In recent times I have done a lot of talking about your "success impediments". What is getting in your way to success? A lot of the time it is our own mind. We allow negative thinking to get in the way. This will be true at any time particularly when times are tough and we are fearful. Or it will happen because we have limited experience or a lack of confidence. However, we should never let the big thoughts go away. These big ideas could be a genuine opportunity that is being thrown your way. To start growing you need to firstly not throw the idea away. At least write it down in a journal or talk to a friend or associate about it. You never know what they too have been thinking or how they will provide you with another thought or idea which will liberate your thinking.

To grow you must think big. In my own case, whenever I have taken a big step or pursued a big idea it is because I have taken that dream and not allowed myself to get in the way. I am doing something right now in our DNA business with an idea which I would never have thought possible. Interestingly, the idea came to me on how we could use technology differently and within weeks I have seen futurists talk about this as the future and industry specialists talk about these types of delivery concepts. While I have the vision, I can also see from those around me who have the talents to implement it. So, I will not be the barrier.

Sure, thinking big takes courage but we can all do it if we want to. What dreams or big ideas do you have that could change your life? Would you be a fool to let them go?

I have just read KPMG's Swiss Financial Services Newsletter for August 2008. The newsletter provides very sharp insights into the increasingly complex international needs of high net worth individuals. The outcome is that the consulting team will need to have a greater global outlook and more sophisticated approach to the technical and human issues impacting the HNWI client.

Some of the key trends driving the changes in how HNWI's need to be serviced are:

1. Investments of HNWI's are continuing to become more global and diversified
2. Stronger demand for superior life quality resulting in lifestyles taking on a growing international flavor
3. Family members living and working internationally away from the home base
4. HNWI's want their consultants to play a collaborative role - working with them, not for them
5. Demand for a higher set of values including ethically correct behavior, social recognition and reputation
   

Specifically for the consultant this will mean their service model needs to meet the following requirements for the HNWI:

1. Capability to deal with many different legal and tax jurisdictions, which means increased complexity and recognition of cross border issues
2. A personal approach and outlook which is cross cultural and able to adapt to diverse human requirements
3. Focus on comprehensive, customized solutions with a holistic perspective that take into account the concerns of the HNWI, short and long term goals in life and multi-generational family issues
4. Clearly understand their vision and be able to anticipate their unique needs
5. Understand them in the context of a larger relationship which encompasses both family and business matters
6. Provide a single point of contact with access and the ability to coordinate a worldwide, comprehensive network of professionals
7. Be free from conflicts of interest and exercise absolute independence
8. Innovatively deliver and implement best in breed solutions
9. Have systems that assure complete security and confidentiality
10. Provide the reliability of a recognized brand name
    

I definitely believe this is the new world order for HNWI services. Very few can do it individually. Great collaboration will be needed to be successful.

Personally, over the past 10 years my approach to this has been to play the role of "brains trust" to HNWI's by firstly understanding who they are at a deep level. Then as part of this role, be the independent sounding board to deal with the complex issues and bring in the right specialists as and when needed.

In recent years there has been a lot written about how wealth created by the first generation (the entrepreneur) is lost by the third generation. Often the second generation has also added to the wealth. Then the third generation has lost it through being irresponsible, idle, or simply making poor decisions.

Research from a range of sources is consistently showing that this is happening in over 70% of family wealth transfers.

A significant aspect of intergenerational wealth loss is related to the fact that the financial and estate plans do not adequately take into account the human issues involved. Very often poor communication and relationships within the family along with negative emotions lead to bad decisions. The reality is that many wealth transfer plans whilst technically sound become redundant the day after the wealth transferor passes on.

So, how can you improve those statistics so there is greater intergenerational wealth preservation and also family harmony?

The solutions are found in some interesting research undertaken with a high number of wealthy families by groups like Family Office Exchange and also The Williams Group. Their research points to the top priorities for the families are now to address areas such as family legacy and the family relationships. Whilst investment competence is important it is somewhat low on the list. Investment management is generally seen as a given and considered somewhat of a known science. Notwithstanding, getting the family to adopt these priorities and change their behavior is another matter. If you are an advisor, accountant or attorney what areas should you spend the most time on?

