When you want to build a thriving financial advisory practice, it helps to have advice from those who are experienced in the field. Today’s guest, John Page, RFP, CFP, RFC of Wealth Enhancement Academy, as well as Chairman and Chief Adjudicator of the PlanPlus Global Financial Planning Awards, has plenty of tips to share from his years of experience in working with advisors and providing financial planning advice to Canadian consumers. Tune in to the episode to hear some important insights from John about building your financial advisory practice and successfully transitioning from a product-centric practice into an advice-centric practice.

Topics Discussed in this Episode:

  • Key issues of a product-centric approach and why transitioning into an advice-centric practice is important
  • Why product-centric doesn’t mean commissions and why advice-centric doesn’t mean fees
  • How to never hear from your clients that they will not pay fees for financial planning
  • The importance of knowing the values of the client
  • John’s building blocks of a well-run financial practice
  • The one thing that made John’s approach so successful

Quotes by John:

“In order to give advice, you have to ask a lot of questions, and you have to really try to determine what the needs are.”

“If somebody is extremely risk-averse, and you recommend all equity investments, you’ve violated their values.”

“They need to know the full value of your services before you discuss fees.”

Product-centric vs advice-centric

First of all, what is the difference between product-centric and advice-centric approaches?

In a product-centered practice, the advisor’s #1 focus is on selling a product.

In an advice-centric practice, the focus is on finding out the clients’ values, needs, and objectives to give them the best solutions to their problems. John acknowledges that advice-centric planning takes time. He says, “In order to give advice, you have to ask a lot of questions, and you have to really try to determine what the needs are.”

There are major drawbacks to running a product-centered practice:

  • The biggest issue is that a focus is on selling a product often comes at the expense of understanding a client’s needs and giving them the right advice. Basically, you can get stuck assuming your product is the perfect solution to all problems, even when it’s not appropriate, and you may fail at helping your clients meet their financial needs.
  • Clients may not think of you as their primary advisor ‒ for example, if they’re working with you on insurance, they may not think of coming to you to manage their portfolio. You’re a lot easier to replace due to the transactional nature of product-based planning.

Why transition to advice-centric planning?

  • You’re forced to understand your client’s needs and values, which means that you can meet their needs better.
  • As a growing group of advisors are finding, with advice-centric planning you can often charge a fee that fits the work better. Let’s say you’re running a commission-based practice; for one client you discover a $1 million need in their portfolio, and for another client you find a $100,000 need. You probably put in the same amount of work to discover each need, so why the huge disparity in your compensation?
  • With advice-centric planning, your clients know you are working in their best interest. That means they’ll be more satisfied with your work, and they’ll think of you for any finance-related needs.

Why is it important to know your client’s values?

There is a downside of not knowing your client’s values that goes beyond compliance. If you don’t know your client’s values, there’s a risk of violating these values. The most obvious example of this is their risk tolerance: if they’re very risk-averse and you don’t find that out and make their portfolio all equity-based, you will seriously violate their values.

Objections to a fee-based service

Let’s stop here for a moment to dispel a common myth: people often associate product-centric models with commissions and advice-centric models with fees, but that doesn’t have to be the case.

You can have an advice-centric approach to your practice and still be compensated by commission.

That being said, let’s say you want to make the switch to fee-based planning. Are you thinking, “What if my clients won’t pay my fees?”

It’s a common concern, but John says if you have valuable advice and provide a valuable service, people will be willing to pay for that. “It’s really about value. If you provide value, people will pay fees.”

In Episode 2: How to Properly Articulate the Value of Financial Advice, John and Pawel will be going into the nitty-gritty of providing value to clients and demonstrating that value to them. John’s trick, though, is to come up with a great process that both saves him time and ensures clients get what they want and need, so they’re happy to pay for your great service.

The importance of a process

John believes most people have some kind of process when they do something over and over again. The trick is to be aware of that process and examine it to ensure it’s efficient. This started for him when he came up with a list of questions that helped him discover what he needs to learn from his clients. Then, he expanded and refined his process into what it is today.

