Advisor Marketing with Ready Answers for Difficult Questions

I-don't-knowAs a financial advisor you’re used to asking your clients hard questions.

  • What’s your tolerance for risk?
  • Are you okay with short-term losses to make long-term gains?
  • Who gets your money when you die?

Sometimes clients have ready answers. Other times  a couple will look at each other and tell you, “We need to talk about this.” No problem, you don’t expect a ready answers for these tough questions.

But what about when your client or a prospective client asks YOU some tough questions? Are you ready with good answers?

In a recent issue, Fortune magazine named Apple CEO Steve Jobs, the “CEO of the Decade.” Steve Jobs is a master showman and watching his product intros is always a kick…even if you’re a hardcore Windows/Blackberry guy. This quote really jumped out at me:

A key Jobs business tool is his mastery of the message. He rehearses over and over every line he and others utter in public about Apple. ~ Fortune

For the curious, you can watch him in action below when he introduced the Macintosh (1984), iPod (2001) and iPhone (2007). He only had one chance to make a good first impression. So Steve practiced his lines over and over again and nailed the presentation.

Fortunately, you’ll likely be alone with your client in your office or conference room. A larger venue might be a living trust seminar with 25 or 30 people in the room. While a smaller stage than Steve Jobs commands, your ability to provide a sincere and convincing answer can win or lose the account.

What might you get asked? I dug around the Internet and found numerous lists of “questions to ask your financial advisor.” Here are some highlights:

5 Questions To Ask a Potential Financial Advisor

1. Tell Me About Your Ideal Client

Any good financial advisor will have an area of expertise. You want someone who has expertise working with someone like you. If you’re about to retire, and they tell you they work with young families, maybe this isn’t the person for you. Find a financial advisor whose ideal client sounds very similar to your situation in terms of age, stage of life, and asset level.

3. Ask A Potential Financial Advisor to Explain A Concept To You

What you are looking for here is, can you understand their explanation? If they speak over your head, or their answer makes no sense, then move on. You want to work with someone who can explain financial concepts to you in language you can understand.

Below are five concept oriented questions to consider asking:

  • What is passive vs. active investing?
  • How do you determine how much of my money should be in stocks vs. bonds?
  • What is a laddered bond portfolio?
  • How do you determine how much money I can safely withdraw each year without running out?
  • What do you think of annuities?

Seven Questions to Ask When Picking a Financial Adviser (The Wall Street Journal)

As investors look for guidance in these troubled markets, one question looms above all others:

Whom can you trust?

During boom times, it was easy to hire a financial adviser and put your money on autopilot. Now the market is in chaos and thousands of investors have been devastated by fraud, with Madoffed threatening to become an all-too-common verb.

Small wonder that many investors are getting reluctant to put their faith in experts. More than three-quarters of individuals with at least $1 million to invest intend to move money away from their financial advisers, and more than half intend to leave their advisers altogether, according to Prince & Associates Inc., a market-research firm.

The trouble is, many investors don’t have the time or expertise to make all of their own investment decisions. So, having a professional on your side is crucial. But how can you guarantee that your expert is reliable?

6. Can the adviser put it in writing?

Ask for a formal written outline of the services the adviser will be providing and what fees you will be paying. By setting concrete expectations, you can determine if an adviser is going to, say, “help you set goals and do budgeting or just make investment decisions,” says Ellen Turf, chief executive of the National Association of Personal Financial Advisors.

For instance, you can ask advisers to spell out what they think you are trying to achieve and what they think you should do to get there, including investment strategies, specific benchmarks and suggested financial products. If advisers can’t explain their plan in simple terms, another red flag should go up. Secret strategies like those touted by Mr. Madoff are no longer acceptable, Mr. Sonnenfeldt says.

Also ask advisers to spell out who else stands to gain from your relationship — such as affiliated broker-dealers and insurance agencies — as well as exactly how much the adviser, the adviser’s firm and all those other parties will earn from your business.

Finally, find out whether the advisers are going to take on fiduciary responsibility, in which they are legally bound to act in your best interest. If advisers don’t take this oath, they’re only required to sell you products that are deemed suitable for you — and those may not always be the best fit for your financial situation or objectives.

Eight Questions to Ask Your Financial Advisor

(1) Do you use a comprehensive approach to financial planning by directing our efforts around a written plan based upon my specific goals?
(2) How will you communicate, both initially and through time, what I am paying you, how I am paying you, and what I am receiving for it?
(3) Do you have any conflicts, limitations, or encumbrances that I need to be aware of, and will you communicate them in the future if any arise?
(4) What is your core philosophy regarding your work? What results would lead YOU to conclude that our work together is successful?
(5) Are you acting as a specialist or a generalist? In either case, who will be coordinating the specialists that will be needed over time to address my changing needs?
(6) How often do you meet with clients? What do those meetings look like, and what communication methods do you use between meetings?
(7) Will I be working directly with you, or through skilled assistants, and what procedures should I expect as far as phone calls made and received, mail sent and received, etc.?
(8) What issues, topics, or challenges should I NOT be concerned about, despite what I may hear through the media; what issues, topics, or challenges SHOULD I be concerned about, despite not hearing much about it; and, how will you help me do that?

How to Choose a Planner (CFP Board)

2 Q. What are your qualifications?
A. The term “financial planner” is used by many financial professionals. Ask the planner what qualifies him to offer financial planning advice and whether he is recognized as a CERTIFIED FINANCIAL PLANNER™ professional or CFP® practitioner, a Certified Public Accountant-Personal Financial Specialist (CPA-PFS), or a Chartered Financial Consultant (ChFC). Look for a planner who has proven experience in financial planning topics such as insurance, tax planning, investments, estate planning or retirement planning. Determine what steps the planner takes to stay current with changes and developments in the financial planning field. If the planner holds a financial planning designation or certification, check on his background with CFP Board or other relevant professional organizations. [Nice to see they included ChFC along with CFP.]

15 Questions to Ask a Financial Advisor [written by a CPA who is also a financial advisor]

3.   Can the advisor explain their investment philosophy in simple language?  A 10-year-old should be able to understand the logic of the investment philosophy.

5.    Ask the advisor, “why are you in the business?”  “Besides your alarm clock, what makes you get up in the morning?”

6.   Can evidence be presented to back up the advisor’s investment approach?

7.   Where is the advisors own money invested?

That last question might stump many advisors. Would you use a realtor to buy a house who has rented his whole life? Or buy stocks through a stockbroker who keeps all his money in money market funds? Would you keep your savings with a banker who keeps his savings under his mattress? Probably not.

So my advice to you is to click through a few of these articles and try to see things from your client’s perspective. You want to develop clear, convincing and sincere answers to these types of questions. Practice in front of a mirror. Ask your spouse to role play. Or use your webcam to record your answers and give them a critical view. You’ll be glad you did.

Now watch what careful preparation did for Steve Jobs. He made a great first impression. And followed through later on what he said. And prospered. Go and do likewise!