As this is Financial Literacy Month, now is a great time to consider providing clients with financial education as a way to differentiate your practice.
You can be sure that they are looking for answers in the wake of the recession, housing crisis and stock market crash.
As financial advisers and planners, you are in an ideal position to educate clients, but you need a model to deliver that instruction profitably, as well as a process to get information to the client at the appropriate time. Here are a few approaches that can by be put into practice alone or in combination.
Segment your clients to uncover profitability. By segmenting your clients, you can identify which clients generate excess revenue, based on the services that they use and which clients drain your profits. Consider offering extra educational services only to those clients who provide excess revenue or offering these extras for a fee to those who don't generate much profit.
Offer to help parents educate their children about managing money. Some clients don't like to admit that they know little about financial planning and investing. However, they are usually willing to concede that their children are educated inadequately about personal finance. You can help the parents by providing them with resources and educational materials that they can use to instruct their children.
Create financial-education widgets for review meetings. A widget is a financial-education concept that can stand alone and be taught in three to 10 minutes. You can develop training for several widgets and have them ready for client meetings. Whether you have well-developed client review meetings or you customize your meetings for each individual, you could use a few widgets to educate your clients.
Here is an example: Perhaps you are trying to help a young professional understand how compound interest allows early savers to fund their retirement at 20 cents on the dollar, while someone who starts saving later might have to contribute 75 cents on the dollar for their retirement nest egg. Or maybe you need to inform a 60-year-old that delaying his or her Social Security payments until 70 might double his or her payments.
Develop a bunch of these widgets so you can insert them into review meetings.
Provide educational information and links on your website. You may be able to list resources on your website and provide a hard copy to your clients. In addition to your own site, your broker-dealer or professional association might identify and list resources on its website.
Incorporate information into client appreciation events or seminars. These events are often devoted to financial education. If you prefer to cover other topics at your client appreciation events, you might include a short segment — 15 to 20 minutes — on a financial-education topic. The same widgets that you use for client review meetings might be used here.
Develop classes with partners or on you own. Many advisers provide classes through local colleges, school districts or community groups. You could partner with an organization to develop and deliver training for the public and your clients, or you could offer the training directly at your offices. One advantage of partnering is that an association gives you credibility with people who trust the group but don't know you.
Develop specialized services. There are advisers who regularly offer to meet with clients' children before they head off to college or start their careers. This gives the child a head start, reinforces some of the lessons that the client/parent has been teaching, and allows the adviser to start a relationship with the next generation.
Other advisers are more interested in the other end of life and help their clients with legacy planning. The adviser might meet with a client and the client's heirs to describe the features and benefits of an estate plan.
Alternatively, the adviser might coordinate a succession-planning meeting with key employees of the client's company, the attorney and the certified public accountant. These services can strengthen the relationship with the client, initiate a relationship with the heirs and provide a strong connection to the client's other advisers.
Your wealthy clients are concerned about their heirs' understanding of personal-finance issues, and most of them have gaps in their understanding. By positioning your firm as a resource for financial education, you can differentiate your practice, enhance your relationship with your clients and make your clients better clients.
John Comer is a certified financial planner and the founder of Comer Consulting LLC.
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