The importance of building greater family unity cannot be underestimated. The family needs to have a defined legacy with a shared mission and set of values. This then becomes the framework and platform for family decisions, dealing with businesses, inheritance, financial education, philanthropy and so on. If needed, bring in specialists to deal with the human dynamics and facilitate this. We often do this with advisors. So, I would really encourage for family meetings to be held. Whilst this process can be expensive in some cases, it does not have to be. Just being aware of the importance of these issues and doing a little more to work on them even through more "relational" discussions will help. Of course, for a high net worth family with many financial complexities and plenty of family history then a family meeting is a great idea and will lead to great results.

In the financial services industry there are a lot of supporters for the use of behavioral profiles as part of the client discovery process and there are some detractors from using them. Like in any situation where there are detractors most have not yet had a positive experience or seen the full benefits or simply have been listening to the wrong information. This is human nature.

Overall, I do believe that you can never have enough information about yourself, your clients and also your team. As Benjamin Disraeli said: "The most successful people are those who have the most information". Of course you also need to have the best and most accurate information.

In my past few blogs I have made a very strong case for how by discovering the behavior of your clients you can help them achieve better investment returns and overall make better decisions. So accepting there are very strong benefits for discovering the behavior of your clients, the question becomes how do you do it? This is where there is a great divide. Although, in my view an unnecessary division of thought and approach. At the center of great client discovery is asking the right questions, or what I call "powerful questions". I believe this is more effectively done when you use behavioral profiles and your intuition, not one or the other.

For some, client discovery is only done by asking questions and gauging the reaction of the clients to the questions in terms of how they respond. To a large degree, in this situation the advisor is relying on their intuition to firstly ask the right questions and then secondly to assess the response. There is no doubt a person's intuition can be very strong particularly with a lot of experience and high degrees of self understanding and overall good people skills or what we call emotional intelligence. However, no human being can be perfect and we all have "blind spots" or things we do not see. A person's blind spots will also be carried across into how they see others. Your ability to understand another person can be significantly impacted by how you are on that day let alone how the client is on that day. So, no matter how good your intuition normally is it is not always going to be accurate. Nevertheless, do not discard your intuition. That "gut feeling" or pulse of energy can be telling you a lot even if you have not yet analyzed all of what it means. A behavioral profile will help you with that analysis.

I know that I am a highly intuitive person and naturally learn a lot about people from conversations and asking questions. This is particularly true now that I have learned to get out of my own way and also because much better listening and empathy skills have been learned. Even then I still do not see everything. I am able to go much further and make the person I am mentoring or conversing with feel far more understood when I use profiles.

The point is that the "human element" is variable and we cannot by ourselves see everything at all times. So, what can we do to make our intuitive radar stronger? This is where well constructed and highly validated behavioral profiling systems that objectively measure human behavior can be used to leverage your intuition. As is illustrated by the graphic, there is a great amount of "below the surface" information about a person you need to find out about very quickly to help them make the right decisions. Further, the person also needs to know it for themselves so the have personal clarity. Often the 10% we see on the surface is the "party manners" and not the real person.

The specific benefits of using behavioral profiles in the discovery process to build a financial life plan include:

1. Enhanced objectivity, consistency and measurement
2. No assumptions are made about the client
3. The provision of a natural starting point for safe discussions with clients on their unique terms
4. Separation of your and the client’s emotions – avoid advisor bias
5. Acceleration of trust because the same discovery questions are asked of each person within a couple, family, team
6. Clients are better equipped to better articulate their thoughts when emotional
7. The ability to more quickly gain greater clarity of issues which you intuitively identify
8. Specific identification of strengths, struggles, aptitudes which provides a human capital development framework for wealth mentoring and coaching
9. The ability to better manage client expectations based on greater clarity of needs and goals
10. Serve the clients on their unique terms: "one client - one plan"
11. Meet the “know your client rules” because through better documentation and discussion of client behavior
12. Increases the transferability of the client relationship because the client behavior is data based

In using a behavioral profile the key is to firstly understand the purpose of the instrument and what it was designed to uncover. Then secondly, understand how to properly use it in client facilitation to get the maximum benefit for you and the client. The great users of a behavioral profile understand it is a tool which gets below the surface but it is not a substitute for discussions. Further, one has to be realistic that even the most reliable and accurate profile will not tell you 100% of who a person is. However, they can tell you a lot. As already said the profile is supposed to leverage your insights and ultimately improve the client experience. The key is your "bedside manner" in using the profile.

