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Ben D. Jones
Managing Director – Intermediary Distribution
BMO Global Asset Management
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Miniseries episode 5:
Stop providing only investment advice
In part 5 of our “Building an effective practice” miniseries with Steve Moore, we help advisors go from giving only investment advice to providing wealth management advice. Matt and Steve discuss how to conduct a deep fact-finding meeting, the different types of details you could be uncovering and how to create a financial vision for your clients. Steve Moore’s book, Ineffective Habits of Financial Advisors and the Disciplines to Break Them gives advisors actionable ideas to be more efficient while growing their practice.
In this episode:
- What a re-fact meeting entails
- Why you have to go back and ask questions over again to existing clients
- The difference between fact-facts and feeling-facts
- How to create a financial vision document
- Making a client engagement road map
Like what you hear?
Steve Moore – Wealth management isn’t a male advisor delivering investment advice to a male client. It’s about sitting down with a couple and getting clear where that couple would like to go together and creating the strategies to bring that into fruition.
Ben Jones – Welcome to Better conversations. Better outcomes. presented by BMO Global Asset Management. I’m Ben Jones.
Matt Smith – And I’m Matt Smith. In each episode, we’ll explore topics relevant to today’s trusted advisors, interviewing experts and investing the world of wealth advising from every angle. We’ll also provide actionable ideas designed to improve outcomes for advisors and their clients.
Ben Jones – To learn more, visit us at bmogam.com/betterconversations. Thanks for joining us.
Disclosure – The views expressed here are those of the participants and not those of BMO Global Asset Management, its affiliates, or subsidiaries.
Ben Jones – Today we’re bringing you the fifth installment of our mini-series, Building an Effective Practice, that we’ve embedded here within season one. It’s a set of interviews that Matt Smith completed with Steve Moore.
Matt Smith – Alright Steve, in the previous podcast, we talked about looking at a book of business, how to determine profitable clients, determine which clients to disengage, going through the process of disengaging. But, now we’re at the point of looking at the other end of the book, which is the higher end, the most profitable clients. Your piece of advice is stop providing just investment advice and begin providing true wealth management.
Matt Smith – I had a great conversation with Steve about the transition from investment advice to wealth management. And an important element is having an in-person meeting with your client in order to get to know them more deeply. Steve talks about how to have those conversations and why they’re so important.
Matt Smith – How does an advisor go from providing investment advice to wealth management advice for their existing clients? What’s the process they go through to get to that point?
Steve Moore – Well, we suggest that you go back and do what I would call a re-fact meeting. And we think that it should be done in the couple’s home with the husband and the wife. Now, I know that people are — and I encourage once you’re doing reviews, is to move those reviews into the office — but most people that have money are over age 50. And many — now this is not a sexist statement — and many spouses over age 50 were stay-at-home moms. Many people with money, the spouse was a stay-at-home mom and she’s more comfortable having this conversation in their home over a kitchen table than they are in your office. And so this is — wealth management isn’t a male advisor delivering investment advice to a male client. It’s about sitting down with a couple and getting clear where that couple would like to go together, and creating the strategies to bring that into fruition.
Matt Smith – Okay, sorry to interrupt, but some of these clients the advisors worked with for 20 years. You’re saying go back and start asking them questions about themselves and they’ve known them for 20 years?
Steve Moore – I promise you, promise you, promise you that the advisor does not know the client as deeply as they need to to advise them well. They need to know them historically better than they do to advise them well. People have baggage that they’ve drug along and they make decisions with that baggage on their back. And if you don’t know what that baggage is, you can’t advise them well. Case in point, Carol and I were so dead broke for so many years that she cried I don’t know for how many years every month when she had to write checks and pay the bills because we didn’t have enough to cover it. And so it’s strange now the amount of money that she just keeps in the bank for her to be able to write checks off of. It just makes no financial sense at all, but it does make emotional sense. If you knew where she came from and the pain that she went through, you can rationalize and clearly understand why she has that money in the bank that she can reach out and grab anytime she needs to.
Matt Smith – Okay, we’ll come back to this — a point I want to talk about a little bit further down the road, which is the fact that your clients’ lives change and so does their financial objectives and their vision for the future. But let’s stay on this point in time where the advisor — they understand that they need to gather more information from the client. They want to go deeper. You call it re-facting.
Steve Moore – Yup.
