Month: December 2019

Using Communication to Diffuse Frustration

Using Communication to Diffuse Frustration

We’ve all lost
clients for one reason or another.

Clients move. The
market experiences poor performance. A friend enters the industry and your
client transfers business to them.

Often, the reason
doesn’t seem to have anything to do with you personally — it’s just the way it
is. Regardless of why, losing a client is painful and expensive. No one wants
to get fired. Acquiring a new client is the most expensive business process in terms
of capital, time and human effort.

But there is something you can do in most
situations. And that’s to manage client expectations. Regardless of what they
say, clients are really leaving
because their tie to you – their relationship with you –  isn’t deep enough to overcome missed

And there’s always
the one emotion that can derail your client relationships: frustration.

Frustration Before It Starts

Frustration is a powerful emotion. It generally turns things
from good to bad and, if left unaddressed, from bad to worse. But setting
realistic expectations can replace frustration with understanding and empathy.

Let’s look at a practical example. I was sitting at an
airport recently during a delay. Delays happen frequently when I travel, so I
try not to get upset at the prospect of waiting an extra 20 to 30 minutes
sitting in the airport. But, for non-business travelers, their immediate
frustration levels ramp up as they realize their flight isn’t on time. When the
gate agent explains that the inbound aircraft is running a few minutes late and
they will be able to make up the time in the air, everyone relaxes. They
continue reading or watching their favorite YouTube video once they know what
to expect.

But if the communication stops or becomes inaccurate, the
frustration level increases. Now it’s higher than it was before. About 30
minutes after the initial announcement, the airline updated everyone of the
decision to bring in a new plane which would delay us another two hours. You
can see people begin pacing. They call loved ones and spew hatred for the
airline over an uncontrollable situation. Now it’s not just a late aircraft. And,
an hour and a half later, there is still no word of when the new plane will arrive,
and we can take off. Frustration continues to build in the gate area, but it is
met with radio silence. There are no notifications on the travelers’ phones. Customers
seek out employees of the airline for answers.

Then the gate agent returns. He provides an update of
another 30-minute delay but verifies the new plane has landed, is at the gate,
and being serviced for food and beverages. Again, the relief is palpable. From there, the delay went as planned and everyone
got to their destination.

Circumstance Isn’t the Biggest Problem. Frustration Is.

On this travel day, I missed my connection by more than two hours. My new flight arrived eight hours later than planned. Because of the delay, I missed the largest networking opportunity at my conference. All in all, it was a lost day. I’m sure other people lost time with their business trips or their families. That’s a problem, no question. But the larger problem was frustration levels. During times of communication, frustration was low, and customers understood the dilemma. During times of high frustration, people were angry and talking negatively about the airline. When frustration left again, it became, “That’s alright, I’m still getting to my destination safely.”

How to Overcome Problems Without Losing Clients

Although frustration can be managed, it’s even better when
it can be avoided. Pretty basic, right? What we need to recognize, however, is
that our business is very complex, confusing and intimidating to most
customers. Just having to sign stacks of paperwork to transfer assets to our
firm creates a bad customer experience off the bat. Then, when markets fluctuate,
or specific goals don’t seem to be met, frustration can increase dramatically. We
must manage the frustration level.

Fortunately, there are some simple strategies to help do that. 

Ideas to Control Client Frustration Levels

  1. Communicate regularly. Many forms of communication can be automated. These don’t have to be fancy, they just need to be informative.
  2. Follow a process. Your clients will know when things are not going correctly in their eyes. The problem is that you might not see that until the frustration comes to the surface. Have a regular process of talking – yes talking – to clients about their concerns and their path to financial security. Make them a part of the process.
  3. Set expectations early. In the client relationship, it’s preferable to set expectations before the client engages with you. Your client needs to know how your practice operates, who to call with questions on their portfolio or paperwork, when they should expect to review their finances with you, and when you will reach out to coach them through difficult situations. It’s part of the process. Educating clients up front is critical to long-term success.
  4. Use technology appropriately. While you can automate a lot of communication and education, never lose the personal touch. Technology should be used for menial tasks. You have to manage the relationship.

If you can reduce frustration with any problem, you have a better chance of resolving conflict without damage to your practice.  

