Transfer the assets of unhappy clients from their current investment firms.
This is the easiest way to win new business. The simplest way to get that ball rolling is to ask for their investment account statements. More than likely, their accounts are in negative territory. Except for a few asset classes, the traditional 60/40 portfolio is underwater. Once you share this fact with them, they are likely to welcome your perspective.
You are going to learn three things from the statements:
- What the prospective client is invested in and where he or she is losing money
- Fees the investor is paying
- Who the financial advisor is (Is he/she a fiduciary, abiding by the fiduciary standard?)
The last time the United States experienced an inflation-based downturn was July 1981–November 1982. The severe downturn was triggered by tight monetary policy that was enacted in an effort to fight mounting inflation. This difficult time for Americans occurred before many current financial advisors had entered our profession — and before many were even born! Those advisors have not guided clients through a downturn like this before. The suggestions I share below will help you start these important conversations with your clients.
Certainly, the last decade of the “buy the dip” philosophy has mostly worked. But the past decade was a one of fiscal accommodation by central banks around the world. Here in the United States, it was no exception. What is clear, and broadcasted affirmatively, is that the Fed is taking the punchbowl of accommodation away. Asset classes that were direct beneficiaries of loose fiscal policies are now deflating, and in some cases, the declines are setting records.
Action #1: Discover your prospective (almost new) clients’ pain points.
You can say something like, “John and Mary, I want to thank you for the opportunity to look at your investment statements. Before I share with you some of the things I have discovered, I would like to ask you a question. [Pause] What bothers you the most about your current situation?”
The answers you hear will run the gamut:
- “I don’t like losing money.”
- “I need these assets to pay for retirement.”
- “I feel like I’ve let my family down.”
- “At this rate, I won’t be able to retire/stay retired or buy the cabin in the woods!”
It is very important to exhibit empathy and repeat back to the new client what he or she has just revealed to you:
- “So, you are worried about losing money?”
- “So, you need those assets to for and stay in retirement?”
- “So, you don’t want to let your family down?”
- “It sounds like you are saying you are concerned about retiring/staying retired and having the funds to buy the cabin in the woods.”
This time-tested technique works. By repeating back to your new clients what they have shared with you, you are telling them, “I hear you!” Most advisors — especially, in my experience, the younger ones — do not know what to do in this situation. They will repeat what “the home office” tells them, or they will post their golf trip to Europe on social media while their clients suffer and endure sleepless nights!
Action #2: Convert the fees that your clients are paying from percentages to dollars.
There is often confusion in our profession regarding how advisors get paid. Many clients do not realize that our industry lives off 1 percent on every $1 million managed. Even if they do acknowledge it, they may not realize the magnitude of the amount they are paying when they hear that they are paying “1 percent.” But it will get their attention when you state the amount they are paying in terms of dollars instead of percentages.
For example, if your almost-new client has $2 million in AUM with another advisor, you could say, “Did you know that you are paying $20,000 for the current advice you are receiving? Your advisor is getting 1 percent of your $2 million investment.”
It is critically important to wait until the client absorbs what you have shared before moving forward. Depending on the circumstances, you can share this: “That sounds like a lot of money to pay for you be up at night worrying” Or “That’s two first class tickets to Europe!” Or “That represents the annual dues for your golf club!” The truth is, clients do not have to pay that 1 percent fee.
Action #3: Stress the importance of advisors being fiduciaries.
Finally, if you see that your client’s current advisor is not a fiduciary, bring up this topic. You could say, “Does it bother you that your advisor is not a fiduciary and is not held to the fiduciary standard?” Advisors who are not affiliated with a corporate RIA or a pure RIA do not have to operate according to, and are not held to, a fiduciary standard. This is a perfect time to explain to your clients the advantages they receive when their advisor is a fiduciary.
Over the coming months, our firm, The AmeriFlex Group®, also referred to as the Home for Hybrids, will share and post more do’s and don’ts for winning in this current downturn and recession. Contact us if you would like to receive these helpful tools or other ideas for winning.