Matt Smith – The original meeting that they might have had with the client when they first brought them on as a client is a discovery process. You discover certain things about your clients and some of it for regulatory purposes we have to document. You have to clearly document their investment objective and their amount of money. Sometimes advisors just do that from a regulatory standpoint, but now we’re going to go back and re-fact. Walk me through how that conversation goes between the advisor and the client sitting around the kitchen table or in their office. How does that go?
Steve Moore – So, once again I’d suggest that it be done around the kitchen table and the reasons for that is that you’re going to walk in to that house and you’re going to pick up more information in their home than you would ever pick up in your office. You’re going to see pictures on the wall and you’re going to get a family history in 10 minutes. You’re going to see a fly rod in the corner or a travel brochure on an end table. You’re going to pick up more information — you’re going to see how the couple lives; what kind of car they drive, whether they’re in to things or they’re very simple people. You’re going to find out what motivates them. And as I mentioned a moment ago, it’s also where the spouse is going to be more comfortable having this conversation. And this is a shared vision that you’re going to try and create as a result of this meeting that’s not — once again — that’s not a male advisor working with a male client with investment strategies. It’s a wealth management set of strategies and it’s a joint vision that you’re trying to bring the couple towards. So, it’s done in the home. So, we suggest that you just call the couple and say something like we’re hearing more and more from our clients that they would like to get crystal clear on the things they would like to accomplish and have a roadmap to get there. Would you meet with me for an hour or so to review your plan and of course they’ll say yes. So, we suggest that you create a document checklist to gather the information that you need to update their plans. The fact finding is broken up into two categories; the fact-facts, the data that you need to update the financial plan, but also the feeling-facts. So, we suggest you create a document checklist of all the information you need to gather to update the financial plan and send that in advantage so that when the — you get there, the couple has organized the documents. You could walk in, take your iPhone, take pictures of the data that you need to update their plan, and the fact-facts have been gathered. Now, a lot of the people that are — or the financial planners will tell you that if you rely on data input sheets or self-assessing that much of that data is erroneous. And so if you feed that into the financial planning document you’ve got garbage in, you have garbage out. So, the only thing that should enter into a financial planning document is the facts, the data that you gathered off the documents that has that information. Then once that’s collected, then you shift to the feeling fact questions.
Matt Smith – We’re talking about fact-facts and there’s the right way and the wrong way to get these from your clients. And just sending them a fact sheet for them to fill out, half of the information which you already have like their name, and address, and Social Security number, you don’t want to put your clients through that process again. How do you suggest getting some of these fact-facts?
Steve Moore – So, once again, I would go to the financial planning document. I would see what pieces of information needed to be updated and I would only ask for that information. But, I would ask for it by way of documents. I would ask for the document that has that information in it so that I’m not spending any time asking them data questions. So, you walk into the house and hopefully they have had that work done. You’re going to take pictures of the data that you need in order to update the financial plan, and you’re done with it. Advisors have reported back to me that it is maybe a 10 minute exercise.
Matt Smith – Okay. You want to save the time and the energy for the qualitative facts, the feeling-facts.
Steve Moore – Feeling-facts is critical in this meeting. That’s why we’re doing it in their home, that’s why we want to make sure that the husband and wife are there together.
Matt Smith – So, when you’re getting ready to get the feeling facts from your clients, is this another list of questions that you give your advisor clients to ask their clients? Or how do they go about this?
Steve Moore – There’s just one question that we ask people to use and that is please tell me your story. Now, you have to have a preamble that may vary based on who the client is, but let it come out of your mouth: Please tell me your story. It may sound something like, you know, I’ve known you for 15 years, but I’m finding out I need to know my clients historically better than I do. Would the two of you share with me your story from beginning to end; how the two of you grew up, how you met, colleges, career, family, ex-family, the whole damn thing. But let it come out of your mouth: Please tell me your story. And you will find an amazing story. Matt, the most profound one for me was a couple had been working with an advisor for years and they were elderly and they had a ton of money, and yet they were incredibly tight. Just held on to every penny they possibly could and they didn’t understand it until after they asked them please tell me your story. And what they found out is the wife was raised in her early years in a Nazi prison camp and she was brought in. Her mother had large breasts because she was breastfeeding her and the guards thought that she was smuggling something in and so they did something to her breasts that damaged them. And so she couldn’t feed this baby. And so the other prisoners in this prison camp kept this baby alive by feeding her. Now, if you had that in your history, you just might have a little scarcity, right?
Matt Smith – Right.