Transformational Tactic

Establish processes and communication strategies across your entire practice to mitigate frustration.

Posted by hpp
Mitigate Risk. Remain Relevant. Serve Your Clients.

Mitigate Risk. Remain Relevant. Serve Your Clients.

In every industry, there’s that one person, that expert, who’s willing to share knowledge for the good of others. For financial advisors working with middle-class Americans, that person is Professor Emeritus William Sharpe.

As he ages, he understands firsthand the concerns he has worked so diligently to help us solve. In fact, many of us still use the Sharpe ratio to gauge performance and risk.

Today, I want to highlight an article published on It documents an interview Professor Sharpe gave about the importance of preparing for retirement, while acknowledging that we’re facing a big problem as we try to figure out how to do it. Understanding what Professor Sharpe has to say, and how to implement it, is an important step to transform to a High Performing Practice.

Let’s pull out some key points and relate them to our clients.

Why retirement income is a difficult problem
Professor Sharpe outlines two risks – investment and mortality. He points out that you can eliminate one but not the other. And, there are so many potential outcomes, especially when you have two people, that it’s extremely hard to know which scenario to plan for. These uncertainties create a problem that is difficult to solve without the use of an annuity portfolio.

Potential for employer involvement in the future
Like Professor Sharpe, I would love to see more programs, education and options in corporate benefit plans designed to help Americans retire more securely. There is currently a lot of talk around The Secure Act that would allow guaranteed income in some plans. And, even this partial step to a more secure retirement doesn’t come without costs in the planning process. The loss of stretch provisions above $400,000 takes away flexibility in the overall planning process. At the end of the day, the discussions around The Secure Act should at least provide additional validity to the proper use of guaranteed income in retirement income portfolios.

Oh boy — that’s a big issue
Yes, I’m talking about Social Security. But I’m less concerned about the funding of Social Security. Even with the rise in benefits and the lack of additional funding to date, there are alternatives to correct the trust fund’s balance and provide security to many Americans for decades to come. All it would take is a few tweaks. Urgency is important in the legislative process but unlikely due to the political nature of this subject.

The real issue of concern is the continued misuse of Social Security. Even with the immense amount of education over the last several years, the election rate for maximizing benefits at age 70 is very low. For those advisors wanting to provide value to their clients, leveraging Social Security’s guaranteed income with inflation protection is critical to the success of many middle-American retirement income portfolios.

Professor Sharpe points to a basic premise in investment management – diversification. This technique mitigates the investment risk by pooling it. Annuities pool the longevity risk. And, if you pool the investment risk during the accumulation phase, why wouldn’t you continue that practice during the income phase? The article states that longevity risk is at least as big a concern as investment risk.

Today, there continue to be specialists in insurance and investments that do not collaborate. Going forward, as our products merge, we must learn to collaborate or implement different products into our planning process. There are advantages to both. If the two biggest uncertainties are investment and longevity, there is a place for both.

Professor Sharpe states that he did all this research for free because it was of interest to him. As he ages, he likely faces the same risk most Americans do.

Remaining relevant with our clients is paramount to our long-term success as planners and business owners.

Making sure that we are aligned with the changing demographics and offering solutions to meet the future needs of Americans allows us to remain relevant with them and with the industry.

Next Steps
Read the original article. Think about how retirement income planning will be relevant in your practice over the next 10-20 years as your clients age.

Transformational Tactic

Having solutions that mitigate more than investment risk will provide more opportunities to serve clients.

Posted by hpp
3 Hidden Benefits of an Income Alpha Strategy to Grow Your Business

3 Hidden Benefits of an Income Alpha Strategy to Grow Your Business

Change, even good change, can be daunting. And change
usually comes with reservations. After all, if you are accustomed to doing
things a certain way, and that way has worked all right, it’s hard to be
enthusiastic. If it isn’t broke… right?

Today I want to talk about a new strategy to implement with
your clients – The Income Alpha Strategy. If you give it a chance, you might
just find that your old strategy might actually need some fixing.

It’s natural to have reservations about trying a new strategy. You’re probably wondering:

  • Will it work?
  • How does it benefit my clients?
  • What will it mean for my overall business?

