


Current income

Equity ownership



Financial security

Future Income

Geographic location


Home environment

Influence and Power

Intrinsic nature of work

Leisure time

Personal growth

Prestige and Status

Professional growth

Spiritual development

Spouse / Significant Other

Workplace environment

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What a 29 year old Banker can Teach You About Referrals

February 27th, 2013

via Dan Richards,

It all started with a simple request that, as it turned out, was not so simple. The resulting encounter with a 29 year old account manager at a leading bank provides important lessons for advisors around:

- Communicating your focus on customer needs
- Checking for satisfaction
- Letting clients know you’re open for business
- Following up
- The right incentives for your team

A simple request

Given a growing amount of business south of the border, earlier this year I decided to open a US dollar bank account to make deposits and write cheques. Even though I’ve banked at this branch for many years, I was told that I had to sit down with an account manager to do this … and was introduced to a young woman who appeared to be in her late 20s or early 30s, let’s call her Mary Smith.

“Mr. Richards, we have several different plans for US dollar accounts” Mary began. “To ensure that I open the right one for you, how many deposits and cheques are you likely to make in the average month and what kind of balance do you expect to maintain in the account.”

The paperwork wasn’t onerous and we were through in about 5 minutes. And that’s where it got interesting.

What else can I help you with?
After I’d finished signing all the forms, Mary said:

“Mr. Richards, is there anything else can I help you with, perhaps a line of credit or we could check to see if you can reduce your bank fees by switching to a different type of account?”

And then she did what everyone should do after asking that kind of question, she sat back and waited for me to respond … after a couple of seconds I had no choice but to fill the vacuum.

“Thanks for the suggestion, Mary”  I said “ and I may take you up on your offer to look at my bank account at some point down the road, but I have an appointment in 10 minutes I have to head off to.”

The “net promoter question” in action

“That’s not a problem at all” was the answer. “Do you have two quick minutes just to touch on a couple of final things?”
When I answered yes, Mary went on:

“You may get a follow-up call about our appointment today, with seven or eight questions. The most important question is one that asks if you’d feel comfortable recommending me to a friend on a scale from 0 to 10. It’s important to note that 10, the top score, doesn’t mean I was perfect, just that I fully met your needs. And I hope that based on our conversation, if you do get that call you’ll feel comfortable giving me a 10.”

Again, she paused and waited for my response. There was no way I could turn Mary down. And indeed, if I’d gotten that follow-up call, I would have given her a 10 just on her interest and enthusiasm alone.

As an aside, this bank uses something called the “net promoter question” to measure satisfaction.  I’ve written in the past about this as the best vehicle to measure satisfaction and loyalty. Used  by organizations like Apple, Schwab and American Express,  it asks: From 0 to 10, how likely is it that you would recommend this individual to a friend or colleague?

Start with the 9’s and 10’s (the promoters), subtract the scores from 0 to 6 (the detractors) and you get a “net promoter score” that is highly predictive of satisfaction and loyalty; indeed, several leading banks now use this to help determine their frontline staff’s bonus.

That conversation with Mary actually crystallized my thinking on the positive job she’d done. The key of course is that she communicated real concern and interest; we’ve all had similar requests from service departments at auto dealers and muffler shops, if I get a request for a 10 after getting ho-hum, indifferent service, it’s not going to turn a 6 into a 10, in fact it may even reduce it to a 5.

“I’d like to give you two cards”

Then Mary finished with one last request: “I’d like to give you two of my business cards” she said handing me two cards. “I hope you’ll use the first card to put my information into your contact management system should there be anything you want to discuss in future. And the reason that I’m giving you the second card is in case you have a friend or family member who is having problems or needs some help on any aspect of their banking needs.”

So there you have it – no muss, no fuss, no pressure – but she’d planted the seed should I be talking to anyone who’s run into a roadblock at their bank.

Mary’s impressive performance didn’t end there, though. When I got back to my office, there was an email thanking me for taking the time to meet with her. And about four weeks later I got a voicemail from Mary reminding me that anytime I’d like to review my existing account, simply to let her know.

What does it take to get that kind of motivation?

I was intrigued and impressed by our interaction. I called Mary and explained that I’ve worked in the industry for many years (In the small world category, it turns out that one of her colleagues had a copy of my book Getting Clients Keeping Clients, with its prominent green cover.) I asked Mary how long she’d been with the bank and, without getting into too many details, a bit about how she’s compensated.

It turns out that Mary had started working in the branch during her third year of university and after four years had successfully applied for a position as account manager, a role that she’s been in for three years. Mary was quite forthright about her compensation: Her base is $44,000 but if she hits all her targets for sales and customer satisfaction she can make another $10,000. She said that it’s unlikely that she’s going to get all of that bonus, but had earned $5,000 last year and is aiming to earn $7,500 this year.

This also provides a lesson on the power of the right variable incentives. This isn’t to suggest that money is the only thing that matters, far from it – if people don’t like their job and the people they work with, it’s unlikely that the prospect of a $10,000 bonus will get them excited. But if the folks on your team fundamentally enjoy what they do, this demonstrates the power of well-targeted incentives, structured so people feel that earning that bonus is within their control.

It also reminds us that we can learn from everyone we deal with – from the positive attitude of the staff at Starbucks to the curiosity and enthusiasm of young folks just starting in the business. And Indeed many of us could take lessons from that 29 year old account manager about customer focus, checking for satisfaction, planting the seed for referrals and disciplined follow-up.

If you’re interested in reading more about how to apply the net promoter question to your business, click here.

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