Steve Moore – You might want to hang on to some things. But I’ve heard hundreds of profound stories. Not that profound, but a hundred profound stories of discoveries that people found out about a couple simply by asking would you please tell me your story.
Matt Smith – And then the client can self-select all of the facts that are most important to them and just the things that they choose to tell you tells a lot about them.
Steve Moore – Right, and if this were a friend of yours and they were telling you a story, and you legitimately cared about them, you’d ask natural questions. You know sometimes advisors ask me well what are the follow-up questions? I said there are no follow-up questions other than be interested in the client and ask them well, what happened then? Well, I thought you said this, and how’d that happen? Just be captivated by their story and if you cannot do that, then you don’t belong in wealth management.
Matt Smith – Now, you’ve had this great conversation, you’ve heard the story. What do you do with the feeling-facts?
Steve Moore – Well, the first part of the feeling-facts is — creates just — the tell me your story part just creates what used to be called a discovery agreement. All the information that influenced this, the family, the ex-family, the properties, their life. And I used to call it a discovery agreement. And you have that in support of that tell me your story.
Matt Smith – So, the advisor that — you document that so you have it, you can refer to it down the road, but that is just something the advisor does for themselves to capture all of that so that they have it in the file.
Steve Moore – To be able to advise that couple within the context of their life, yes.
Ben Jones – I think Steve’s advice to have a new conversation to ask more in-depth questions might sound a bit daunting or even unnecessary. But, it helps to think about it as a new start or phase of the advisors relationship with the client, one that requires you to know a lot more about the client’s emotional story and personal history. Now that you’ve figured out what information to get from your clients, let’s find out what you should do with this information.
Matt Smith – Now that you’ve gotten the fact-facts and the feeling-facts and you’ve organized your notes so that you have a complete picture which is your own discovery document, your discovery agreement, then you advise that they create a financial vision document with their client. Can you tell me about that?
Steve Moore – Sure, so wealth management is about helping a couple get from where they are to where they would like to be. And where they would like to be is called vision. And so you get that from a couple simply by asking the question what is it that you would like to accomplish that will require planning, money, and time? And though our brains are wired to think that way, we’ve let that part of our brain go to sleep for so long that oftentimes they may look at you dumbfounded. So, go back to another question that is not as good a question, but it’s more concrete and they’ll understand it to prime the pump with. So, you will simply say, for example, tell me something that you have on your bucket list and they’ll get that and they’ll tell you. Then after they’ve told you what that is, then you shift back to that better question, what else would you like to accomplish that will require planning, money, and time. And by that time, they will have within the context of how you’re talking to them and they’ll begin to answer the question. But the most important part of asking that question is to probe on their answers. So, they may say well we’d like to go to Europe. Well where in Europe? Europe’s a big place. Well, Italy. Still a big place. Where in Italy? And if you ask where and ask for enough detail, out it will come. Oh, well Avalon read Under the Tuscan Sun and it was written just outside the city walls of Crotona Italy, and now you’re going to start to prime the pump and get the detail that you really need to build a rich financial vision document. So, you ask for detail. You also ask for the reason why. And you also ask for the emotion, how it would make you feel. And when you get the detail and the reasons why and the emotion behind it, then you have a rich statement.
Matt Smith – Now that you’ve created the financial vision, is this something also that goes in the file and it’s just for the advisors, or is this something that then gets documented and shared with the client?
Steve Moore – It gets documented and shared with the client. So, the process is to actually do that planning, update their financial plan, sit down and think deeply on what you can do for a couple to help them actually move in the direction of their financial vision. You create this financial vision document that’s richly written that hopefully has pictures that are connected to it. And each sub-vision that they have looking for detail, looking for emotion, and looking for reasons why. Richly written, written as though the couple wrote it. And that is what the job of a wealth manager is. Your job is to bring that financial vision into fruition. All the other stuff are tactics or strategies to actually do that. So, you create that financial vision document, then you do your deep planning. You come up with a way that you’re going to help the couple actually bring that vision into fruition, and then you take a road map that, over the next two years, are steps in the direction of that vision. You ask, well what happens at the end of those two years? You say well, you throw out another two years is what you do. You just keep on keeping on because lives change, visions change, issues pop up that you will never run out of issues for your road map.
Matt Smith – You talk about putting two years’ worth of items on the client engagement road map. Can we take a step back and can you give us a brief overview of what this road map looks like and how it’s used?