February 20, 2008

The other day, I was having a philosophical discussion with one of our Wealth Mentors about the role of advisors in the life of a client. "Around the traps", very often wisdom is brought up, or providing peace of mind, and of course, managing the performance of investments and overall financial stewardship.

None of these are incorrect and they are no doubt part of it. In recent times, I have pinpointed helping clients find "BALANCE" as being extremely important. That is balance between life and money. After all, life and financial decisions are completely integrated. Many financial decisions are a reflection of your life and behavior. Key to finding balance is helping the client objectively understand their inherent strengths and struggles based on who they uniquely are, and then their preferences. So, the balance will be different depending on our different behavioral styles.

Everyone has to be accountable, including the financial advisor. So if we take BALANCE as the platform, then how should the advisor be measured by the client. To a large degree, the advisor is responsible for communicating the right message - which comes down to understanding his or her own role. So perhaps the messaging needs to be more of the flavor: "If I help you discover what you want and help you get it - does it matter what financial return you get?" This is not saying financial return is unimportant, just not the only priority.

Further, as a life issue think about the fact that a lot of money does not necessarily provide freedom, and too little does not either. Depending on who you are there is a comfortable balance. The role of the advisor is to help you find yours and keep you on that path.

May 28, 2007

We all know that successful long-term advisor client relationships are built on trust. The question is ... are we as advisors trustworthy?

There are many levels and dimensions of trust and it can be examined and discussed in many ways. Trust is not just about character, it can simply be about how we act or come across to another person. In the same setting with the same actions, one person may trust you and another may not. So to develop trust with different people you will need to adapt your behavior to meet them on their terms.

In our work of mentoring people based on behavioral styles we teach that for a client (or any person for that matter) to trust you, then the FIRST STEP is for you to trust yourself. Trusting yourself will free you to trust others and the environment is then set for them to trust you. Of course some clients (and advisors) will be naturally low in trust because of how they are "hard-wired". So even though you are trusting, your client may not be. Nevertheless, having a heightened self-awareness of all of the dimensions of who you are and who the client is will help in the building of trust.

To be blunt, if a client does not completely trust you then first look at your own behavior. A large part of our Wealth Mentor training and our Quality Life Programs are about self-discovery to develop greater trust in yourself, your relationships and your decisions.

Recently, State Street Advisors sponsored a very powerful research article prepared by Wharton University: "Bridging the Trust Divide: The Advisor Client Relationship". Every financial advisor (and even investors) should read it.

The article focuses on what is needed to build trust and then importantly what damages trust, although it does not address trust completely in the same way I have above. However, our beliefs are the same and the point of trusting yourself to build client trust fits in well. This article says that trust can be developed with: demonstrating competence, character and empathy. Empathy is definitely related to knowing who you are and then how to recognize the feelings of others and relate to them. Often competence and character are what get an advisor a meeting, but the relationship is lost because of "behavior", i.e. the empathy is not there.

The article points out very strongly that trust is damaged in the fee discussion, or the lack thereof. The whole issue of fee transparency is a major factor in the loss of trust. Why do advisors get fuzzy about fees? Because they are concerned about their ability to communicate the value of what they deliver. When you work through all the layers, it often comes back to the advisor not trusting themselves and the value they provide. Further, if all you are perceived to be delivering is a portfolio of managed funds that mark the market, then what is the value?

The industry is de-commoditizing fast. To win in the climate of de-commoditization will mean delivering value for what is charged and differentiating the service.

Advisors will have to learn how to work with the client at all levels of their lives and not just their money. This is what I call "Quality Life Planning". Yes, this approach is going further than traditional product based planning. What it will mean is that the advisor will have to know more about themselves, be confident in who they are and through this believe in the wisdom they have to offer.

One of the messages I have learned is that we all have a story to tell. Believe in the power of your own story and communicate it. This is where the wisdom comes from and is what will set you up to be a great mentor to others, not just their advisor.