And, if you follow my blog, you might also be wondering why it’s worth making a change. Let’s walk through the Income Alpha strategy and discover how it produces more income with fewer assets while creating a legacy account for the family’s beneficiary.  And those are just the obvious benefits.

Less obvious is the totality of the strategy. It enhances
your client’s retirement income and builds your business. Are you ready? Let’s
take a closer look at those less obvious benefits. Stick with me – it’s going
to get a little technical so you can really understand the nuances of what
makes this strategy so effective.

1. Increased Tax Efficiency

The Income Alpha Strategy uses guaranteed income which
allows a planner to be more aggressive with the other assets. Guaranteed income
allows for higher equity allocation which in turn creates embedded tax
efficiencies due to the long-term capital gain structure. Since the entire
portfolio is not dedicated to income generation, the allocation allows for
income distributions from mid-cap and small-cap investments after longer holds.
The capital gain taxation versus short-term gains in distributions reduces the
tax load for the income portion later in life.

In addition, the overall wealth creation of Income Alpha means that this bucket of funds does not need to be distributed until the death of the income recipient. It’s worth noting that if it is needed before the death of the clients, this too will likely have long-term capital gain treatment. If held to death, the beneficiaries will receive a step up in basis to the fair market value of the stock portfolio on the date of death. Because these funds are not held and positioned for the systematic withdrawal for income, the portfolio can be more tax-efficient to the heirs.

2. Ability to Address Other Risks

Since we have developed income with fewer assets, this allows the client to do one of two things. They could place funds in a long-term account to grow as discussed above. Or, we can change the conversation and address some of the other risks that might negatively affect the retirement income stream. Namely, the potential risk of long-term care can be mitigated. Using an asset-based long-term care solution, the client places some of those non-income producing assets into a tax-deferred vehicle with additional benefits for a long-term care event. The care benefits are received income tax-free, even when it is distributed from the tax-deferred accumulation. That changes the growth in the account from tax-deferred to tax-free in the event of a qualifying event.

3. Minimize Both Investment AND Longevity Risk

In a recent article, Professor William Sharpe, economist and Noble Prize winner, discussed the two major risks for retirees – investment and longevity. With Income Alpha, the equity holding account is not subject to the sequence of return risks. This allows the lump sum to be more aggressive without the fear of sequence of returns.

In addition, the placement of guaranteed income increases
the level of income that will not stop during the clients’ lifetime. While not
completely eliminating both, you are addressing and minimizing both.
Conventional portfolio indicates that you typically can only address one or the
other. (Source: Barrons)

Bonus Content – Income Alpha

Get straight to the numbers! Download the visual case study on how to win the retirement game.

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What’s in it for me?

Using an Income Alpha strategy benefits your client in many
ways. And even if that’s all it did, it would put you, as the planner, in a
great position. There are, however, benefits to the practice as well. Let’s look
at a few:

  • Income Alpha can increase referrals. Your clients are not likely to see this type of innovative income planning strategy (i.e. one that generates income and uses fewer assets) from the competition. This will win you the business and give your clients a great story to share with their friends. And, since they are coming from your existing base of target clients, they will be the right referrals for your emerging High Performing Practice.
  • Client persistency. By successfully changing the conversation and addressing other retirement income planning needs, you have increased the chances of client persistency. Every product or additional service you offer strengthens your relationship with your clients. The additional brand recognition will pay dividends for your firm.
  • Growth of AUM. Taking pressure off the income assets and creating a wealth account will likely lead to long-term growth of assets under management. And, with increased long-term assets under management, you are likely making your business more valuable to a potential buyer in a planned succession plan. While most planners are using systematic withdrawal that creates a discounted multiple because assets are scheduled to diminish, you create a negotiating point for more value.
  • Client Peace of Mind. With more guaranteed income, there is typically greater peace of mind for the client. Your service requests and annual reviews will be less volatile and there is less chance for frustration, confusion, and missed expectations. Instead, you’ll be able to replace those negative reactions with a positive experience.

Transformational Tactic

Think different; look deeper; plan better.

Learn more about Income Alpha strategies by registering a free demo of the JourneyGuide software. For more ways to learn about how to transform your business, sign up for our free course.

Posted by hpp