17 minutes | May 15, 2019

Building Relationships With Your Clients' Heirs

The main reason clients’ heirs leave a financial advisor is not having a relationship. 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 tells you a story about his personal experience of suddenly becoming an accredited investor, and who befriended him. He’ll also share who didn’t make any efforts to connect with him (namely any of the financial advisors he knew). Make these insights work for you so you can double the lifetime value of your large accounts, and attract more wealthy clients. 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. You’ll learn that people make emotional decisions and then justify those decisions rationally. You’ll learn that you shouldn’t just choose emotion or logic in dealing with your clients or potential clients. You need to use both. Finally, you’ll discover the importance of calling your clients and other contacts. Not just sending them an email newsletter. Please read carefully. Because this episode could have a significant impact on your future success. An investment conference with no advisors (aka, shooting fish in a barrel) It’s Friday late morning in early February 2010. I’m at the Atlantis Resort in the Bahamas. It’s a sprawling complex of buildings, which is kind of funny considering that the weather in the Bahamas is usually always beautiful, but at this resort you could spend the entire time never going outside. I’m attending the FreedomFest conference, which is a libertarian-oriented investor conference. Why was I at this event? Because one of the most recent books that my father bought was called Investing in One Lesson, by Mark Skousen. At the end of the book, Mr. Skousen invites readers to attend conferences that he put on. One is in Las Vegas, and the other is in the Bahamas. I later put together that Professor Skousen made his money selling investor newsletters and putting on these conferences. Anyway, my father was a very successful investor – having built his military retirement into $28 million over 40 years. He had recently died, and I wanted to honor him by learning what I could about what he did. I thought that attending this conference would be a good way of getting introduced to the investing world. Little did I know that investor conferences are basically glorified flea markets. Only instead of selling old antique junk, an investor conference sells junky investments to accredited investors. Anyway, as I’m walking through the exhibition booths on my way to the lecture hall, I pass a booth with beautiful bronze and silver sculptures. The company was owned by a good looking fellow about my age by the name of Mark. Also assisting him was a beautiful girl who I later learned was his wife. Mark was very enthusiastic and immediately struck a conversation with me. He treated me like I imagine Bill Clinton would treat someone he just met. He was the personification of ebullient – cheerful and full of energy. He took his time getting to know me over the coming days at the conference. I attended one of his breakout sessions where he explained how his company made money providing sculptures to charitable auctions such as schools. The company provided the sculpture to the charity, with a reserve. Then the deal was that the company would receive 50% of whatever the sculpture sold for at the charity. It sounded reasonable enough to a newbie investor like me. And, after all, Mark was so likeable. In the end, I invested millions with Mark. Only later did I discover that my millions had gone to building a new house for Mark complete with a helicopter pad. Now, when I was telling you this story, did you notice what I never mentioned? Did you hear me mention anything about my father’s stock broker? Or any of the financial advisors that I had gotten to know over the years as an experienced trusts and estates lawyer? Remember that I had been an estate lawyer since 2001, and it goes without saying that I had gotten to know at least a handful of financial advisors in the course of my legal practice. But I never reached out to any of these people … and none of them reached out to me during the years following my inheriting my father’s $28 million estate. What was that about? I should correct something. Various advisors continued to email me newsletters about changes in the tax law and market conditions. But none of them ever called or reached out to me personally. I can tell you that once I got on the list of accredited investors, there were lots of private equity companies that called me and sent me mailings. They did this relentlessly. But no legitimate financial advisor reached out … other than the bland emailed newsletters. Using Neuroscience: Emotion Plus Reason Here’s something you need to learn. Clients don’t invest rationally. Sure, they may tell you that they agree with what you tell them … your methods of selecting stocks, for example. But people are actually making an emotion-based decision to go with you, and then rationalizing it after the fact. This is what neuroscience says. Now I’m not saying to ONLY use an emotional appeal to your clients. The fact is that people use BOTH emotion and logic in making decisions. That includes decisions on whether to invest with you, whether to change to another advisor, or whether to just take the money and spend it. Remember two things about this. First, emotion always comes first. Second, people will justify an emotional decision based on a rationalization … and almost any rationalization will work. In one study that Harvard professor Ellen Langer conducted, researchers approached people in the act of using copying machines and asked if they could cut into the line and make photocopies. The experimental subjects were given different reasons for the request ranging from the sensible to the seemingly senseless, such as “because I’m in a rush” and “because I need to make copies.” It turned out that almost any reason worked, as long as it wasn’t completely fantastical … such as being chased by a pack of wild dogs. How do you apply this to how you promote your financial services company? Lead with a big idea that has an emotional appeal. You don’t need an endless and a constantly changing list of how your investment approach is superior. You need to just say that you focus on preparing your clients for retirement, or helping make sure their kids are taken care of. Something that has emotional appeal. Sure, every financial advisor probably does that. The difference is that you realize that investors are attracted to a big idea, and only after that do they then rationalize their decision. One RIA that I knew years ago promoted their understanding of Maslow’s hierarchy of needs, and that their clients were self-actualizers. The approach worked. They had a loyal following of clients who all saw themselves as “self-actualizers.” Then he would met with them each year to make sure their investments were meeting their goals. But that was the rationalizing part. The clients were already emotionally connected to his big idea of being “self-actualizers.” Another thing my story demonstrates is that you have no idea if I – your client or potential client – have suddenly received an inheritance or if I’m struggling to figure out how to invest or if I’m thinking of leaving you and trying another advisor, if you haven’t taken the time to reach out to me. Requesting an annual review is a good first step. But how about just reaching out a few other times during the year and asking how things are going? Mark, the guy who scammed me out of millions, still calls once or twice a year just to say “hi” and ask how it’s going. And you know what’s crazy? I actually like the guy because he shows genuine interest. I’ll never trust him with money again. But I’m happy to talk to him. There’s probably some sort of warped psychology at play here … something like defending your former abuser. But my point is that I actually feel closer to Mark than I do with most of the advisors that I have mutual clients with. He knows at this point that I’ll never invest with him again. But he still calls just to ask how I’m doing. And I feel a connection as a result. So, the one thing I want you to do this week is this: Schedule an hour a day for the next two weeks. Start calling ALL of your clients. If any of them have adult children, ask for their contact info and permission to call and introduce yourself to them. Tell your clients that research has shown that inheritances work much smoother and more successfully when the client’s children have some sort of relationship with the client’s advisor. If you want coaching on what to say, shoot me an email and we’ll schedule a short call. My email address is paul@magellanlawfirm.com. EPISODE REVIEW So, let’s do a quick review of the insights you and I discovered in this episode. This week, you learned that people make emotional decisions and then justify those decisions rationally. You also learne
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