Debt’s not a dirty word

Over the last nine years, I think I’ve become pretty effective at getting my point across with my clients when I talk about debt. However, it has become somewhat automatic for me. I have no problem starting the debt conversation with anyone, really. In fact, I find it a difficult conversation NOT to have. I cannot help myself. It’s in my blood. I know this might not be the same for every advisor and I think it is a hard topic to tackle when the subject matter has never crossed your lips. What do you say? How do you start?

The fact is, most advisors don’t talk turkey with clients about their liabilities because they don’t get trained for it. We are taught to build product-based businesses. And why wouldn’t we? That’s how most of us get paid, right?

Even if you are fee-based – generally licensed and collecting a percentage of assets direct from the client as a fee – most likely the topic of discussion with a client lives on that pretty side of the balance sheet where the assets are. I’ve even researched quite a few of the fee-for-advice firms and found that, in general, the knowledge and expertise is in investments, insurance and other financial products. Sure these services offer more than only direct products or product analysis but that still ignores the full financial reality for most folks. So, is it really any wonder that broaching the subject of debt, crossing that preverbal line, may leave us paralyzed with fear?

While I do consider myself an expert at starting this conversation, I don’t consider myself a communications authority. So, I thought it best to consult someone to help me help you. I called upon world-renowned motivational speaker, Mike Lipkin (www.mikelipkin.com). Mike is the CEO of Environics/Lipkin, Canada’s leading research and motivation company. He is an authority on social trends and values. He believes we achieve preeminence in any field, one conversation at a time. When I met him last year I was impressed with his message. His passion was contagious. Who better to lend their expertise to a topic that can be challenging to bring up?

Inundated with unrelenting media reports of market mayhem and uncertainty spoon fed to our clients at the touch of a button, they expect more from us. Our clients expect more advice from us, – not just the latest fund or insurance advice. That’s no longer enough. They need to know how to make it through this and keep themselves financially unscathed in the future. What can an advisor who doesn’t currently talk to clients about debt or cash flow management do? Mike says enhancing your message and therefore your value to include this somewhat foreign subject matter is all about three core qualities:

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• You need the knowledge to provide the advice. That’s fundamental to your credibility. The reality is either you have the knowledge or you need to find someone who has the knowledge.
• You must have extraordinary empathy with the values and fears of your client. Ultimately, effective communication is the transfer of emotions above all else. Clients may forget exactly what you said, but they will never forget the way you made them feel. Every conversation must become an experience that builds the relationship bond.
• You must have the discipline to initiate conversations with clients and then follow up. Most likely, the client may not even know they need the advice you offer. Great advisors set the agenda and follow through. They also immunize themselves against distraction by staying focused on the game-changers transforming their clients’ lives.

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In other words, if you don’t currently have the knowledge you need to open this door, get it. Put pressure on your MGAs, investment dealers, or anyone else who provides training to you. There is no need to wait for public pressure to force regulated training in this area. These companies would say they are there to help us be the best advisors we can be. They need to know that we can be even better if we could truly help clients harness their financial power. If we all make some noise, the wheel will get some grease.

Also consider debt management skills or the willingness to develop them when seeking out a junior advisor, partner or another advisor to collaborate with. Where there is a will, there is a way. A vast majority of our clients’ financial plans are in the line of fire, at risk of rising interest rates, increasing credit card balances and dwindling or non-existent savings.

Don’t judge. Changing financial habits often means your clients will be admitting they don’t know what they don’t know, and sometimes it means accepting responsibility for financial errors they have made. This is tough on the ego and it doesn’t help to pile on the blame. What’s done is done. Your job is to help them not waste another moment worrying about things they have done but to focus on the amazing life they can lead by taking control. As advisors, we all make mistakes with our money and we are no different than our clients but regret usually costs us even more. Your clients need to feel safe telling you about all those financial skeletons in their closets.

Set up your regular review process to include debt. Make a commitment. Put something, or have your assistant put something, in client files to remind you to get started. Update your forms or fact finders to include liability details and expenses. Once you get in the habit, it will come easy. Freeing clients from the financial badlands is addictive.

