How To Establish Direct Referral Relationships with Investment Counselling Firms and Portfolio Managers | FEE044 – Transript



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True or false? You, as a financial advisor, are suffering through a totally sceptical and mistrusting public, primarily caused by the avalanche of negative articles and reports of scandals in the media. And the resulting compliance panic at the home offices has made an already tough marketing and promotion situation nearly impossible.

Now, I think you’d have to agree that that’s a true statement. And, it’s just a reality; it’s a reality we’re at today.

Now electing to build your fee-based financial planning business using my fee-based financial planning business model requires you to have some great relationships with great people.

Up to this point, the industry really has simply provided you access to your implementation solutions without paying too much attention to the quality of those solutions. I mean all they’re doing is providing you access. But at the end of the day, it’s up to you to determine what’s good and what’s not within the confines of what’s available.

And what I’m referring to is really it’s the dealer model. And so within your dealer you basically have solutions that are available to you. It’s the solutions that are available to them.

It’s not necessarily the best solutions that are available in the marketplace. It’s just what’s available there. And we just — you know, we’ve kind of come to accept that.

Well, what I’m asking you to do now is take a step back. Remove yourself from the constraints put on you from the investment dealers and dream a little.

You see as a fee-based financial planner you simply can’t do it alone. So you’d better get acquainted, really acquainted, with your dream team.

No longer are you going to be simply providing solutions based on what’s made available to you. The bottom line is that there’s more to life than mutual funds. Okay, did you hear what I said? There’s more to life than mutual funds.

Mutual funds are a great solution. They’re a great solution for an entry-level solution. They did a good thing when they were introduced to the marketplace. They really made this market what it is today.

But because of the success that the mutual fund industry has had over the past few decades, I would argue that the majority of people on the street would think that a well-diversified portfolio can only be had through a portfolio of mutual funds. And that would be true when you, as an investor, are just starting out.

I mean that’s again what the mutual funds were created for in my mind. And you know, some people may disagree with me. And that’s fine. I’m just coming at this from where I’m coming from.

But as a fee based financial planner, part of your job is to make sure that your clients’ investment solutions are in line with what they qualify for, that your clients’ investment solutions are the best that they can be.

I’ve said it before. If you’ve amassed a certain level of liquid wealth, and I’m not talking seven figures of wealth, I’m only talking six figures of wealth. If you’re investing in the same solutions that your paperboy would qualify to invest in, you’re probably in the wrong place.

But most financial advisors never venture outside of their mutual fund world. And the reality is that there are a lot of other great solutions for your clients if you just look for them.

If you can align yourself with them and provide them to your clients, my experience has been that your clients will thank you for it. I mean literally say, hey thank you. I always felt like there was something that just wasn’t quite right with what I had in my investments and whatnot. But I just couldn’t put my finger on it.

Once we started exposing our clients to these new solutions they were thanking us. They said you know I just appreciate you bringing it to my attention. I appreciate you taking the time and the energy and putting the structure in place to be able to offer this to me.

You’re now going to make some conscious decisions as to what you’re going to make available to your clients. And this really just sort of stems from this whole evolutionary process I’m talking about. About migrating your business to a fee-based financial planning model.

And in doing so you’ve got to find better solutions. You’ve got to find solutions that will enhance the uniqueness of your offering. That will strengthen your relationships with your team. That will provide better results to your clients. That will give you more control. Will give your clients more control. That will give you more clarity and give your clients more clarity.

You’ll simply have a competitive advantage that very few of your competitors will have. I mean doing this properly you will be pretty much unstoppable.

My experience is now when people come and they find out what solutions are available, if they’ve been in that mutual fund world for a long period of time and they’ve amassed a certain amount of liquid wealth, they basically know that there’s something wrong. They just can’t put their finger on it.

As soon as they meet with me and I start going through all the solutions that we have available, and really talking about it in a sense that we want to do the financial plan first so we can have the financial plan dictate what we need out of our investment solutions, and then based on that we will then put together some recommendations on who to better manage the accounts for them. Once we’ve done that, they really say wow this is exactly what I’m looking for.

Done properly, you’ll have better solutions for a lower cost. I mean who can argue with that?

