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Your New Partner: Client Data

Have you ever been browsing Facebook and come across an ad for something you just need to have? How did they know I needed a Furbo dog camera, you might think. I was just talking about how my dog needs to be surveilled when he is alone in the house (you know, so you can watch destruction in real time).

Technology today likely knows more about your clients and their needs than they do. And clients readily give their information in exchange for convenience and safety. Smart refrigerators tell them when they’re out of certain groceries—some go so far as to order the missing groceries. Video cameras alert them when there is a stranger outside their door and allows them to talk to that stranger from wherever they are.

Our phones know our patterns. Our smart speakers are always listening and predicting what we want. Some might argue this is not a good thing, but it might be for financial planners.

Bernie Clark, executive vice president and head of Schwab Advisor Services, noted in a recent interview with Financial Planning (“What’s New With Your Client? Data Will Tell You Before They Do”) that in the near future, technology that tells you what your clients are up to is going to be more prevalent.

Clark noted that client data will soon be analyzed to alert financial planners when wedding planners are hired or big jewelry purchases are made. Essentially, data will become predictive and you’ll know when big changes are coming for your clients and be able to be more proactive.

Some new software even helps planners predict how much clients are likely to spend on healthcare by analyzing their health history and location, according to the Aug. 5, 2019 InvestmentNews article, “Tech to Help Advisers Plan for More Years of Healthcare Costs in Retirement.”

While many planners have been employing predictive analysis to figure out how to best reach a prospect, using client data to predict what is coming down the pike for the financial planning process is perhaps new for many others.

“No matter how good you are as a human, you’re going to miss stuff,” said Jeff McMillan, chief analytics and data officer at Morgan Stanley in the 2017 InvestmentNews article, “Wirehouses Use Predictive Analytics to Shore Up Goals-Based Planning.”

“Data-driven analytics are key to the current and future competitiveness of financial service companies,” writes Karsten Egetoft, senior solution architect of the financial services industry unit at SAP, in the January 2019 issue of Digitalist Magazine. “We are just at the beginning of a wave of innovation based on data and powerful analytics.”

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Ana Trujillo Limón is senior editor of the Journal of Financial Planning and the FPA Next Generation Planner. She also edits the FPA Practice Management Blog. Email her at alimon@onefpa.org, or connect with her on LinkedIn


The Reality of CFP Exam Prep

Back in 2003, when I was single, 26, not working and freshly minted with my master’s degree from Texas Tech University, I was singularly committed to studying for the CFP® exam.

I passed the exam on my first try.

My two months and 250 hours of study rule of thumb is good if passing the exam is the only priority in your life. It worked for me because I was not working and laser-focused on studying for the exam.

I realize my situation is not the norm. While I won’t get into the battle of which study prep outfit is better—it’s all subjective and should be determined based on how the individual chooses to study based on their learning preferences. The part I will give recommendations on is study time and study behavior—even if you don’t have all the time to study like I did.

The Honest Assessment

If the exam is not the only thing in your life and you have other commitments, you have to do an honest assessment of your life leading up to the exam and go beyond my two months and 250 hour studying rule. Assess how important passing the CFP® exam is relative to everything else in your life.

Here’s a quick assessment to do:

  • Write “CFP exam” in the middle of a piece of paper.
  • Do you have a spouse or significant other? Put that person’s name above the exam.
  • Do you have a job? Put that above the exam.
  • Do you have kids? Put their names above the exam.
  • What other time commitments does your life demand? Put those down, too.
  • For every item written above the exam, add 20 to 25 hours of dedicated study time. Don’t spread this time over more than a couple of weeks.

My experience was to eat, breathe and sleep the CFP® exam with absolutely no other commitments for my time. I spent about 10 weeks or 250 to 300 hours of study while also enrolled in a long-form review course.

When I was preparing for the exam, the financial planning faculty at Texas Tech were offering an eight- or 10-week review course on campus. I took a random day off each week to decompress because I had more time than commitments. I studied more on days we had class and at least four hours on days we didn’t. Being a recent graduate, I was still able to use the university library and reserve a private study room. I had saved enough money during a semester in Singapore that I didn’t need to work to cover expenses. And, renting a room in a house also helped me save money.

The Time Commitments

Most people’s reality is they have a full-time job in the financial planning profession, and many have a spouse or significant other.

Be realistic about your time commitments. Your job takes up 40 hours a week and the odds are high that you will not be able to study during work hours.

Your relationship requires time and attention. Life happens. You need to have a serious conversation with your spouse or partner as you build out your study calendar. If you are trying to cram 250 to 300 hours into 10 weeks, it will take sacrifice and understanding. There are 1,680 hours in 10 weeks. You sleep for 560 of these hours, assuming you sleep eight hours a night. No one bounces out of bed ready to go, so budget another 100 hours for getting ready for and winding down from the day. Your job requires at least 400 of these hours.

If your average commute to work is one hour each way, there goes another 100 hours. While this time can be used to listen to relevant podcasts and recorded lectures, it’s not full-on study time. We are down to 520 hours.

You can see where this is going—we haven’t even scheduled time with our loved ones and 70 percent of our time is spoken for. If you have children or other commitments, they will require your time and attention through this process. You need to find a way to carve out three to four hours of dedicated and uninterrupted time in your day, every day.

The Big Mistake

As you can see, time is precious. Don’t waste time studying what you already know. The biggest study mistake I see people make is doing just that.

