Tag: Podcast

There are a variety of reasons that advisors feel like clients just don’t “get it” when it comes to risk. I’m going to name a few.

Do any of these sound familiar to you?

• They want low risk but high returns
• They don’t grasp the idea of uncertainty or loss until they feel it
• They don’t understand long term investing
• They have recency bias
• They don’t get it that long term growth comes with short term volatility
• They view short term volatility as a risk
• Clients answer the exact same risk tolerance questionnaire differently each time they complete it
• They don’t fully grasp the concept of risk when talk about interest rate risk and purchasing power risk
• They think they can tolerate more risk than they really can (usually revealed when markets drop)

Ridiculous. And, explosively dangerous.

Why is this so hard? Does client risk tolerance have to be as incendiary as as Molotov cocktail?

We can’t change our clients’ behavioral tendencies. But what is well within our control is our ability to understand and respond to their attitudes towards risk, no matter what they may be. This is the only solution. Blaming or arguing with the client is a pointless conversation.

I’m so excited to have Hugh Massie, founder of DNA Behavior, on the show to discuss exactly that!

You will hear about:

• What does risk mean? The difference between risk need, risk capacity, and a client’s natural level of risk.
• That the words matter. Example: “risk tolerance” vs “loss aversion”
• How advisors themselves may have a different risk profile than the client, and how this skews things
• Behavioral biases and cognitive biases that people have
• One of the most neglected topics- people’s spending patterns and the impact of that on risk
• Why the risk tolerance questionnaire is situationally-biased and should not be relied upon on its own as a measurement of risk
• How to adapt your communication style to serve the client on their terms– people hear risk differently depending upon their personality
• Why you should consider using a team approach to make sure there is proper client-advisor match
• Methods for integrating a behavioral assessment into your practice
• What to do if two partners have a completely different risk measurement

Thanks for listening and please subscribe, rate, and review my podcast!

 

Disclaimer

Grillo Investment Management, LLC does not guarantee any specific level of performance, the success of any strategy that Grillo Investment Management, LLC may use, or the success of any program.

Grillo Investment Management, LLC will strive to maintain current information however it may become out of date. Grillo Investment Management, LLC is under no obligation to advise users of subsequent changes to statements or information contained herein. This information is general in nature; for specific advice applicable to your current situation please contact a consultant or advisor.

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When it comes to investment risk, many financial advisors feel that clients “just don’t get it.”

In this webinar replay of “The Right Way to Talk to Your Clients about Risk” with Aaron Klein of Riskalyze, we address the responses (posted by webinar participants) to this question below – and more!

What is the #1 frustration you have when talking to your clients about risk?

#1

Frustration—-the fact that clients have recency bias—-they favor the short term trend and forget to remember that their plan is built for the long term and that should be the focus. A perfect example is the market correction in December that damaged year-end portfolio statements. When clients called in mid-January to discuss, they had failed to notice that 2019 performance has led to portfolio recoveries——letting their plan work as it is intended will allow them to reach their goals.

#2

Clients positioned in lower risk equities (large cap value) with lower returns, but wanting returns of riskier equities (small cap growth) and blaming me for investment selection–

#3

The biggest frustration I have when talking about risk:

1.  They get the concept of risk when it comes to the fluctuations on stock
2.   They don’t fully grasp the concept of risk when talk about interest rate risk and purchasing power risk
3.  They want low risk but high returns

#4

Clients (and journalists) do not think in terms of risk (future outcomes will distribute across a range of possibilities). They think in terms of straight lines (whatever happened before will happen again the same way).

How can we communicate the fundamental truth of risk of investments in simple, understandable ways?

#5

The RTQ’s are great but I don’t think they do enough. I’m definitely interested in learning more about how risk can be communicated.

#6

They think they can tolerate more risk than they really can. This is usually revealed when markets drop.

#7

They don’t understand between individual stock positions and asset class portfolio investing.

#8

Generally with younger clients is explaining (at least for our firm) that we are wealth managers and not market timer or day traders, so we do not go out to “beat the market”. If anything, those attempts are more risky than the strategies we implement.

#9

As you know, how someone feels about risk is very subjective and, typically, can vary from day to day.  No matter how the risk tolerance questionnaire (“RTQ”) is worded, many clients will answer the exact same RTQ differently each time they complete it.  Additionally, most RTQs do a fairly horrible job of incorporating the clients’ CAPACITY to take risk.  Consequently, when clients are on the edge of a risk range (for example, if your firm has 5 ranges – conservative, conservative growth, moderate/balanced, growth, aggressive growth), this can create portfolio construction issues and demands additional forethought to avoid substantial differences in portfolio standard deviation (e.g., low range of moderate/balanced vs high range of a growth portfolio).