And that is a key point when it comes to making this migration and having a better conversation with your client is that at the end of the day you always want to make sure that once you’ve explained it properly, it’s kind of a why would I not response that you’re going to get from your clients. And so I just want to make sure that you’re setting things up so that you can have those types of discussions with your clients.

Okay, so now I want you to do something for me. Take a minute and push pause on this if you need to and go and get your most recent current investment statement. And this is yours. It’s not for your clients. It’s yours. I want you to take a look at your portfolio.

And I want you to take a close look at it. And answer these questions.

What’s your performance been since inception? What’s the discipline being used to manage these assets? Are all of your clients invested in what you’re investing in? Who made the first investment into these investments that you currently have in your portfolio? Was it you or was it your client first?

If you could take the balance of your portfolio right now and just start from scratch and do what I call a do over, what would it look like? Would it look the same as it does right now? Would you be in exactly the same investments? Or would it look different?

Really take a close look at it and answer all these questions for yourself. Because if first of all if you can’t determine what your performance — and I’m talking your true performance since inception. Okay there’s something that you need to be aware of is that if you can’t find it for yourself, then your clients definitely can’t find it.

The other thing is what’s the discipline being used to manage your assets? Again, if you don’t have a very clear discipline that’s being used that you can articulate that to yourself and your clients, it’s kind of just going into a black hole solution. And you want to be able to gain more clarity and provide more clarity on that.

If your clients aren’t invested in what you’re investing in, I mean, answer that question for yourself. Why? Why is it that you’re making one recommendation for your clients but another one for yourself?

I’ve always believed that the first investment you need to make in any investment solution needs to be your own. If you don’t have skin in the game then you can’t say to your clients listen this is what I’m doing with my portfolio. And this is why I feel it’s appropriate for you.

One of my philosophies is that every investment solution that we provide to our clients currently, we want to make sure that we were the first investment. So either myself or my family’s assets, we wanted to make sure that we were the first ones there so we could experience it first. And if we’re willing to put our money up, we’ve got skin in the game.

So making the recommendation is just — clients appreciate that. They like the fact that they know, hey I’m not just investing in this because he thinks it’s good for me, he’s actually done it himself. So if it doesn’t work out it’s not — there’s a little more skin in the game. And that’s exactly what I want to happen.

So really what I’m trying to do here is have you formulate your own philosophy when it comes to investing. You need to put your clients’ money with the same managers you’re currently investing in.

In other words you need to put your money where you mouth is, just what I said. It’s so important to get on the same side of the table as clients. So you’re not actually selling something, you’re basically just helping them buy better solutions.

And it’s the solutions that you’re already investing in. And so you’re having the same experience.

I mean it may sound like a no brainer, but the reason I ask that all of the solutions we put together — and the reason why I ask these questions of you is that I’ve found that in the industry, a lot of investment solutions that advisors have been making to their clients were driven by compensation and not a disciplined methodology or whatnot. It was basically compensation first and then they found a way of arguing why it’s a better solution for a client.

Well, I mean when the client receives that information they’ve got this limited scope. So they — yeah, maybe in the scope that they’re looking at it’s a good solution. But if you really took a look at everything that was available out there, it would be very easy to refute that that is the best solution.

So as I say, if you’re not willing to put your own or your family’s money into an investment, you’re probably recommending it — I’m not going to say for the wrong reasons. But you want to really look at what those reasons are.

So what do you look for in good investment solutions? What do you look for when you want to put your money away, what is it that you’re looking for?

Well start by identifying a pool of candidates that you’d like to consider using for your clients. Now where we’re going with this is basically I want you to start building a list of investment counselling firms or portfolio managers or whoever that you feel are really doing a good job.

Now maybe you can qualify to work with them, maybe you can’t. That’s irrelevant at this point. But get clear on what it is that you think makes a good investment solution. And find the managers that are doing just that.

Really spend the time on that and actually start surfing around and Googling investment counselling firms in your area to see if there’s something available that maybe isn’t on your radar screen at current. Because remember the dealers are only promoting what the dealers have been made aware of. And generally what they’ve been made aware of are managed solutions or mutual fund solutions.

Whereas when you take a look at the wealthier people or wealthier investors, the reality is that they’re probably not in just mutual funds. They’re probably in a much more sophisticated solution, or just a much more tailored made solution. And so these are the solutions I want you to start looking for.

