Think back over your career in financial services. Of the thousands of conversations you’ve had with your clients over the years, think of the most difficult ones – the ones that give you that queasy feeling in your stomach even now as you recall the circumstances.
When I ask advisors to describe their most difficult conversation, each answer is slightly unique, based on their particular situations, but almost all fall into a few categories:
In virtually every case, the advisor freely admits the blame rests largely with him or her. They know things could have been different if they were a bit more adamant about covering the specific needs and risk tolerances of their clients, and positioning them to handle any eventuality.
As the conversation continues, my next logical question is, “So, what are you doing now to make sure you avoid having to have a similar difficult conversation in the future?”
The Bottom Line: Ash Brokerage is uniquely qualified to help advisors design products and portfolios to avoid the perils of market volatility, income shortfall, catastrophic injury or illness, or premature death. You should call your Ash RVP today, and start a conversation. We’ll help make your difficult client conversations down the road much more pleasant.
The proposed rule from the Department of Labor takes up a lot of conversation these days. While we await the final rule, it’s clear that we are likely to be acting in a fiduciary role soon. Many have predicted lower sales and as much as 25 percent of the sales force shrinking. However, with any change, there is opportunity to capture additional market share – even with increased regulation.
A large advice gap exists in the United Kingdom, where similar legislation went into effect in 2012. Many financial institutions moved up market as they did not find the mass affluent market profitable. Unlike in the United Kingdom, we will still be able to write commission-based products. Let’s not lose sight of that fact in the conversations surrounding the Department of Labor. For those financial professionals who can work efficiently in the mass affluent, there will likely be opportunity to thrive in the post-DOL world.
It will take efficiency and effectiveness – two business building blocks – in order to succeed in this market with the proposed regulations. Professionals earning a commission must be able to repeat a sales process with every client to assure the planning process remains holistic. In order to capitalize on the opportunity that involves key components in the proposed rule, in 2015-16, you must think about strategic maneuvering:
New regulation does not mean you automatically have to change your business plan to a fee-based or assets under management model. However, it will require some thought about how to take advantage of some of the opportunities. I urge everyone to begin the thought process around a post-DOL Conflict of Interest era. The plans you make today are likely to help you and your clients succeed in the future.
Mike McGlothlin is the Executive Vice President of Annuities at Ash Brokerage. His strength is helping advisors become more efficient and effective in their businesses. He and his team provide income-planning solutions focused on longevity and tax efficiency, and they also assist advisors with entering defined-benefit termination planning and structured settlement markets.
I am not an avid reader. But last winter, my wife received a book called “The Go-Giver,” by Bob Burg and John David Mann.
I sat down thinking I would only read about one chapter, lose interest, and put the book on my bookshelf to collect dust. Interestingly enough, two hours later I was finished with the book. I was so enamored with it; I sat down and read it again the next day. I was even so inspired that I bought 50 copies to give to some of my top advisors.
I’m not here to give you a book report because I’d like you to actually read this book yourself. But the message is this: Your income is determined by how well you serve others. In an instant gratification society, we are so caught up with, “What is in this for me?” We don’t realize the value we bring to others will take care of us for our lifetimes.
The best example of this is a conversation I had with Jim Ash, the founder of Ash Brokerage. We had a prospective group of advisors – a large opportunity – in our offices in Fort Wayne, and we took them to dinner. Jim discussed with them how we were able to land a few of our larger accounts.
One example was a large mutual Insurance company for which we were going to be a brokerage outlet if they could not place cases with their career company. After a couple of months, the GA’s of this firm had a huge increase in their OWN product line. When they questioned the advisors about what they were doing differently, they said, “Ash Brokerage is giving us positioning ideas on our own product line.” That being said, there was no instant gratification for Ash Brokerage, but this is now one of our largest accounts.
I also have a peer who is a very successful wholesaler in a different product line, and he prides himself on knowing every product available. When one doesn’t fit, he always recommends one that will. Needless to say, he’s now in upper management at his firm, running the top territory in his company.
The Bottom Line: Your income is always dependent on how well you serve others. If you just do the right things in life, even if there is no instant gratification, you’ll come out ahead.
Business schools still teach ROI, I’m sure. For most Americans, unfortunately, it might be the wrong ROI.
Business schools are probably stuck on return on investment, and I can argue that many financial planners are still talking to their clients about return on investment. However, I say the new ROI is Reliability Of Income. For most retirees, the need for a steady, dependable, lifetime income continues to grow in importance.
So many planners and schools focus on the returns of a portfolio. In reality, the changes in return from 5 percent to 6 percent, for example, have a nominal difference on the retiree’s income outcome. Now, the sequencing of those returns, especially early in retirement, may have a larger effect on the outcome. But overall averages will not impact the success or failure of a retirement plan. Instead, the larger impact comes from life expectancy, which is a variable we cannot predict.
Therefore, clients need to have a guaranteed, inflation-adjusted floor of dependable income in their portfolio. Without it, the success of their retirement portfolio can’t be projected accurately. Too many variables – like return on investments, life expectancy, sequencing of returns, health care costs and emergencies – could impact the probability of success.
By focusing on the reliability of their income, clients can reduce the risks in their retirement portfolio. Inflation can be mitigated with cost-of-living increases. Longevity can be eliminated with lifetime income options – both single and joint. Fee and tax drag can be greatly reduced, if not eliminated, by proper choice of product.
Bottom Line: Put first things first when designing a portfolio – reliability of income should be the new ROI.
I love good sports stories and analogies, as well as strange facts and figures from the sports world. So of course I enjoyed an article from USA Today Sports that listed 101 little-known sports facts. One that jumped out at me? Bill Buckner has more hits than Ted Williams. Unfortunately, most people remember Bill Buckner for one error than they do for all his achievements at the plate.
This made me think about our business and our relationships, not only our clients but also their beneficiaries. Do you want to be remembered for the one error you might have committed in the planning process? Or, will you be remembered for all the great years of returns you provided your client during their working years? You can accumulate a lot of money for your clients over their earning years, but if you fail to plan for their lifetime income, your legacy to their family will be dramatically different.
Watching their parents, kids see firsthand what their retirement lifestyle could be with you as an advisor. With a flawed history, your chances of managing the next generation’s assets become slim to zero. If you haven’t addressed their parents’ longevity or health care concerns, they likely won’t want to have the same experience. If you haven’t taken care of their parents, why would they want you to take care of them?
At the end of the day, we can manage assets and build wealth all day long. We can outgain the money manager across the street or beat the market indexes. But, if we commit an error in not addressing predictable, guaranteed, inflation-adjusted income to our client; we will be remembered for our one error versus all the years of outperforming the market.
Bottom Line: Don’t let one error define your legacy for generations to come.
© 2018 Ash Brokerage LLC.