Your mind is going to draw you to spend time on what you know because you get the answers correct and it makes you feel good. But you must be disciplined and study the things you hate and aren’t good at. In my case I have a bachelor’s in corporate finance and a master’s in personal financial planning. Outside of the classroom time devoted to investments and tax, I never cracked open my Dalton materials to those sections. However, the retirement and estate planning sections of my books were marked up, flagged and tattered by the end of it.

Behind the Curtain

I wish I could say that I was a model student with a natural ability to efficiently prepare for exams—I was not. I wish I could say that no one was surprised I passed the CFP® exam the first time—they were.

But the one thing that I did have to my advantage was that I understood the seriousness of the CFP® exam early on and adjusted my study habits to fit the challenge (thank you to the late professor Robert E. Barnhill III for showing me how demanding the CFP® exam was going to be).

Accepting the Challenge

While it might feel like an impossible feat to pass the exam when you have a full-time job and other commitments, it is doable. You must be honest with yourself and your loved ones about how demanding the exam preparation is going to be. There is no way to study just enough to pass—you must be over prepared. If that means three months and 350 hours of study for you, take ownership of the process and move forward.

Jason McGarraugh

Jason McGarraugh, CFP® is a financial adviser with Neal Financial Group. Connect with him on LinkedIn

Editor’s note: This article first appeared in the February issue of the FPA Next Generation Planner. Download the app (in the Apple App Store and Google Play) and issue today if you haven’t yet done so for more CFP Exam tips. 

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Three Ways to Get More Client Referrals

Most advisory firms will strive to be more successful, whether it is this year or by the year 2030. To do this, most will have to significantly grow the number of total assets managed. For others the total number of clients will need to increase, which is especially true for the minority of financial planners that only charge a financial planning fee.

The SEI and FPA research titled, “Advisory Firms in 2030: The Innovation Imperative,” showed that 77 percent of those surveyed believe client referrals are the most important growth driver. Yet, when we first start consulting our clients, few of them already have a well-thought-out plan to gain more client referrals year after year.

To help, here are three strategic actions each financial planner should do this year. These best practices can have a compounding benefit of increased number of clients and assets under management.

1.) Know Your Clients

At first each firm should have identified target markets that it wants to focus on for future growth. Hopefully the current client base is in line with the ideal client profile, as it is easier to replicate existing clients than to start from scratch.

By knowing the clients better than anyone, customized services can be offered, unique marketing messages can be created and targeted prospecting can take place.

How should planners get to know their clients? Of course, some of that work starts in one-on-one meetings. However, advanced client research requires an independent third-party facilitator to get deep into the clients’ feedback and opinions.

Every planner should use an independent third-party facilitator to conduct an annual survey that can be as short as 10 questions. More advanced research can take place in the form of focus groups and advisory boards to get to know the client base even better. Interestingly enough, when focus groups are conducted, clients involved typically give more referrals after the research than they did before. By asking them to share their thoughts and advice, they start to have an even greater vested interest in the success of the advisory practice.

2.) Have Conversations About Referrals

All the high-pressure tactics of asking for referrals have damaged the financial services industry in many ways. The effects are that often planners do not feel comfortable asking and—not by coincidence—clients do not want to be asked either.

Traditional approaches put the need on the client to help the planner. However, this is not the right approach. Instead the conversations should be around the planner wanting to help their client by helping their family member, friend, colleague, etc.

If the planner can, offer help, instead of asking for it. That approach will lead to many introductions. First of all, the planner will be comfortable having the conversations. Plus, the clients will feel like the planner is doing them a value-added service my helping others they know. This simple change can make a huge difference. Byrnes Consulting has seen that the more “helpful” conversations that occur, the more likely referrals will start coming from the existing client base.

3.) Facilitate Real Introductions

In every survey Byrnes Consulting conducted for our clients that included referrals as part of the learning agenda, we found that clients said they gave significantly more referrals than planners were actually seeing. We find that often planners only have 5 to 20 percent of their clients give referrals. However, approximately three out of four clients say they give referrals.

That is a big difference with huge potential. There might be many reasons the referrals are not reaching out, ranging from them experiencing terrible online first impressions to them just not being ready to take the first step all on their own.

Planners really have to step up their digital presence. Referrals will be the main way planners continue to grow, but any more websites and social networks now get an assist on making the referral a real lead. Today, the majority of prospects will have done some online research before taking the first step to call, email or visit a planner. Expect this preliminary step to be close to 100 percent in the coming years.

For those prospects not quite ready to take the first step on their own, planners need to create opportunities for them to get introduced. Ideally the existing client can bring them to an event or something more intimate. Every year, each firm should have a very diverse event strategy to get most of the client base to participate in at least one activity.

The financial planners that want to grow at a faster pace over the next decade need to continue to have a well-thought-out plan. Hopefully these strategic actions can help them take the initial steps needed to bring in more clients in the coming years.

Mike Byrnes Headshot

Mike Byrnes is a national speaker and owner of Byrnes Consulting, LLC. His firm provides consulting services to help advisers become even more successful. He helps financial professionals with business planning, marketing strategy, business development, client service and management effectiveness. He is a coach in the FPA Coaches Corner. 

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Editor’s note: This piece originally appeared in the FPA Coaches Corner whitepaper, “Action 2020: Create Business Success for Today and Tomorrow.” Download your copy of the whitepaper here.