There are a lot of great investment managers in the marketplace that would love to work with you if you’ll just let them. You see investment managers — really, really good investment managers don’t oftentimes advertise on the side of buses and on billboards and in commercials and stuff like that because they don’t need to.

I mean they run a lean shop. They know exactly what they do. They do a great job at it. And they don’t need to spend that money on advertising.

But if you come along and you say, hey I like what it is that you do. I feel it kind of resonates with what my clients would be looking for. I’d like to consider referring my clients to you so that you can be the one who’s actually making the ultimate decisions and following your investment discipline. They’re definitely going to be listening to what you have to say.

So basically put together a list of your managers. Because these are ultimately — if you’re making a migration away from whether it be an MFDA or an IIROC or investment license solution, if you’re saying listen I don’t want to focus on that.

I’m not the one who’s making the decisions. But I do want to find good investment counselling firms and good portfolio managers for my clients because I need to. I still need to be able to implement those solutions for my clients. Remember you need to start putting together a list of good firms to turn to.

So then develop your own filtering process. And so what we’re going to do now is go through some of the things that I look for and that I’ve done in putting my own filtering process together, the things that I put all of the investment counselling firms who we currently work with. This is what I put them through.

And so we’ll go through this now. And hopefully it’ll give you a baseline or a starting point for just building your own philosophy and checklist.

So create a filtering process that you can use to narrow down your focus to a small handful of firms who, really at the end of the day, who complement one another.

There is no one firm that does everything. You just need to understand that right now. There is no one firm that will do everything.

So what we did was we really identified what are the things that we need. What are the core things that we need to start with so that we’ve got a full rounded solution that we can turn to? And then we can identify the best solution that resonates with what our client financial plan needs in order to be implemented properly.

So you wouldn’t for example want to have two ETF specialists in your group. That would just be duplication. So if you’ve got two ETF specialists, well you need to just choose one. Because why would you go to one over the other. You just really need to choose one. Otherwise you’re going to be spreading things out a little bit more. And you don’t want to spread it too thin.

So here are a few things to consider for your own personal filtering process. And this by no means is an exhaustive list. But something you can use to start with.

Now, the first thing we want to look at is their investment discipline, philosophy and process. We’ve talked about this in other podcasts about process and how important it is and whatnot.

Well is their investment discipline easy to articulate to a client? Is it something that you understand, that you can really easily explain? Because what makes clients feel comfortable moving forward with an investment solution isn’t their research on the investment solution, because honestly if client’s doing research on the solution, why do they have you? They don’t need you.

And most people who work with a fee-based financial planner, they’re saying, listen I don’t know what is the best solution. I don’t have time to go through the marketplace and find — that’s what I expect you to do.

So you then tell me why this firm you feel is the most appropriate for me. And the only way you can do that is if you have a very clear understanding about what the investment counsellor’s or portfolio manager’s discipline is. And if you can articulate that to a client so they can see how that discipline resonates with their financial plan.

You also want to make sure that the investment discipline is repeatable, that it’s not just a one off thing. That it’s something that’s repeatable and predictable. Because if you don’t really have that repeatable, predictable process, well it’s not a process, it’s not a discipline. It’s kind of just winging it.

And so you want to be able to make sure that that process is there and the discipline is repeatable, predictable. And it’s just — and easy to explain to a client.

If it’s very complex, you know, it may not be the right solution. And again, I’m looking for core solutions there. I think that from a — there are some other elaborate, more complicated, more sophisticated, I should say, more sophisticated investment solutions out there that I think are good complements to a portfolio, that can really enhance the overall portfolio. But there’s got to be a core discipline that the manager’s going to be following that you can explain to your client.

And then some of those more sophisticated solutions, the ones that are smaller percentages of the portfolio, those are things you can use to round out. You can explain how they complement the existing core portfolio.

So that’s the first thing is really determine is the investment discipline, their philosophy, their process repeatable and predictable? And is it simple, easy to articulate to your client?

The next thing you want to look at is their transparency of fees. This one is a biggie. And the whole industry, especially in Canada, I know all around the world that there’s been other issues with this. In the U.S. it’s a big issue as well.

Transparency is paramount right now. And if you’re not really focusing on a transparency model, then it’s going to be harder and harder.

