A client’s anxiety is a stew pot of emotional, historical, contemporary, economic and global ingredients, and it’s all focused on the future. Add to this the sheer complexity that exists with thousands of investment, insurance and trust products, and the client seeks an advisory relationship to take the sting of uncertainty away. This is no different than someone who is ill gaining comfort from a doctor who ably implements a treatment plan.
Yet, in this uncertainty, clients still yearn to know “What’s going to happen?” Few advisers position themselves as market forecasters (i.e., if all the brain power, computing power and self-interest can’t predict even six months out where the price of oil is headed, what does it say about predicting anything in the market?), but this anxiety gnaws at clients with the wounds from 2008 still fresh.
With a question so important yet so unknowable, what is under your control that can be a salve to your clients’ anxiety? In a word: diligence.
Diligence as a Tactical Tool
In my blog “Wealth Protection as a Practice Strategy,” I promote wealth protection—minimizing the loss of dollars to investment performance, taxes, fees and unprotected risks—as an operating strategy largely under an adviser’s direct control, and one that has the best path to wealth creation (i.e., you can’t create wealth unless you protect it first).
Wealth protection is like a fortress, but it is only a first-line defense against an enemy’s incursions. A fortress requires watchmen in towers looking beyond the walls, ready to spring into action should any threat be seen. Think of diligence as watchful eyes.
As there are a number of wealth protection tactics, so too does diligence offer an array of defined and concrete actions.
1. Planning diligence. A comprehensive financial plan is detailed itself, but once the plan is implemented, diligence keeps it responsive to a client’s evolving needs and circumstances.
Positioning statement: “We diligently maintain the wealth plan as a dynamic guide for your long-term security by ensuring that it is up to date with the current state of your needs, anxieties and aspirations.”
2. Investment diligence. The various portfolio solutions, insurance products and trusts are the plan’s execution implements. Although an investment plan may liberally use passive ETFs or mutual funds, doesn’t mean that the execution is passive. Here, diligence shows itself through validation that the underlying investment products adhere to their stated diversification, efficiency, income and liquidity purposes.
Positioning statement: “We select investments, insurance products and trusts on the basis that their characteristics and qualities fit with what your plan requires, and, most important, we review each of these products and their providers to ensure that nothing has deviated from what we expected.”
3. Monitoring diligence. As markets move, a client’s investment and property wealth also change. Rebalancing is known for resetting portfolios to the target allocation and, in the process, enforcing “buying low and selling high.” However, rebalancing has a higher purpose in adjusting all wealth sources to the plan’s requirements, with special emphasis on the plan to create liquidity from property wealth as needed.
Positioning statement: “We track your plan’s execution to make sure that the portfolio design, investment products, insurance, trusts and your property fulfill their intended purposes in delivering the plan’s liquidity, stability, growth and income requirements.”
4. Communication diligence. According to a Financial Advisor magazine study of 1,375 advisers, 72 percent of advisers identified “failure to communicate on a timely basis” as one of the top three termination reasons. To an adviser’s essential services, maintaining diligent communications is a vital treatment for a client’s anxiety, particularly during market volatility.
Positioning statement: “We hold regular meetings in which your plan sets the agenda in discussing how the plan’s execution is unfolding. In addition, we give you frequent updates as market, regulatory, tax, planning and risk issues arise.”
A challenge exists because “diligence” lacks tangibility and much of the actual work occurs behind the scenes. In client meetings (and always annually), produce a tangible, written summary of activities from the different diligence categories.
This summary does for your diligence services what the performance report does for the investing solution (see “Performance Reporting: The Plan’s Tangible Evidence”). Furthermore, for prospects, giving an example of the “Summary of our Diligence” gives evidence that your firm’s day-to-day actions go beyond mere words.
An adviser’s diligence releases a client’s anxiety, and, in so doing, the client base is solidified. Both outcomes represent meaningful rewards.
Wealth Planning Consulting Inc.
Princeton Junction, New Jersey