Win Clients with Risk Management NOT Investment Planning

Listening to Clients
June 29th, 2020

If you asked a hundred people on the street what a financial planner does, the answers would be overwhelmingly skewed towards the “investment management” side of the spectrum. This isn’t necessarily false, but good –highly successful– financial planners know they should focus first and foremost on the risk management side of the equation.

After all, if clients were simply looking for a smarter way to invest their money, there are dozens of outlets that allow them to invest, trade, and place their assets into vehicles without the need of a professional advisor.

But that’s not why clients seek out advisors, and it’s not how good advisors work with clients. There should be so much more to an advisory relationship than just managing assets, and successful advisors understand that.

Let me explain.

In my practice, I always started with a discussion of risk management. I knew from personal experience how important it is to manage the risk side of the equation before you tackle the investment side. The question I always raised to my prospects and clients was:  “if an unexpected event were to suddenly happen and that event resulted in a lawsuit where your assets were exposed, what type of planning have you done to protect your assets?”

Typically the answer was “I don’t know… I’ve never really thought about that and my advisor has never really talked about asset protection – just about my investment portfolio and whether it’s balanced or not.”

Well, I’m here to tell you, as an advisor, if you only talk about the investment portfolio, you are not only subjecting yourself to potential risk and liability, you are missing out on helping your clients at the highest level of engagement.

Manage risk and plan for the unexpected.

I came to this conclusion honestly. When I was 11 years old, my father died and unfortunately left my mother with six children and a paltry $10k life insurance policy. A $1million dollar life insurance policy would have gone a long way to making our lives a little easier, and it was more than affordable, but my dad’s plan with his advisor didn’t include it.

While I often think, “shame on both of them,” I also know my dad’s lack of financial planning made me a strong advocate for life insurance, especially in families with young children.

I always discussed life insurance with prospects and clients, making sure they were well covered, especially the bread winner. I never wanted my clients to rely upon employer sponsored life insurance.

What would happen in times like this, if they were laid off or fired? If my prospect had grandchildren, I even asked about how much life insurance their sons and/or daughters-in-law had on their lives?

In my case, my son has three children and was in the military. He did six deployments to the Middle East. If he died in combat, the small amount of life insurance offered by the government would have never been enough to raise my grandchildren.

And what about my daughter-in-law?  If something happened to her and my son still had to deploy, what funds would be available to care for my grandkids?  I made sure there was plenty of life insurance on each of them to counterbalance the risk of their premature deaths.

Your clients need you to focus on the best, but plan for the worst.

What about your clients?  What if a similar situation happened to them?  Have you gone through scenarios like this with both your clients and your prospects to demonstrate that in your role as their financial advisor, you think about more than just their investment portfolios or how their assets are allocated?

Bottom line is you don’t want your clients to ever have to go through an experience like that and wonder what would happen to their home or their investment accounts if an unexpected death threw their plan into turmoil or they were ever sued. And let’s face it – the more money a prospect or client has, the bigger target they become.

From the time a prospect comes into your office, you want to first and foremost talk about risk management. Focus on all the various forms of risk that a prospect might be subject to.

Ask them about their moms and dads, brothers and sisters, and their children. Explore all areas of risk – not just those that pertained directly to the client themselves. I learned many times prospects had parents that might one day be dependent upon them. If that were the case, why not talk about purchasing long term care insurance on that parent so the burden of an extended long term care occurrence could be mitigated?

My Secret Sauce

In my business, I had a series of what I called Disturbing Tracts, and today I teach all of my students these 22 areas of risk they should be asking about in a prospect or client meeting. They are some of the best ways to win clients with risk management, rather than simple investment strategies.

They’re a series of questions and scenarios that help clients think outside of the normal advisor box and identify potential risks to be covered, managed, or avoided.

What I have found is that one of the best ways to differentiate yourself from other advisors in the marketplace is to address the risk areas of a prospect’s life, instead of going down the same old route of showcasing your investment philosophy, Callan charts or other ROI metrics.

If you want to close a new prospect, speak to them about scenarios that could potentially play out that could wreak havoc for them or for those they care about. It’s not fear mongering; it’s good financial planning. It is taking the time to  point out potential pitfalls in their overall financial situation that haven’t been properly addressed.

Given the opportunity, every prospect or client would like the ability to address those issues before a situation befalls them and it’s too late.

I will say, because I brought up many issues with prospects that their current advisor likely overlooked, I typically ended up with a new client. I want that for my students as well.  Prospecting is hard – when you do get in front of a prospect, you should have a very high probability of closing them to become your client.

Over the next few weeks, I’ll go through a couple of these Disturbing Tracts so you get an idea of the types of conversations we should all be having with our prospects and clients.

If you want to win prospective clients over, I can tell you from experience, you will find more success by addressing risks, rather than returns. Become an expert advisor in risk management as a key element to your financial planning process, and watch your closing ratio sky rocket!

I give you all of my Disturbing Tracts in the Elite Advisor Success System™, including the scenarios, the setup, the questions, and the answers/pathways I use. It’s one of the ways I’ve helped advisors take their businesses to the next level by conducting a meeting that’s unlike any their prospects or clients have ever experienced.

If you’re interested in learning how to reach the next level in your business from a Barron’s Top 100 Advisor, I would love to have you on our next live call. Learn more about the program and enroll here.



Business Success, Client Relations, Sales

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