I know at some of my strategic coach sessions and when I talk with other advisors in the industry who haven’t followed the path or gone down the route that I’ve gone down, their biggest concern now is how do I articulate my value to my client.

When they start to see the compensation that we’re receiving, and they start to ask the question, wait a minute, you’re getting X but is that in line with what the value I’m receiving? Their biggest question is how to articulate that value.

And I think it’s going to be a challenging one unless they’ve built out a business around the fee-based financial planning model that will allow them to explain their value and to show their value, that goes well beyond just the investment. So that’s important there.

So you want to make sure that transparency of fees is there because if it’s not, it’s going to be forced upon you.

So are all the fees to manage the portfolio, are they fully disclosed? Are all the fees charged to the portfolio, as opposed to embedded initiative the net asset value — and that’s something that I really try to stay away from is anything that has an embedded fee that just seems to be hidden to clients.

I’d rather have the discussion and go through an education session with the client to explain how fees work. And explain why it’s so much better to have all fees fully transparent as opposed to embedded, then have them find out after the fact that everything’s been embedded and they had no idea what the compensation was that you were receiving. Because that just feels kind of shady.

And so the industry is going in that direction. And if you’re not ahead of that curve, you need to get on that and start doing that. So make sure there is transparency of fees.

Now this one, this next one, is an important one. And it’s just simply an important one from a longevity standpoint. Are they good people?

At this point in my life I will only work with people I like. I don’t have time for assholes. I don’t have time for people that are just people that I really wouldn’t want to hang out with, even if they’re the best manager in the world. If they’re jerks, then I just don’t want to be part of it. I just don’t want that. I don’t want them to be involved in any way shape or form with my business.

I only want high quality, well-respected, good quality people. Good salt of the earth type people, that’s who I want to be working with.

So are they good people? Here’s one of the things that I do.

One of the best things I ever did in my life was I basically took up golf. And I know in our industry that there’s a lot of golf. So this is why I think it’s a good one, because golf is a very revealing sport.

And so what I tend to do is I will actually go golfing and invite some of the investment counsellors who we’re looking at working with. If they’re golfers, I want them to come out for a round of golf, completely on me. I just want to sit down and I want to spend — I mean it gives me a chance to spend four or five hours with them. But also gives me a chance to really get a clear idea of who they are.

Ask yourself these three questions when you’ve brought them out for a round of golf. Did you have fun spending time with this person? Again, you don’t want to have a situation where you just don’t like dealing with the person. So did you have fun with them in the first place?

Were they honest? Did they constantly make excuses during the round? I never play like this. Or I don’t know what’s wrong with me today I’m so much better than this. Well you know, I mean the reality is you’re probably not. I mean golf is one of those sports that you generally are in a zone.

I can understand when you’ve got a few blow up holes and the wheels fall off. And that happens to everybody. But if it’s a constant, oh no I normally never play like this. I don’t know what’s going on. Okay, well just be aware of that.

Were they honest? Honesty is such an important thing. One of the things I like to do is — and if you’re a golfer you’ll know where I’m going with this — is I actually suggest to them when we get there, I say okay let’s play the white tees.

Now why do I say the white tees? Well for those of you who don’t know golf, there’s the longest tees for the golf course. Then there’s the more advanced tees, which are the blue tees. So there’s the black tees which are called the tips. Then there’s the blue tees. And this is general. I mean in some courses they’ve got more tee blocks.

But generally they have the tips for the pros, the blue for the lower handicap better golfers. Then they have the white, which is generally where most people, most adults, should be — would be playing to get their game in check and whatnot. And it just means that you’re closer — it means that each hole is a little bit shorter. And some of the challenges might be removed from some of the holes by playing a little bit closer.

Now I’m not saying that the white tees are the place to play. But I basically say why don’t we play the white tees. If it’s your first game of golf then it’s just a more forgiving first game of golf with somebody. It’s more forgiving and it takes a lot of the stress out of playing with somebody for their first time.

But more importantly I want to see how they react. If they’re a really good golfer, then they may graciously say no problem I’d be happy to play the white tees. I’ll maybe play a better round, but maybe they say normally I play the blues, but I’m happy to play the whites.

If they have a huge ego maybe they’ll say something like oh the whites, well I’m so much better than that. I don’t play the whites. I play the blues. Then that’s kind of boasting a little bit and bragging.