Now, he says he has a methodology for everything, including:

  • Finding clients’ problems
  • Learning about a client’s current situation
  • Solving their problems
  • Reviewing the advice he’s given to ensure it’s still appropriate

This process also helps with compliance. For example, to provide excellent investment planning, he needs to know the client’s mix of assets and the form they’re in, their family situation, age, objectives, and a timeframe for achieving those objectives. This not only helps him give clients the best advice, it also meets basic compliance requirements.

The building blocks of John’s process

John’s been working on his process for 30 years, and we got him to share the five building blocks that make it work:

  1. From his very first contact with a potential client, he positions himself as someone who wants to help them reach their goals. He helps them understand what he does and they figure out if it’s appropriate for their situation.

Tip: Let clients know right away if you’re a fee-based planner, and why that’s the case. There’s no sense hiding this information and putting in time and effort only to realize that they’re not willing to pay a fee no matter what value you can provide. At this point, the client will probably be curious about how much you will cost them, so it’s good to give a ballpark figure of the upfront and monthly fee. Just make sure you’re confident you can give a good estimate.

2. He asks open-ended questions to uncover their values. He says 90% of the first conversation with a client should be them talking. There’s a lot to learn from a conversation like this!

3. He finds out their goals and objectives, as well as their financial situation. This part is generally fill-in-the-blanks, but he’s already listened to them talking about their values and understands the context for the goals and how clients are willing to reach them.

Tip: Once you and a client have agreed to work together, ask to see their documents: statements, insurance policies, wills, etc. Make sure you have a full picture of their situation so you don’t miss anything.

4. Next comes the needs analysis. Most of the time, he uses financial planning software, where he can quickly and easily input the data and find where the client’s needs are. Once the program demonstrates a certain need, he can start to understand where it comes from and how to address it.

5. After the first or second meeting, he outlines what he can do for them and comes up with a fair fee.

Trick: It’s crucial to tell clients what you will do for them first. As John puts it, “They need to know what the value is before you tell them what the fee is.”

Reviewing your process

We’ll be talking a lot more about pricing and fees in Episode 3: Pricing and Structuring your Service Offering to Make it Irresistible to Prospects, but John briefly outlined how he came up with his fee structure and the different iterations it went through over the years. It’s a great example of reviewing your process as you go:

  • Initially, he charged a percentage of assets and a percentage of income since these numbers tend to correlate roughly with the amount of work required. However, clients don’t like to hear that you’re charging them more money just because their annual income is higher.
  • Next, he started to identify more definitively what he does and how long each thing takes. He took his cue from car dealerships, who can give you very precise estimates because they know exactly how long each task takes.
  • Over time, he got more detailed with his pricing. For example, he was able to adopt a pricing model to profitably serve clients who have one insurance policy and 40 insurance policies.
  • When he found he was getting too bogged down with detail, he reviewed his process and simplified it. Now he tells clients his fees are based on time and complexity, which most people understand is fair.

Tip: Once you come up with a great process, constantly review and refine it to make sure it still works for you.

Making the transition

Are you convinced that an advice-based model is the way to go but aren’t sure how to go about it? John has two tips to get you started:

  1. Start with the end in mind. You may want to transition fully to an advice-based model, or you while others want to keep a mix of both in their practice. That’s fine, as long as you decide that from the beginning.
  2. Don’t change your entire model all of a sudden ‒ in fact, it may take you a couple years to complete the transition, so start one by one with new clients. You can start to transition current clients when reviewing with them. Let them know you’ve developed a method that you think will provide them with more value and go from there.

What’s the #1 thing that made John successful with his process?

John created a process that “genuinely helped clients to reach their goals and objectives.” He says clients truly noticed that because of him, they were able to achieve what they wanted.

The evidence is all in client satisfaction. He recalls a review meeting with a woman who was just retiring, and she jumped up to hug him. She told him, “Without you, we never would be able to retire.”

Isn’t that what it’s all about?

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