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?

MICRO Level

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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April 4th, 2013

Mak­ing Mutual Funds Per­form in Your Portfolios

By Brian Liv­ingston, Vice Pres­i­dent, SIA​Funds​.com

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.

SIA​Funds​.com 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.

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.

*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. SIA​Funds​.com 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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April 2nd, 2013

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

by Dan Richards, Cli​entIn​sights​.ca

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:

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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March 13th, 2013

by Norm Trainor, The Covenant Group

March 7, 2013

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 suc​cess​.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.

Fol­low The Covenant Group

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March 13th, 2013

by Shauna Trainor, The Covenant Group

March 13, 2013

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.

Fol­low The Covenant Group

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Tags: Attempt, Business Strategy, Conversations, Covenant Group, Desires, Educational Seminars, Feedback, Financial Planning, Financial Services World, Guarantee, Marketing Function, Marketing Organization, Newsletters, Pipeline, Profile, Prospects, Salespeople, Shauna, Targets, Vague Answers
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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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Tags: Car Dealers, Financial Advisors, Google, Google Searches, Header Tags, Images, Lawyers, Mainstream, Mobile Phone, Older Investors, Page Titles, Restaurants
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March 13th, 2013

by Dan Richards, Cli​entIn​sights​.ca

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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Tags: Choppy Markets, Client Relationships, Conscious Decision, dan richards, Email, Friend Doesn, Friends, Friendship, Good Friend, Instances, Investors, Marketing, New York City, Option 1, Personal Friendships, Personal Network, Personal Preference, Relationship, Salesperson, Team 3
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February 27th, 2013

by Dan Richards, Cli​entIn​sights​.ca

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                                                                                                                                                                          

Co-workers

Cur­rent income

Equity own­er­ship

Fam­ily

Friends

Finan­cial security

Future Income

Geo­graphic location

Health

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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Tags: Cards, Conversations, Exercise, Financial Aspects, First Meeting, Immediate Future, Important Things, Initial Conversation, Limited, People, Personal, Priorities, Priority, Private Clients, Probability, Prospective Clients, Prospects, Unobtrusive Fashion
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February 27th, 2013

via Dan Richards, Cli​entIn​sights​.ca

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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