A really good golfer who should be playing the blues will play the whites or the blues irrespective of — just to have a good round with somebody. Because they know that their play is going to speak for themselves.

Whereas somebody who argues oh no I want to play the blues, it may be sort of a boasting thing. I’m not saying it is all the time, but again, it’s really just about the energy and the tone of the relationship at that time.

Bottom line is that if their ego pushes them to the blue tees, but they’re really a white tee player, let’s just say again it raises a bit of a red flag for me. And I always wonder why people can’t be humble and play what’s most appropriate.

I mean at the beginning of my season — I mean right now in my golf season, I’m really not playing very well. So I’m actually more comfortable playing the whites just because it doesn’t beat me down so much. And all I really want to do is work on my game and whatnot.

So humbleness, I think, is a good quality to have in this industry. And I think people who are very humble and very honest it just speaks to character.

Now I keep track of the score. And really watch to see how they score themselves. Again I’m not just kind of — I don’t mean eagle eyes on them or whatnot. But I want to know are they paying honest. Because the only person they’re hurting is themselves.

I mean when I comes to playing golf it’s all about honesty and playing within your zone.

I really don’t care what anybody — how they play or what their score is. But because if they’re continually not scoring properly, if they’re looking for shortcuts to keep that score in check, well you know what, I’m not really in to that. I’m more into honestly.

I would rather have somebody finish a round going wow, I just shot 110, but I counted every single stroke. That’s something that I would actually find — I would see that as a plus in their integrity.

And especially if they whip the ball in the — I remember playing golf with a really good friend of mine. And this is one of the reasons why I like playing golf with this guy.

So we played a round. We were basically on the second hole and he was off in the rough somewhere, the really tall grass. And he came out, gave me his score, great. We went on the next hole. And he was just falling apart. I mean literally falling apart.

The next two holes he was literally just falling apart. And then he came up to me at the next hole and he said, listen I need you to change my score for three holes ago. Because I took a swing in the deep stuff and I missed the ball.

And the fact that I took that swing I know I should have counted it but I didn’t when I told you the score. It’s driving me nuts. I need to get it off my chest and I need to get it on the card so that I can carry on and play a good game.

I like that. I like it when people not being honest it affects them. Because it’s just so much easier to be honest, so much easier to tell the truth because then you never have to worry about all the different renditions and versions of things.

Anyway it’s just a much nicer way of having a relationship with somebody.

So I keep track of the score. I just want to tell whether or not they’re being honest and so on and so forth. I mean honesty is very important to me.

So the other thing that we’re looking at is what’s their etiquette like? So with golf there’s a lot of etiquette. And if you’ve been around a golf course, if you’ve played for a while, there’s certain things that are important to understand.

Are they a gracious competitor? Gracious being good loser, good winner. Will they applaud and support a good shot of another golfer. Or does that make them upset when somebody else starts to beat them, because I want people to be gracious.

How do they handle — I remember an interview technique that somebody told me once was go out for lunch with somebody and see how they treat the waiting staff, the waitress or whoever bring the food to the table. Are thy gracious to them? Because how they are with the waiting staff really it speaks — again it speaks to them.

How do they handle themselves under stress? Do they lose it? Do they get really, really upset and then it just makes it very uncomfortable and frustrating for everybody.

Or do they recognize that golf is just a game. And the only person they’re competing against really is themselves. And they’re just there to have fun.

So again it’s just — golf is one of those great character sports. It reveals so much about a person. Whether you like it or not, I mean you can only hold out a certain front or act for so long.

But when you’re playing golf and it’s a four-hour round, it’s very difficult to keep that act up unless it’s really a part of who you are. So that’s why I like the game so much when it comes to this.

And so it’s one of the things that you may want to just consider trying is take them out. And if it’s not golf maybe it’s another game. But if it’s another game make sure it’s a game that has a certain level of etiquette. Like tennis is another good one for that, just something along those lines.

Now with the investment counselling firm, with the portfolio manager who you’re looking at, do they have the proper tools in the toolbox. Or are they just kind of a one tool wonder.

I know there’s a few investment counselling firms in our area and they’re really, really, really, really good at one particular style. But the problem is I’m looking for an all around solution. I want a solution that I can rely on in any given marketplace.

So I know that one firm who I’m thinking of, they’re a great manager during a certain market cycle. But when the markets are not in that cycle or when the economy is in a different place in that cycle, they tend to really underperform.

Well I want my managers to be able to make adjustments if need be and to bring the appropriate tools out of their toolbox to make the portfolio work. And especially right now with the way things are in the fixed income market and whatnot. You’ve got to have a lot of good tools in your toolbox.

So are they a one size fits all solution? Or do they have solutions for various market cycles? And really get clear on what tools they have available to them in their toolbox of investment solutions.

The next area is clarity of reporting. I remember saying to somebody at one point clarity of reporting, the investment statements that are provided to clients are kind of like — I use the analogy it’s kind of like the speakers to your sound system.

You could have the best, most powerful, most clear, wonderful sound system, all the components and stereo and all that sort of stuff. But if you have crappy speakers, you’re never going to know it.

Well same sort of thing applies with clarity of reporting. If you have the best investment solution in the world, and it’s just doing gangbusters and just doing amazing things yet it’s difficult for the client to understand how they’re doing when they get their statement, then it’s kind of meaningless. Because the client won’t appreciate what the success they’re having is. And if it’s complicated, it actually gets them frustrated.

So do the reports show their net invested since inception? Not the book value. I mean book value is important for tax purposes. I’m talking about how much did your client take out of their jeans and put into this investment solution.

I want to know what the dollar from day one was. The net invested since inception.

And not many firms do this for some reason. And I know why some of the firms don’t do it. But I won’t work with them.

I have to have a good quality net invested since inception number. So I can say to a client, you invested $100,000 out of your pocket. It’s worth $300,000 today. So I know the difference between those two is pure gain.

Do the reports show the difference between contribution, unrealized gain, realized gain, income that’s been received, what the fees were — so that transparency of fees — and what the market value is?

Do they take that, the growth of the portfolio, and then unravel it or compartmentalize it out and say okay but your growth came from these different places. You pay this much in fees. It grew by this much. You received this much in income, so on and so forth.

Where is all the return coming from? So it just allows for a much better conversation when it comes to reviewing the overall performance of the investment counsellor.

Are there graphs in the reports? Are they easy to interpret? Are they easy to follow? Do they make sense? Are they simple?

And so making sure the statements are simple and easy to understand is probably the most important thing that I find when it comes to quality and clarity of reporting.

Now do they have online access? Can a client access the information on their accounts online 24 hours a day, seven days a week? Do they have that ability to do so?

Can they deposit money themselves from their own bank? Can a client say listen, I want to make a contribution to one of my accounts. I’m just going to do a transfer of money from my bank account into the account.

Can they do that? That technology is there and if you’re not able to do that right now, you know, it’s kind of behind the times. And you need to get things set up so that you can get that happening.

Can they get money quickly? Are their accounts pre set up so that they’re already linked to their bank account? So if the client calls and says hey I need $5,000 that you could get it to them in the quickest way possible.

There’s nothing worse than a client not being able to gain access to their money, because generally a client will call you at sort of the last minute. Oh I need the money now.

And if you can’t get that money quickly, it’s going to make a very, very frustrating experience. And that frustrating experience sometimes will lead to just lack of confidence in the solution, even if it’s a great solution. They tend to resist — not resist, but they tend to lose some confidence in that.

So make sure the clarity of reporting, the online access, all that sort of stuff is in check.

Are they customizable? This is an important one. This just comes to the ability of building a better portfolio. Can you apply restrictions on the account?

Some clients may have a lot of stock options, or their employment bonusing or benefits, or part of their compensation gives them a lot of this one company stock. Well can you then put a limit on the portfolio to say listen don’t put anymore of the portfolio into this particular stock because I’ve already got so much of it over here.

So can you do stuff like that? Can you — I have one client actually who’s not allowed to invest in certain companies because those companies use her firm as the auditing firm. So they’re not allowed to invest because they have privileged information.

So we need to be able to say okay we’ve got to limit the solutions that the client is able to look at. So that’s an important customizing solution as well.

Now price — are they charging a fair price for what clients are getting? I have no problem paying a decent fee, like a higher fee, for high quality returns, for high quality consistent performance. I’m willing to pay for good quality advice.

But I don’t like it when I get a sense that a firm is basically — I don’t know how to put it — overcharging, and just being very aggressive with it.

It puts a bad taste in my mouth. I just want value. I want high value. And if I have a firm that isn’t really giving the returns, the consistency, the clarity of reporting, yet their fees are kind of high, it just kind of — that’s a stroke against them.

If you could take away all of the client acquisition costs to these investment counselling firms and these portfolio managers, if you could just take away all of their acquisition costs. So basically say to them listen, I’m going to make it so you don’t have to go out and prospect for another dollar ever. I’m just going to start bringing money to you.

Then the question is how much can those managers reduce their fees by to account for this fact? If you say to them listen, you’re not going to have to market for these clients. You’re hardly going to have to service the clients. You’re just going to have to really follow your discipline.

That being the case, you don’t need to then increase — you don’t need to get a certain revenue for that because you’re basically not having to do any of that. So what can you bring your fee down to that just allows for a better solution or better fee to be put in place to accommodate the fact that you’re not having to really work for finding those clients? There’s not really any marketing going on.

So by showing your portfolio managers that you have a clear client acquisition system in place, that you have basically a systemized approach, a very disciplined approach, an approach that’s education based using the education based direct response marketing that we recommend.

If you could really show them that you have an approach for acquiring clients, and a process for taking them through to really determine what the best solutions are, those firms are going to look to you and say wow. I want to align myself with that company because I know that by them choosing me, I’m going to be managing assets for some clients that are really high quality clients.

So it really does allow them to see that if they position things right, they won’t have to do very much other than what they’re being hired to do which is manage money following their discipline. They’re going to be able to build their assets under management, which is really what they want to do. And they’re going to be doing it through high quality relationships with clients that you’re bringing on.

So really it’s a win-win for everybody.

And then the final thing you want to take a look at is performance. Do they have a verifiable track record? Is it something that is very consistent that we have the track record? We know it’s audited. We know it’s real numbers.

Is it consistent? Is it a consistent, constant process that they follow? And is the return repeatable? Is it replenishable? How did it do?

If this manager is saying something like we have a high margin of safety built into our management style. We really focus on risk or whatever. Well that’s fine. I’m glad to hear that.

But let me go back and see if you can prove that through your performance. If we go through another market meltdown how did you investment fair during that market meltdown?

Because back then if you were telling me now that you have a process that has a high margin of safety, well you’d better be able to articulate that, and show that, and prove that through taking a look at your historical performance and seeing what happened at recent historical market corrections.

Because if your performance was buffered against that negative market event to a large degree — I get that not everybody can avoid those market corrections — but heck if the average market or the benchmark for your portfolio was down 20 to 25 percent, yet your portfolio was down 5 percent, you know what that’s a pretty decent risk adjusted return for a really, really bad time in the marketplace.

So you want to take a look at the performance. What is it that they’re trying to do? Are they trying to keep it into a certain range? Is there lots of volatility? Or is there not lots of volatility?

Basically is the performance a result of their discipline. Is there congruency between what they say and what they’re doing and what the actual results are?

If they say they’re focused on risk yet you see the investments are getting more and more volatile, okay there’s a bit of an inconsistency there. So you want to really focus on finding out what is their discipline.

So take what you’ve learned in this section and build your own list of managers to interview. Just start Googling around and start looking around.

Maybe you know of some that you’ve heard of in the past and whatnot. Look for some investment counsellors. Look for a good portfolio manager.

Getting clear on who you want to align yourself with in your new company — and again I’m talking about this for how to migrate away from the traditional retail model and move to more of a wholesale model where you’ve got key relationships with high quality firms who you can bring down the overall costs, and increase the overall value, and increase the overall look and feel and everything about the — getting clear on that and aligning yourself with these great firms, it gives you tremendous confidence.

It also gives your clients tremendous confidence. But it really gives you tremendous confidence to keep moving forward with this new business model.

So once you’ve found these solutions — and this is one of the big things that holds people back from making the migration from a commission based model into a fee-based model, is that they don’t have the right solutions. They’re like I could never — I can’t do that because I don’t know how to still get paid for it. I don’t know how to still generate revenue.