Steve Moore – Sure. First of all, let me go back a step where we came up with it quickly, Matt, because I thought it was interesting. I was doing work with the three groups that had to launch Microsoft’s first smartphone and there was — in the meeting room was embedded a group and the pocket PC group and the mobility group, and they all had their own product road maps, but they weren’t integrated. So, my job was to work with these three groups to create an integrated product road map. And I walked right out of that meeting, which I think was a day and a half, I don’t recall — walked into a focus group of what was the equivalent of the listeners, high net worth clients. And what they told me was that they care about their advisor, they trust their advisor, but they don’t have a clue of where they’re going with them. It’s just whatever comes up in a particular quarter or a particular time is dealt with. There’s no plan, it’s just a reactive strategy. Also, these were all fee-based clients and they were telling me that they understood why the money came out in the beginning because they got the risk tolerance tools and they got all the goodies, all the charts and the product information. But now they’ve been with their advisor four or five years and they’re wondering why this money keeps coming out.
Matt Smith – This is the advisor’s fee.
Steve Moore – The advisor’s fee. They don’t get it. They don’t feel like they’re getting —
Matt Smith – They paid for it once and now why do I keep paying for this quarter after quarter?
Steve Moore – Right. So, I just put two and two together and figured if a road map can launch a smartphone, maybe a road map would be a good idea to put in place for an advisor to work with their clients over time. Then I worked with an advisor downtown here in Seattle, Kurt Green, and one of my good friends down in Long Beach, an RIA, Russ Hill, and we came up with a template and some thoughts. And it’s evolved since then, but that sort of came about and it has been wildly successful. In essence, what it does is it allows you to take a meaty wealth management topic and take one on every quarter as opposed to trying to dump it all on somebody up front.
Matt Smith – And these are shown — these topics are shown on the road map?
Steve Moore – On the road map every quarter. Next quarter we’re going to take this one on, next quarter we’re going to take this one on, next quarter we’re going to take this on. So, what does that look like? Well, it might be to make sure the will and estate plan is in place. The next quarter it’s going to be our spending plan. The next one is college funding for grandson. You know, you name it. Over the next two years here’s our road map of the things that we’re going to take on and that has been wildly successful and clients absolutely love it.
Matt Smith – You’re going to put the urgent issues in the next quarter or two, and the client can see that this other important thing that we need to talk about, which we only need to — just need to talk about sometime in the next couple years — they can see it. Three quarters or four quarters out. And then they can relax.
Steve Moore – Exactly.
Matt Smith – They know you haven’t forgotten about it, but we’re going to do these other two in these next two quarters and we’ll get to that one. And that gives the client a sense of okay, it’s out there. We’re going to get to it, but we’re going to deal with these more urgent issues first.
Steve Moore – Perfect. The important, urgent things up front. The important, less urgent things further back. Yup.
Matt Smith – There’s eight quarters on the road map and you’re a couple of quarters into using this road map with your clients. Your advice is to leave those past couple of quarters on the road map instead of just rotating so that you always have the next quarter and then the seven after that. You leave some of those past quarters on there. Why do you do that?
Steve Moore – Well, for two purposes. First of all, efficacy. Self-efficacy for the client. They need to see the things that they’ve accomplished and be reminded of the things that they’ve accomplished. It builds their efficacy. But also, there was a guiding principal that the very first RIA that I worked with in the US, here in Seattle, Washington had the guiding principal: do great things for clients and make sure they know about it. And so it’s an elegant way of just putting checks next to the things that have been accomplished and so when the next quarter comes up, the client will look at the quarter they’re going to be dealing with, but they can also see the checks of the previous quarters and the advisor can, without beating their chest, remind them of the work they’ve done for the client.
Matt Smith – So, this gets back to, in a way, justifying the fee. The client is aware that they’re paying their advisor a fee and the road map — every quarter they see it — it’s answering the question. This is part of what you’re paying for in your fee.
Steve Moore – Yeah, and you have to put it in context. Let’s just say a client is paying you $10,000. What could you do — what could the client do for that $10,000 for themselves? They may decide to — let’s go down to San Francisco for a weekend and fly first class, stay at a wonderful hotel, and have a couple wonderful meals, and tour the San Francisco area, come back. Next quarter they may say listen, let’s just take a week and go over to Hawaii. And they can take part of that money and spend a week over in Hawaii and come back and you still haven’t gotten to that $10,000. Alright, so let’s go take a plane over at New York City. So, they’ll fly over to New York City, have a wonderful vacation weekend, get back. They still probably have not burned through that $10,000. So, that’s how people judge. Am I really getting that kind of value for it?