#10

Explaining that long term growth comes with short term volatility.

#11

The idea of risk is not “real” to some clients, and they only care about returns. I show them actual dollar amounts, of what a stress test against 2007 to 2009 would look like with their own portfolio, and there’s a sense of denial like, “Well that’s not going to happen again and you’d change my investments if it did, right?”  I explain that it’s impossible to guess ups and downs, and I won’t jump in and out of the market… and they still insist on a risk level higher than what they should.  Then, when we get a situation like December 24, 2018, they freak out.

I work a lot with educating clients about risk; and I’m pretty good at it.  But there are still some of those clients, no matter how many times you talk to them, ad nauseam, about risk, they still just don’t get it.

#12
The number one frustration with clients regarding risk is that they forget what they said they could tolerate on the downside.  More importantly, as we saw this fall, it is the daily, grind it out, downward, volatile swings which the risk tolerance questionnaires just do not prepare people for.  They spend too much time looking at their phones and t.v.

Disclosures

Grillo Investment Management, LLC will strive to maintain current information however it may become out of date. Grillo Investment Management, LLC is under no obligation to advise users of subsequent changes to statements or information contained herein. This information is general in nature; for specific advice applicable to your current situation please contact a consultant or advisor.

We make no guarantee that the information on the Site is accurate and non-misleading. Grillo Investment Management, LLC, will not be liable to you in relation to the content contained herein, use of, or any connection with the Site. Grillo Investment Management, LLC, will not be liable to you for any business losses or loss of revenue, profits, or data that may occur in connection with the Site.

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I’m locked down with kids now, but how fondly do I remember the dating game of my twenties.

I’d meet a dude at a bar or something, he thought I was fly and I thought he was fly. Probably we’d both been drinking a little bit. We’d agree to go out on a date and I’d get all dolled up. Then the next weekend I found myself sitting there across from the guy saying to myself, “Holy smokie bookie. Get me outta here.”

Not a match!

I wasted a decade going on first dates that I thought were going to be hot. Just like you financial advisors can waste a lifetime meeting with prospects who (by traditional measures) seem to be very qualified for your services but just do not fit in terms of personality. You will waste even more time and money if the wrong prospect then decides to become your client.

It’s called chemistry and when it’s wrong you’re not getting anywhere. Period.

Financial advisors do the same thing with new client relationships. I know, because I talk to advisors all the time who tell me they have done this. And I did the same thing myself, going out on a first date and marrying the wrong client. You’ll never get anything from these people other than frustrating non responses, disputes, and terminated relationships.

That’s why I am welcoming Akshay Singh of Advisory Match who in this episode is going to tell financial advisors how you can find out if a client is going to really be a personality match or not before you go on the first date.

Enjoy!

Please subscribe, rate, and review my podcast!

Grillo Investment Management, LLC will strive to maintain current information however it may become out of date. Grillo Investment Management, LLC is under no obligation to advise users of subsequent changes to statements or information contained herein. This information is general in nature; for specific advice applicable to your current situation please contact a consultant or advisor.

We make no guarantee that the information on the Site is accurate and non-misleading. Grillo Investment Management, LLC, will not be liable to you in relation to the content contained herein, use of, or any connection with the Site. Grillo Investment Management, LLC, will not be liable to you for any business losses or loss of revenue, profits, or data that may occur in connection with the Site.

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It’s clear that with roboadvisors and automation, people expect more if they are paying you more. With investment management fees going to zero faster than the speed of light, financial planning is where it’s at.

But how do you deliver this without running yourself into the ground?

• I’ve seen advisors running around like their hair is on fire.
• I’ve heard of advisors shoveling snow, going to the DMV with clients, driving four hours to go to a family event for a client.
• I’ve seen planners take it to the extent that they are no longer being compensated for their time.
• I’ve had financial advisors haggle with me over the $35 a month cost of my membership service. No offense, but are you serious? And you’re serving affluent people? What would your clients think if they saw that?

Do you really think that clients don’t notice the stress it causes you when you’re running a business that doesn’t pay you what it should? And how do you think it makes them feel about what you do?

This improves credibility?

I’m all for the human touch and going above the call. The personal attention is, to be honest, why most advisors have a business. However, here’s what can happen if you don’t pay attention to yourself first and what all of the time is costing your business.

You can get trapped.

The experienced financial advisor makes around $90k a year according to some measures. Many make more, some make less. Nothing wrong with $90k a year at face value, but at that level of pay you are vulnerable given this is a serious kind of business. Lose a client who trashes you to the country club, security breach, new technology emerges. Now all of a sudden you could actually be out of business.