Well number one you need to get a process that you could take your clients through that they’re willing to pay you for and that it really adds a lot of value. Then once you’ve done that, you want to make sure that the solutions that you’re implementing are giving the client the best solution or giving you the best solution.

And following a traditional model doesn’t give you — traditional mutual funds and whatnot, it might not give you the control and the transparency in the relationship and all that sort of stuff.

Whereas going direct to your investment counselling firms and going direct to the portfolio managers, you can — it’s so nice to be able to say to a client, you know what I don’t know the answer to that question. That’s more of an individual security question. Let’s give the manager a call and get that answer now.

Pick up the phone and call them with the client right there and have that manager answer the phone. I mean that’s phenomenal. The clients love that type of experience.

So understand that the model is very doable. I’m not saying it’s easy by any means. I’m saying that I know what I went through in order to build all of our solutions in place. And so I get that it can be a little bit of a daunting task.

And in going through all of this and just recognizing some of the challenges that other fee-based financial planners are facing, we basically have identified that there’s a need for something.

And what we’ve done in Canada — and this may be of interest to you, it may not be. I’m just going to put that out there. And I’ll talk about it in the future as well.

But if you’re in Canada you may be interested in a new initiative that we’ve put in place. And that new initiative is specifically for Canadian fee-based financial planners who want to get rid of their investment license and focus on their financial planning process with their clients. But don’t want to walk away from the ability to have implementation solutions.

So what we’ve done is I’ve pioneered the very first Canadian fee-based financial planning syndicate. And this syndicate model basically provides you with a turnkey platform should you be interested in migrating hour business to a fee-based financial planning model.

So the emphasis is on providing the infrastructure for you to run your unique business on. There’s a lot of infrastructure that you’ve got right now that if you left your current dealer environment and you decided that you really wanted to focus on fee-based financial planning, that you would lose. And so we needed to put a solution in place.

So basically we’ve done that. And for established firms who are really looking to go down this model, what I’d recommend is give me a call. If you’re considering transitioning to a fee-based financial planning model — and some of what I’m talking about kind of resonates with you — we’ve done all the heavy lifting. I know what it means.

I’ve put the solutions in place. I’ve put the implementation in place. I’ve put the technology in place. I’ve put the relationships in place. I’ve put everything that you need in order to run your business properly and automate it and market it and all that sort of stuff, I’ve put all that in place.

And so we’ve created a syndicate model, a Canadian fee-based financial planning syndicate model. And if it’s something that kind of resonates with you just send me an e-mail. Give me a call and we can have a further discussion on some of the details.

It may be something for you. It may not be. But really I’m putting it out there and mentioning it on this podcast because I find that the people who are listening to this podcast are really some of the highest quality financial planners in the world, but definitely in Canada. And because I’m domiciled in Canada, this is a solution that is resonating quite a bit with other fee-based financial planners.

So if you’re interested at all just send me a note. We can always have an online meeting and go through a bit of a demo of the whole process and the whole structure. So anyway I’ll just leave that with you. And if you are interested, just reach out to me.

But basically that’s it. That’s the process you want to go through to build your own investment solutions, and to build your own relationships with investment solutions who you can refer your clients to.

You can say to your clients, listen I know exactly what you need. I feel that this particular firm probably has the best solution — is the best solution to accomplish that. And the nice thing is that it truly is in your mind the best solution for that client.

It’s not just a solution that it’s the only one available because that’s what your dealer offered. It’s the solution that you’ve gone out and found.

And I tell you there’s a lot more value in that then there is in basically just forwarding a client to a mutual fund structure, which again it looks and feels the same as every other mutual fund structure.

So what’s a lot different?

Well going this route and putting in place and establishing your own investment relationships that makes it look, feel and it truly is different. And it’s just that much better

So knowing that really all I can recommend to you is that if you want to get started going down this path, this is the next step. And once you’ve chosen your date, which we — your actual transition date, which we talked about in the last episode.

In this episode it’s all about establishing those relationships. And on the investment side we’re talking about in particular putting those relationships together so that you know you’ve got high quality solutions. You can start transitioning your clients over to. And your clients are going to love you for it.

So knowing all that get out there and build yourself a better business.

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Copyright © Scott E. Plaskett 2014 All Rights Reserved. No part of this document may be reproduced without Scott E. Plaskett’s written permission.

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