The Prospecting Professor

Expert vs. Advisor

David Maister is a native of Great Britain, holds degrees from the University of Birmingham, the London School of Economics and a doctorate in Business Administration from the Harvard Business School. In 2002, he was identified as one of the top 40 business thinkers in the world. He is also a frequent writer, and in the April edition of "Law Practice Today" he compares and contrasts being an "expert" vs an "advisor."

Expert

• Job is the right-to-solve clients problems through the application of technical and professional skill.
• Takes responsibility away from client and acts as if he/she is "in charge" until the project is done.

Advisor

• Rather than being "right," the advisor's job is to be helpful...providing guidance, input, and counseling to the client's own though and decision-making process.
• Client retains control and responsibility. Advisor is subordinate to client.

As Mr. Maister points out, neither role is inherently better. The only mistake is to pretend. An expert who wants to be an expert is going to be miserably poor at pretending to be an advisor, and is going to resent the client throughout the time that they work together.

What do clients want? Of course, each client is different. I tend to think that the majority of clients today are looking for a trusted advisor. Fewer are looking for experts. I also wonder if their isn't a generational dynamic here too. From my experience, members of the GI Generation, and older...are more willing to accept, and seek, the expert. However, I think that Baby Boomers want more control...and are less willing to cede responsibility to anyone.

Gallup on Branding

Today is the birth anniversary of George Gallup, born in Jefferson, Iowa. Gallup attended the University of Iowa, played football, and became editor of the Daily Iowan. While editor, Gallup conducted what is believed to be the first poll in human history. He took a survey among his fellow Hawkeyes, who were asked to name the prettiest girl on campus. The winner of the poll was Ophelia Smith. George Gallup and Ophelia Smith were married on Dec. 27, 1925.

Way to go, George!

As the editor of the Daily Iowan in the mid-1920s, Gallup was a bit of a rabble-rouser. In one editorial he said, "Doubt everything. Question everything. Be a radical."

In a new book published by the Gallup Organization, entitled "Married to the Brand", the question is asked how and why consumers connect to the products they use and buy. Gallup's research contends that customer satisfaction is woefully insufficient when the goal is an ongoing exclusive relationship between a customer and the brand."See Amazon.com link"

Instead, an enduring relationship between a company and a customer has four prerequisites.Together, these add up to an emotional connection that is powerful and profitable.

1. Confidence. Consumers must feel that a brand is one they always can trust and one that always delivers on whatever it promises.
2. Integrity. Consumers must feel that the brand treats them fairly...stands resolutely behind its products and services...and if a problem arises, the company will fix it.
3. Pride. Consumers must feel proud to be associated with the brand...proud to be known as a brand owner, shopper, or user.
4. Passion. The consumer must feel that the brand is irreplaceable in their lives and represents a perfect fit with their needs. In fact, they should feel that their world really wouldn't be the same without it.

Gallup believes that these four aspects of an enduring customer relationship must be reinforced wherever, whenever, and however companies touch their customers. The relationship between brand and its buyers is visceral and emotional. It derives not just from the product and its features, but from the experience that surrounds its purchase and use.

The most important aspect of a great many purchases, one that leads consumers to "marry" a brand, is People. People may be visible to consumers, may be voices heard on the phone, or may just be names on an e-mail response. They live the brand, and in the eyes of many customers, they are the brand.

George Gallup died in 1984, while staying at his summer home in Switzerland. He had made his money...many millions...from corporate clients by researching the effectiveness of ad campaigns, and by finding out  who watches certain TV shows. