Securing clients for life: Part One

READER ALERT: This is Part One in a Two Part series on how you can turn all your clients into lifetime clients. Part Two will be posted on Friday.

A few months ago, two respected money management firms — one bank-owned brokerage and one discretionary investment counsel — made compelling pitches to an ultra-conservative Toronto couple on how they would manage the couple’s $2 million non-registered portfolio.

In addition, they had $1.5 million in revolving debt. Then Rona Birenbaum, a fee-only advisor with Caring for Clients in Toronto, made a recommendation that surprised everyone.

Birenbaum pointed out the 5% interest on the debt was not tax-deductible, due to the way the debt was incurred. She suggested the couple pay off their debt using the fixed-income investments they already owned. At the top marginal tax bracket, they would have to earn almost 10% interest to equal the debt interest cost, so by repaying the debt, the couple would guarantee themselves an after-tax return of about 5%. This is the guaranteed return the bank was making at their expense, Birenbaum explained.

That kind of advice meant the couple only had $500,000 left for investing, though — and you can see the obvious conflict. That’s the rub in an industry where the compensation structure can make it challenging for advisors to maximize their revenue and provide clients with value.

“High-level service and quality advice mean potentially having a smaller business that is less profitable than one that strives to maximize revenue,” Birenbaum says. “[Yet] the couple was properly advised, and when they know that, they become a client for life.”

Isn’t every advisor’s goal to turn all his clients into lifetime clients? When there is abundant competition, with full- and self-service options, proving value means developing an honest-to-goodness, in-your-clients’-best-interest glue that sticks them to you. Indeed, the couple hired Birenbaum to prepare their financial plan, which involved analyzing cash flow; reviewing risk; planning for their estate, retirement, and succession — and investing that $500,000.

Birenbaum subjects her clients to a fair bit of mediation, along with personal and professional coaching.

“If they want me to butt out, I will, but most times they welcome the objectivity and honesty,” she says.

When one of her clients lost her job, Birenbaum gave her a pep talk about her vast skill set and spent time with her discussing how to network and use online venues like LinkedIn.

“Loyalty comes when clients realize their success is my primary concern,” says Birenbaum. “When our clients have newborns or find travelling difficult for any reason, I will gladly make a house call. When clients have a need that can be expertly handled by a member of my professional network, I quickly make that referral.”

For example, when clients need lawyers to vet the estate plans she has created, Birenbaum refers her clients to competent estate lawyers in her vast professional network. Typically, she sends instructions to the lawyer to ensure the initial meeting with the client is productive.

“The lawyer will let us know if they have additional recommendations we haven’t considered,” she explained. “We ask to see the draft documents prior to the clients’ signing. This ensures all considerations in the financial plan are accounted for. The clients feel confident they have an experienced set of eyes reviewing the document before they put pen to paper.”

Caring connections

Circles of influence can link you and your client together. Connecting her clients to other professional advisors enhances Sandra Glaze’s relationship with her clients, too. Glaze, a Waterloo, Ontario-based PFP with Armstrong & Quaile, knows she’s providing a value-added service to clients when she brings another professional advisor into the fold.

She works with a bank in town for investment lending and mortgages.

“They don’t poach my clients,” she says, adding she doesn’t receive compensation from the bank for the referral—she just asks the bank to do what’s in the best interest of the clients. “Clients can compare rates between my bank and theirs so they can power-play the banks. I hand them the tools so they can make the decisions that work for them.”

Glaze works with her clients’ accountants, too, especially during tax season. “I always ask permission to speak to other advisors, and by working with them, we enhance what we do for our clients.”

Glaze speaks at such a rapid pace about her work you can feel her energy and passion bursting through the phone. She speaks of clients as if they are family. Many of them have been with her since she became an advisor in 1996. She knows the money side of the business, but says clients also like the feeling they get when she connects with them on a personal level.

Two of her clients are sisters aged 75 and 85, who enjoy finding dolls at garage sales, making them new clothes and sending them to children in third-world countries. Recently, the sisters bought a computer so they could try online banking. The first call they made was to Glaze, who went over and helped them get access to their accounts.

“These two girls call me for the little things,” she says. “Should I buy a recliner? Should I put in a fence?” Glaze believes her clients are sent to her for a reason, so she doesn’t base her level of service on the size of their portfolio. “I know [the sisters] don’t have a lot of extra money, so I hired someone to do their taxes.”

While this might be going too far for some advisors, Glaze says she simply cares for her clients as people. “Am I overstepping my bounds? I don’t care, because I have to live with the consequences of my recommendations. Managing risk plays a major role in the solutions I suggest for clients,” she says. “Clients will never say to you, ‘Stop, you are making me too much money.’ I make a difference in my clients’ lives, just like a nurse or a doctor.”