Matt Smith – Now, when an advisor is building this road map for their clients and it’s informed by the financial vision that they discovered when they re-facted their clients — This isn’t just a template that they use. One of the tenants that you talk about in your book is you need to personalize the road map.
Steve Moore – Sure, so when we put down — you can put down second home discussion, but Lake Tahoe home discussion means more. It’s more specific and it conjures up more vision. Disability insurance for Courtney, our granddaughter with Downs Syndrome. Having that rather than just disability insurance. Long-term care for Carol. Carol has some Alzheimer’s in her family line. So, rather than having long-term care there, but putting names into it makes it richer. Names, locations.
Matt Smith – It might be tempting for efficiency’s sake to have pre-printed road maps with boxes filled out and this is typically how I take my clients through the first eight quarters. We address these issues in this order. Whether or not you actually — that’s an efficient template to use with your clients — help them feel like this is a completely unique road map designed just for you.
Steve Moore – Right, and so two things you talked about there, Matt. So first of all, yes, it should be uniquely theirs. What it should be, the advisor should ask themselves if this were my brother and sister-in-law, is this what I would suggest that they do? The spirit of intent of the things that they take on should be very specific and with the point of view if I am doing this for somebody that I actually love and care about, would I be doing this for them? It shouldn’t be of self-interest at all. Not only do clients like it, once they’ve shown it to — for example — an estate planning attorney or an accountant, the accountants want to steal it. It’s a wonderful way of having clear expectations of what you’re going to do for somebody, checking them off, and moving on to the next one. As I say that, one question that I’m often asked, Matt, is will that road map stay the same? It absolutely will not. It will change. You’ll get started and there will be something urgent that pops up that you’ve got to slide this one back, and move this one up, or another issue will pop up that —
Matt Smith – So, it’s a guideline for the next eight quarters, but don’t be worried about having to change it based on developments that happen with your client?
Steve Moore – Exactly. And then when you get finally to that eighth quarter, people say well what are you going to do after that, and the answer to that is really simple. Lives change. And so there will be an infinite number of things you can continue to work on.
Matt Smith – Probably is also true for that financial visions document, right?
Steve Moore – It will change.
Matt Smith – You need to keep that re-facting process happening so that you can understand if their goals have changed.
Steve Moore – Exactly, Matt.
Matt Smith – The road map may be a different kind of document than you’ve created for your client before. Knowing where your client is today is the starting point. The road map enables you to put them on a path to achieving the things that are important to them by giving them step by step guidance. We hope you’ve been enjoying this miniseries on building an effective practice, as well as our other episodes of the Better conversations podcast so far. We’d love to hear from you. Send us an e-mail and tell us your favorite episode so far or what topics we should cover in the future. E-mail us at email@example.com. That’s firstname.lastname@example.org and thanks so much for listening and participating.
Ben Jones – Another big thanks to Steve Moore for his time and insights over the course of this miniseries. Our production team includes Pat Bordak, Gayle Gibson, Matt Perry, and the team from Freedom Podcasting. Thanks for listening to Better conversations. Better outcomes. This podcast is presented by BMO Global Asset Management. To learn more about what BMO can do for you, go to bmogam.com/betterconversations.
Matt Smith – We hope you found something of value in today’s episode, and if you did we encourage you to subscribe to the show, and leave us a rating and review on iTunes. And of course the greatest compliment of all is if you tell your friends and coworkers to tune in. Until next time, I’m Matt Smith.
Ben Jones – And I’m Ben Jones. From all of us at BMO Global Asset Management, hoping you have a productive and wonderful week.
Disclosure – The views expressed here are those of the participants and not those of BMO Global Asset Management, its affiliates, or subsidiaries. This was not intended to serve as a complete analysis of every material fact regarding any company, industry, or security. This presentation may contain forward looking statements. Investors are cautioned not to place undue reliance on such statements, as actual results could vary. This presentation is for general information purposes only and does not constitute investment advice, and is not intended as an endorsement of any specific investment product or service. Individual investors should consult with an investment professional about their personal situation. Past performance is not indicative of future results. BMO Asset Management Corp is the investment advisor to the BMO funds. BMO Investment Distributors, LLC is the distributor. Member of FINRA SIPC. BMO Asset Management Corp and BMO Investment Distributors are affiliated companies. Further information can be found at www.bmo.com.