Many client relationships follow the same sequence of events: You have your initial meeting with your client. You discuss the client’s financial hopes and dreams. You establish long-term goals to accumulate wealth for the client’s retirement. You generate positive investment performance. You meet your goals. The client retires—and then, poof, he or she is gone to another investment firm. Just like that. What happened?
The answer is simple: You may have fallen victim to “the hidden threat,” in which your client pigeon-holes you as an advisor who can help with the accumulation of wealth only. He or she assumes that you’re not an expert on the next stage of the financial lifecycle—the Distribution or Retirement stage—and looks elsewhere for solutions.
You’ve taken your client to the Promised Land. Why would they leave you?
To understand why your client would defect, it’s important to recognize that client goals do not end with the accumulation of assets for retirement. Setting and meeting goals—and achieving financial security—are ongoing processes. Unfortunately, over the years, you may have been focused solely on getting your client to the point where there would be enough money to retire…but you’ve never set a specific plan in place for what happens financially once the retirement actually takes place.
Studies have shown that there are several leading reasons that clients leave their advisor: performance, lack of communication, and the frequently-overlooked reason that we will focus on here—namely, that clients compartmentalize their advisors, and believe that the advisor who takes them through the Accumulation Stage is not the same person who can take them through the Distribution or Retirement Stage. Many clients assume that the advisory world is highly specialized—an understandable if not necessarily accurate assumption in a world where specialization has become the order of the day.
How do you combat the perception that you’re a one-trick-pony?
Clearly, it’s important to fight the perception of being an “Accumulation-Only” advisor. You need to make sure your client knows you are also the right advisor for the Distribution phase of their life. There are three ways to influence your client’s perception:
Communicate early and often. Sure, you’ve probably spent a great deal of time discussing the methods you’ll use to help your clients accumulate the appropriate amount of money for a comfortable retirement. But what’s neglected and needs to be part of the conversation is how they can maintain their lifestyle during retirement. This is not to say that advisors don’t think and prepare for that time to come. The issue is that they don’t express it to their clients. You may think that because you’ve generated great performance over the years—and your client likes you (and has been with you through the toughest of times)—your client will remain loyal to your firm. This is a major misconception. The fact is, if you don’t communicate with your client—by telling them in explicit terms about how you are planning to handle their wellbeing during retirement—they will likely think that you don’t have a plan. You need to have this conversation early and often.
Set consistent goals. This is imperative. Be specific about the method and instruments that you’ll use to achieve the client’s short, medium and long term goals. As time moves on, the goals will change, and your approach should be flexible enough to change with them. Eventually, as you reach further into your client’s financial future, you’ll arrive at the point where the discussion is all about the strategic and tactical moves you and your client need to make to maintain their lifestyle during their retirement years. Remember, the end goal is not retirement; it’s getting through retirement (and perhaps having a legacy to pass on to heirs). Let this all be a fluid process.
Make your Distribution capabilities part of your marketing plan. Don’t let your competitors position themselves as the Distribution experts, while relegating you to “Accumulation Only.” Be aggressive in marketing yourself as the whole package, whether it’s on your website, in client-facing communications, or in any marketing vehicle with which you promote your firm in the marketplace.
In summary, make Accumulation-AND-Distribution a theme for your practice. Let your clients know that you’ll help prepare them and take care of them during all stages of the financial life cycle–and that as their advisor, you’ll be there to help create generational wealth and wellbeing.
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