Or worse.

Let’s be real: the margins matter.

If you are not running a business the scales well enough so that you can grow faster than your costs are, then you are in trouble. And with the technologies available to you, there’s no reason why you can’t. This episode we have Matt Regan, President of Wealthcare Capital Management, who has some of the answers to questions about how to do this. Join us to hear about:

• What is considered light planning vs. heavy planning?
• What is goals-based vs. cash flow planning?
• Charging for planning on a stand alone basis vs. bundling it
• Hourly fees, asset based fees, retainer fees
• Where advisors get into profitability problems with financial planning, and how to avoid it
• The three things advisors can do to improve the efficiency of their financial planning

Please subscribe, rate, and review this podcast!

 

Resource mentioned in this show:

Kitces, Michael. (2017, October 16^th). 2017 Financial Advisor Compensation Trends And The Emerging Shortage Of Financial Planning Talent. Retrieved from https://www.kitces.com/blog/how-much-financial-advisors-make-salary-bonus-compensation-latest-industry-benchmarking-data/

 

Disclosures

Grillo Investment Management, LLC will strive to maintain current information however it may become out of date. Grillo Investment Management, LLC is under no obligation to advise users of subsequent changes to statements or information contained herein. This information is general in nature; for specific advice applicable to your current situation please contact a consultant or advisor.

We make no guarantee that the information on the Site is accurate and non-misleading. Grillo Investment Management, LLC, will not be liable to you in relation to the content contained herein, use of, or any connection with the Site. Grillo Investment Management, LLC, will not be liable to you for any business losses or loss of revenue, profits, or data that may occur in connection with the Site.

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So you’ve decided it’s about time to give your website an overhaul. Or maybe you broke off and went independent, and now you need to set up a site for your new firm. Do you use a template? Do you get a developer and custom design your own site?

Let’s face it: Picking the right web platform for your financial advisor firm is overwhelming.

That’s why I was so glad to have Ryan Russell of Twenty over Ten with me on the show to shed some light on the options you may have.

You’ll learn:

• The major things to consider when you are trying to figure out which web platform works for your financial advisor firm.
• Guidelines to help you make sure your website’s security is up to par with standards
• Why it matters if you own the content or not
• Cost considerations for the initial site and on an ongoing basis

Thanks for listening, and please subscribe, rate, and review this podcast!

Resources mentioned in the show

Twenty Over Ten

Samantha Russell’s LinkedIn videos – see here LinkedIn feed here

 

Disclosures

Grillo Investment Management, LLC does not guarantee any specific level of performance, the success of any strategy that Grillo Investment Management, LLC may use, or the success of any program.

Grillo Investment Management, LLC will strive to maintain current information however it may become out of date. Grillo Investment Management, LLC is under no obligation to advise users of subsequent changes to statements or information contained herein. This information is general in nature; for specific advice applicable to your current situation please contact a consultant or advisor.

We make no guarantee that the information on the Site is accurate and non-misleading. Grillo Investment Management, LLC, will not be liable to you in relation to the content contained herein, use of, or any connection with the Site. Grillo Investment Management, LLC, will not be liable to you for any business losses or loss of revenue, profits, or data that may occur in connection with the Site.

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If you look at the difference between success and failure, many times it has to do with what we choose to spend our time on. It is that simple.

So I’m excited to have a very special guest on the show to discuss my favorite topic: avoiding distraction.

The reality is that it is no longer acceptable for clients to experience complex or confusing technology.  In our discussion, Ron Carson, founder and CEO of Carson Group, will share how advisors can (and why they must) embrace the client demand for an immersive experience.

According to Ron, “There’s no question about the consolidation that has to happen in financial services. Most advisors have been lucky, they’ve been spared this accelerated change because of regulation. But guess what – that isn’t going to last forever.  And we’re already starting to see the changes.”

In this episode you’ll hear about:

• The invisible influences shaping the profession of financial advising today
• Why the real competition isn’t other advisors anymore – it’s Amazon
• What an immersive technology experience really is and why consumers prefer it
• What will happen to advisors who lag behind in terms of technology
• What Singularity is and how it applies to the financial advising profession
• The 3 choices that advisors who are lagging behind in terms of technology should consider

Thanks for listening. Please subscribe, rate, and review this podcast!

Resources mentioned in this show:

• Carson, Ron and Ford, Scott. Sustainable Edge. Greenleaf Book Group Press (January 19, 2016)
• Diamandis, Peter H., Ismail, Salim, Malone, Michael, and Van Geest, Yuri. Exponential Organizations. Diversion Books (October 14, 2014)
• Ronsense
• Singularity Hub

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What can I say, he’s got swag. And here’s what you can learn from him if you are an investment professional looking to stop being part of the noise that gets ignored.

