12 minutes | Jun 19, 2019

Bridging the Information Gap with Clients’ Heirs

Up to 90% of children fire their parents’ advisors after an inheritance. And Millennials represent 55 percent of assets held by investors who are “at risk” of leaving their current firm, according to a recent J.D. Power study. In this episode, you’ll learn three key insights that are critical to doubling the lifetime value of your accounts and dramatically increasing the value of your practice. Lean in as Paul addresses one of the main challenges associated with serving the next generation and how to turn it into an opportunity for long-term growth – namely, that many younger investors lack financial education.   Bridging the Information Gap with Clients’ Heirs This is the show devoted to financial advisors, fee-based investment advisors, and wealth managers who want to increase the value of their practice by attracting more premium clients and reducing client attrition. Now if this sounds like you, all you need to do is lean forward and listen carefully. Family Dynasty Planning is central to our discussions, and you and I will also explore other fascinating and important topics such as attracting wealthy clients, dealing with increasing competition, continuity planning and succession planning, growing and building your business, understanding the true worth of your business, and leveraging technology, just to name a few. In this episode, you’ll learn three key insights that I believe are critical to doubling the lifetime value of your accounts and dramatically increasing the value of your practice. First, you’ll hear one of the main challenges associated with serving the next generation – namely that many younger investors lack financial education, and you’ll find out how to turn this challenge into an opportunity. Second, you’ll find out the single most important thing you can do to effectively teach your clients’ heirs about investing and the role that you play. And it’s probably not what you think! And finally, you’ll learn one great way to engage millennials in the process of learning about investing. So please read carefully. Because this episode could have a significant impact on your future success.   A cherished mentor It was my first semester at the Iowa College of Law, a top-tier law school in Iowa City, Iowa. I was sitting in the middle of the lecture hall for Contracts class. The professor was Alan Widiss, who was a co-author of several national treatises on Insurance Law. He also wrote the nationally used textbook that we happened to be using for this class. At the end of this particular class, he announced that he was looking for a research assistant. That the position required working 10 hours per week, and one of the benefits was that it would qualify the student for in-state tuition. I ran down to him at the end of class and asked if I could apply. We made an appointment for me to meet with him at his office. I got the job. My responsibility as research assistant was to find and photocopy all cases from around the country that mentioned uninsured or underinsured motorist insurance coverage. There were usually 30 or 40 cases each week. Each case was usually 5 to 15 pages long. He read them all, and then continually incorporated cutting edge cases into his multi-volume treatise on the subject. I admired Professor Widiss’s work ethic and his dedication to perfection within his profession. It’s 25 years later, and I still remember the little nuggets of wisdom that he mentioned. (Professor Widiss in 2001. He had been one of the foremost experts on insurance law.)   New investors need you to be a mentor I mention this story because mentors play an important role in our lives.  Your clients’ heirs probably need someone like you to teach them. I say this because the basics of financial planning are lost on many new investors. Only about a quarter of millennial investors demonstrated a basic understanding of how to manage their money, according to one study. Yet 69 percent said they believe they have a high level of financial knowledge. More affluent investors may have a better handle on financial factors, but that’s no guarantee they know or value the same things as their parents when it comes to managing their money. For advisors, this creates a two-fold problem: younger investors may not see the value that financial advisors provide, and they may have unrealistic expectations of what services they can expect from an advisor based on their investable assets. Education is a clear and valuable service that advisors can offer younger investors. You can and they should take advantage of early opportunities to do so. As clients’ children get older and reach their own financial milestones, from opening their first checking account to building a retirement strategy, advisors who take the time to sit down and provide education and guidance will also be nurturing an important future relationship. To help bridge this education gap, many advisors are leveraging their client portals to build a library of informative resources for newer investors. This also enables them to send timely materials personalized for an investor’s specific needs or questions. So, what is the single most important thing you can do to inspire your clients’ heirs to learn from you? There was a study presented at Wisconsin’s Annual Distance Teaching and Learning Conference in 2010. Researchers had asked their students this question: What characteristics are essential for effective teaching from the student perspective? Analyzing and combining reasonably synonymous characteristics, researchers isolated the top responses. What did students say was the most essential characteristic for effective teaching? ANSWER: Showing Respect. It turns out that for both online and face-to-face students, Respect was more important than any other characteristic. Students ranked it higher than knowledge or the ability to communicate and engage. In other words, you can have years of experience and be the absolute smartest financial advisor. You may have a whole alphabet of credentials behind your name. But when it comes to teaching your clients’ heirs about investing and about what you do, simply showing them respect is what they actually care the most about. For me, I remember being able to ask Professor Widiss anything. He never judged me or thought any question was too simple. In fact, one of the best answers I ever got from a teacher was when he answered my very basic question of “When exactly is a contract formed?” I had caught him walking back to his office on the way from Contracts class on day. (If you’re curious about his answer, he said that there is a moment in time when all the requirements for a binding contract happen, and then he snapped his fingers to demonstrate that at that precise point in time is when the contract is created.) Again, I was one of 120 students in his Contracts class, and we had been spending weeks talking about the nuances of contract creation and defenses to contracts. He showed me the respect of being willing to answer even the most basic-seeming question. Now, let me tell you a great way to engage millennials in the process of learning about investing. Anyone born between 1981 and 1996 (ages 23 to 38 in 2019) is considered a Millennial, and anyone born from 1997 onward is part of a new generation. Millennials are always looking to learn, and they respond well to mentoring and coaching programs. So, a great idea for you would be to start a mentoring program in which you teach them how to open practice accounts on the trading platform of your choosing. You can have them compete with each other on selecting stocks and mutual funds. In the process, you can not only teach them basics of investing, but also teach them the value that you bring as an investment advisor. Finally, I want to thank InvestEdge for providing some of the inspiration for this episode. They have a good article entitled “4 Reasons The ‘Great Wealth Transfer’ Keeps Advisors Up At Night.” It’s located here.   EPISODE REVIEW So, let’s do a quick review of the insights you and I discovered in this episode. In this episode, we heard one of the main challenges associated with serving the next generation – namely that many younger investors lack financial education, and we talked about how to turn this challenge into an opportunity. Education is a clear and valuable service that advisors can offer younger investors. Second, we learned the single most important thing you can do to effectively teach your clients’ heirs about investing and the role that you play. It was simply showing respect to these younger people. Third, I mentioned that a mentoring program might be a great way to get millennials engaged in learning about investing and also learning the value that you bring as an investment advisor. And speaking of reviews, please go to DynastyAdvisorPodcast.com/iTunes and type-in your biggest “take-away” or ‘aha!’ moment you experienced during this episode. You can do this now in the Reviews section and when you do it, iTunes will ask to rate this episode ... I hope I’ve earned 5-stars from you!   It’ll takes 3 minutes out of your day, but what you declare could provide you a lifetime of learning!    I hope our paths cross again next week for the Dynasty Advisor Podcast, the show dedicated to helping you use Family Dynasty Planning to keep your biggest investment accounts even after your wealthy clients have passed away. Please do whatever it takes join me next week because we’ll cover how to build trust with your clients’ heirs. If you can master this one thing, you’ll be way ahead of most other FAs! (And please promise me that you won’t misuse this information. Con artists use these same tactics, as you’ll hear in the next episode.) I encourage you to invite a friend or bring a study-buddy, because the next episode is pretty important. I ca
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