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“[Preeminent advisors] are great net-workers who are constantly looking for ways to take their practices to the next level. They benchmark themselves against their peers through observation and conversation. They’re constantly sharing their ideas with others. They’re generous with their insights. They’re not concerned about giving away too much. They are totally concerned with making a difference both to their clients and their profession.”

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Beyond these three core qualities, there is a need for change in the way you think about money and debt. Ultimately, to really evolve your practice to incorporate both sides of the balance sheet requires an adjustment of your mind set. This is a true shift.

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How we view ourselves and our industry has to change. Mike agrees. And this is his expert advice. “This [new topic of debt] requires a change of perception – both internally and with clients”, he says. “Advisors need to perceive themselves as qualified to have this new kind of conversation. Then, they need to change the clients’ perception of their contribution. It requires a willingness to stretch and be uncomfortable in the beginning then, it requires ‘deliberate practice’. That’s when the advice is provided repeatedly but not mindlessly. In every conversation, the advisor needs to be aware of who and how they are being. It takes time to master new skills and convince others at the same time. There is an inevitable ‘beginners’ phase that the advisor has to go through. They shouldn’t shy away from this. Very quickly, with the right training and guidance, the advisor can become proficient in the new subject matter,” he said.

I think Mike Lipkin’s favorite word might just be preeminent and why not? It’s a pretty great word. So what does it take to become a preeminent financial advisor?

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“When it comes to being preeminent, it all begins with a simple desire to be the best, followed by the willingness to do whatever it takes to become the best,” he said. “Being preeminent is hard work. It demands an extraordinary commitment both to oneself and to clients. The best never rest. They’re obsessed about learning and growing. They also take care of themselves physically. They know that the real substance of success is vital health. They focus on feeling good so they make their clients feel good.”

Mike goes on to say, “Preeminent advisors hang with other preeminent advisors.” We need to surround ourselves with others who are like-minded. Strive to spend as much time with these individuals as you can. Don’t wait until you feel you are someone’s equal in any measure. If you see greatness in areas you are lacking, then go make friends with greatness and soak up every nugget of knowledge and insight you can. You’d be surprised by what greatness gets from you.

“[Preeminent advisors] are great net-workers who are constantly looking for ways to take their practices to the next level. They benchmark themselves against their peers through observation and conversation. They’re constantly sharing their ideas with others. They’re generous with their insights. They’re not concerned about giving away too much. They are totally concerned with making a difference both to their clients and their profession,” he said.

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Share? That’s right. That’s what I am doing. I’m on a mission to see the industry change and nothing will ever change if we don’t share with each other. Giving freely and expecting nothing in return applies to knowledge and experience, too. We are not guarding the Cadbury secret here. We are supposed to be helping. Holding your cards too close to your chest only stifles you, and could hurt your clients. Be open.

It’s not just about how you communicate – as in tone, cadence, conversational style, empathy, etc. – but it’s also literally about the how.

“Preeminent advisors are technologically savvy”, Mike advised. “They understand the new tools at their command and they use them. They have invested disproportionately in being at the cutting edge of knowledge acquisition and dissemination. In fact, they often help their clients become more technologically proficient. They have their own technology advisors to help them excel. They never cut corners when it comes to staying in front of the pack.”

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Especially with data collection for expenses, details on mortgages, credit cards and loans, we can leverage technology. There is quite a bit of software available and we can delegate this part of the process. None of this has to mean more time per client permanently, but it will often mean an investment of time on the front end. If we are to survive the current and coming turmoil in this industry, we must adapt. Technology can help us. Put it to work.

And here’s one final nugget from Mike.

“Preeminent advisors have their own philosophy they can articulate with confidence and passion. Clients feel comfortable around them because they know they will find a way or make a way to succeed,” he said.

Change will come. We will get the support we need, if only we ask for it. So, the next time you find yourself filling out an online survey from one of the companies you are contracted with, in that box where it asks if you have any suggestions, make sure you tell them you need training on debt management.

At the next event put on by your MGA, let them know you want to protect your business from the other side of the balance sheet. And when one of your wholesalers takes you for lunch and asks you what they can do to help you grow your business, you know what to say.