I was honored to have one of the “greats” in the investment world on my show this episode. Today we welcome Larry Swedroe, a widely recognize investment thought leader and the director of research for The BAM Alliance, a community of more than 140 independent registered investment advisors throughout the country.

As brilliant as Larry is as an investor, he’s made his mark on the world in an important way: earning a position as a thought leader by adeptly communicating with investors, financial advisors, and the investment community at large.

And this skill is becoming more valuable by the minute.

In a world of fee compression, smart beta, low cost TAMPs, and next to zero management fee ETFs, it’s clear that anyone charging a fee for investment advice is going to have to fight for it. The human touch that a credible investment manager brings is irreplaceable.

Larry is going to share with us some ways to improve your ability to reach clients, and it is advice that anyone in the investment industry should consider.

Hear Larry’s thoughts on the following:

• You’ve made quite a name for yourself as an investment expert. Why do you think people like listening to you talk about investments, a subject that is typically dry and unappealing?
• You recently described a technique used when a client asks a question – you write about it in a blog. I do this also. Tell me more about what you’ve seen as the results of this communication.
• You write for AP and also etf.com. What have you seen as the most effective writing techniques that have gotten people engaged? Does this drive leads for you?
• In your current role, you’re a mentor of sorts for the advisors at BAM. Tell us some of the wisdom you’ve imparted to them that has made a difference about how to run their practices from an investment perspective.

Please subscribe, rate, and review this podcast!

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While the rest of the world offers free software like YouTube, Adobe, Evernote, Spotify, etc., financial services has resisted. Today I’m talking to David Lyon, Founder and CEO of Oranj, about how this model may just be the future of financial advisor software.

Listeners will learn:

• Why free software, more scalable, is the way that you build really good software
• Why free platforms are getting the traction that they are outside of finance
• What David is seeing the factors impacting independent financial advisors that will require software to be low or no cost in the future
• What happened to the music industry over the last 20 years and how finance may be following the same path
• How the economics of free software work – is free really free? Is it really viable for financial advisors to use free software?
• David’s 3 tidbits of advice for a financial advisor who is looking at any piece of free software

Please subscribe, rate, and review this podcast!

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Here’s my interview with Bob Dannhauser , head of Private Wealth Management at the CFA Institute, about the special tools that CFA® charterholders have available to them to develop their wealth management practices.

You will learn:

• The character attributes that a CFA®charterholder may have that high net worth clients welcome
• How the CFA Institute is now preparing private wealth professionals (as opposed to institutional investment managers) to excel
• The clout of the CFA designation versus other designations that you can buy or that don’t carry as much  merit in the private wealth space
• Why you shouldn’t write off the CFA candidate or member pool as non-viable prospects and how to find the people within these populations that could be your clients
• The value of emotional intelligence and why it should be developed
• What the CFA Institute has coming down the pike in Feb 2019 in terms of tools and resources designed to help private wealth advisors
• Online CFA Institute resources and how to make the most out of them to develop new clients for your private wealth practice

Please subscribe, rate, and review this podcast!

 

Resources mentioned in this podcast:

Marketing Tips for CFA® Charterholders

 

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I felt it was important to have a discussion about risk because over and over again in my interviews with my advisor clients, client misunderstanding of risk keeps coming up as the #1 reason that advisors lose clients. Or, that a problem with the client’s understanding of risk creates so much tension that it puts the relationship in turmoil.

I have seen even the most experienced advisors, those with 30 years in the business, struggle with getting this wrong and losing clients. It’s a serious problem. Of all the things that cost your business money, losing a client is one of the most costly. Plus there are reputational, morale, and legal issues that may come along with it.

The advisor and client seem to be diametrically opposed in some cases.

• One on side, you have the advisor whose probably number one liability is getting sued over a portfolio performance issue.
• On the other side, you have the client who wants to maximize the value of your services by achieving better performance than what they could get on their own. Some clients want this more than others, but in the back of their minds, they all expect you to do better than they could do. (Real talk). You can say all you want about the value of planning and tax advice but if you’re managing their investments, this is what they expect.

How do you make the client see risk from a rational perspective without boring them or talking in technical mumbo jumbo that goes over their head? How do you really grasp the level of risk they are really comfortable taking? How do you do all of this without misleading them or creating a legal liability?

It takes skill and knowledge and that’s what we’re going to discuss today.

Take control back by getting a handle on how you discuss risk with clients. I’m honored to have one of the industry’s best to talk about that here with us today, Aaron Klein of Riskalyze. Enjoy the show!

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