For many years, people in the financial services industry have been stereotyped as order takers or salespeople. You are a professional. You start every relationship with financial planning. And it’s important to convey this as soon as you meet high-net-worth (or any) prospects.
Like filling out forms at a new doctor’s office, the introductory process can seem mind numbing to prospects. Everyone wants to feel that they would be an important client and not just another client folder. How can you get the message across that you are committed to helping them make progress toward their goals? How can you differentiate yourself from the competition?
Let us look at seven questions that should get the prospect to sit up, pay attention and recognize that you are there to help them:
What do you want your money to do for you?
Too often, people in our industry focus on “making money” or choosing the investments that have historically gotten the best results. Investing involves risk. When the conversation is focused on performance, we lose sight of what money is supposed to accomplish.
You have heard the expression, “Money is the root of all evil.” The correct quote is “The love of money is the root of all evil.” Money can accomplish a lot. It’s when we obsess over making it and can never get enough of it, that problems develop.
When you ask the question above, you should get some insightful answers from prospects. “I want to achieve financial freedom, the moment when work becomes a choice, not an obligation.” Maybe they say, “I want to be able to afford to send my children and grandchildren to college.” Perhaps they want to leave a legacy. Their answer helps choose the direction you want the future financial planning conversation to take.
Are you pleased or disappointed with your children?
Perhaps they will say, “No one has ever asked me that question before!” They may have sacrificed to get their children the best education possible, yet are discovering their children might expect a cushy job in the family business or see inheritance as their early retirement plan. This question establishes whether the prospect is confident in their child’s ability and decision-making process (and therefore might back them in starting a business) or if they feel money slips through their children’s fingers (requiring them to protect their wealth more stringently).
Do you know the overhead expenses required to keep your lifestyle going?
When times are good, it is easy to assume the good times will last forever. Your prospects might spend everything they earn. The economy runs in cycles. If their income dropped dramatically one day, their ongoing expenses might wipe out their savings, even if they are substantial. The first step in budgeting is to understand how much is going out and how much is coming in. Do your prospects know those numbers?
What would happen if you were no longer in the picture?
If the prospect owns a business, this is a succession planning question. Is their spouse good at handling money? If they do not have a spouse but do have plenty of wealth, what are the estate planning consequences? Is there sufficient liquidity? This can be an issue when the majority of their wealth is tied up in the business or hard assets like real estate. There may be a needfor insurance. The surviving spouse might need a regular income coming in. As their trusted advisor, you could help protect the spouse from predators by providing ongoing financial advice.
When do you see yourself stopping work?
This can be another way of approaching retirement planning, but from the financial independence perspective. Some prospects do not see themselves ever stopping work. Perhaps they are the sole breadwinner in the family and/or think they have inadequate savings. Or they may be workaholics. Others might see retirement as the time to leave the corporate world and start their own business. This question gets prospects thinking, “Am I prepared for retirement?” Years ago, a manager had suggested the following question: “How confident are you? 100%? 50%?” This leads into Monte Carlo analysis, which can quantify a need.
Do you know where all your money is?
This might seem like a lightweight question. Because you are in the financial services business, this is what you do. Some people have accounts all over the place. Years ago, when CDs were very popular, people had them at multiple banks. Today we have online brokerage accounts. Let us not forget cryptocurrencies. Some people own gold in physical form, like coins. Others own rare stamps. They might own mutual funds on reinvestment. Where does that money go? What about orphaned IRAs? Part of the value the advisor can bring to the relationship is getting clients organized.
Additional Reading: So, Your Client Wants to Be a Snowbird
How much do you owe?
This, too, can be an uncomfortable question. But just because a prospect is wealthy doesn’t mean they have no debt. The Motley Fool points out the top 1% hold 4.6% of all debt while the bottom 50% account for only 36%. Let’s assume debt comes in two forms, fixed and variable debt. When interest rates are rising, variable debt can get out of control. According to Forbes, the average credit card interest rate as of July 10, 2023 was 24.52%! Regardless of one’s level of wealth, everyone needs to know what they are carrying and how much it is costing them. They also need a plan to pay it off.
These questions identify needs, treat each prospect as a unique individual and demonstrate the value the advisor brings to the relationship.
Bryce Sanders is president of Perceptive Business Solutions Inc. He provides HNW client acquisition training for the financial services industry. His book, “Captivating the Wealthy Investor,” is available on Amazon.
