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Years ago, we were shopping in a market in Asia. We negotiated the price and bought an article of clothing. As I paid in cash, I had the feeling the salesperson had glanced over and assessed how much cash was in my wallet. After the purchase, they kept selling. Their objective was to get us to spend all that cash before we left the store. Great financial advisors are more alike than different in this respect.
Let us assume all client relationships start with a financial plan. The “Know Your Customer” rule means you need to gather lots of information and developing a plan is a sensible next step. Your family doctor wants to know a lot about your family history and reactions to medications before they start talking about problems and treatments.
Back in the days of transactional business, advisors would talk about “low hanging fruit.” This was the business that was easy to do. Money was maturing in bonds or CDs, for example. There are assets in house, assets held away and assets that are not available now but will be soon. There are also other product areas like lending and estate planning.
What does it mean to “Not leave anything on the table?” Let us start with what it does not mean: It does not mean to try to get everything done at once. “This afternoon we are going to turn over all your jointly held assets, retirement assets, refinance your house, setup a donor advised fund for charitable giving and lay the groundwork for setting up trusts.” That will overwhelm people. If too much is happening, they might push back.
Years ago, I learned about the benefits of the “security blanket” in the investing world. I had met an advisor in Hawaii who talked about a prospect who would be showing up later that afternoon. He explained after looking over the prospect’s holdings (statements) in advance, they would need to “get rid of everything.” This is a tough pill to swallow if you are the prospect. You have been successful enough in life to be able to afford to retire in Hawaii. Now, a stranger you just met tells you all the investing you have done up to now is wrong and you need to start with a clean slate! There will be pushback.
One solution is the “security blanket” strategy. Identify at least one or two current holdings that would be an ideal fit in the new portfolio. Compliment the prospect on choosing them. You want to keep them in the new portfolio, possibly adding to those positions. This should make acceptance of your other recommendations easier to accept.
Now, let us look at “not leaving anything on the table.”
1. Immediate changes. You have presented your portfolio recommendations after reviewing their financial plan. There are some changes that can be made when the assets are transferred in or they hand over a check.
2. Upcoming investments. There will be money that will be available soon, but not now. This might be when bonds or CDs mature. It might be the rollover of retirement assets when they retire in the next couple of months. There needs to be a plan and timetable for getting this done.
3. Dollar cost averaging. You might be suggesting your client add money at certain intervals. Your plan for their retirement might involve ongoing saving and investment. Can this be set up as an automatic debit from their checking account?
4. Transferring in assets held away. They might see the logic in theory but are not comfortable abandoning other relationships. They want to “get comfortable with you” and “see what you can do.” The time for revisiting this issue needs to be established.
5. Liability side of the equation. It might make sense for them to refinance their mortgage. If they carry credit card balances month to month, they might consider asset based lending as a strategy to reduce their monthly personal interest expense. This might not be addressed now, but what paperwork needs to be brought together for the next meeting?
6. Where does insurance fit in? They own policies purchased elsewhere. Some might have significant accumulated cash value. These might stay where they are, but they should be kept in mind when considering retirement planning.
7. Donor advised funds. These can make great sense if they are involved with charitable giving and seek to leave a legacy. If the concept is new to them, this will require explanation. You might plan another meeting.
8. Trusts and estate planning. It can be tempting to say: “You really need to set up trusts.” You might suggest they talk with their attorney. You might suggest a few lawyers to consider. Your firm might be able to get the process to a certain point. Have the trusts been funded?
There are times when you will need to bring in specialists. You will be able to handle many aspects of implementing the financial plan on your own. It is important to have a “plan to implement the plan” much like doctors proscribe a course of treatment. To do a professional job, you need to sequentially address all the recommendations in the plan. Don’t leave anything on the table.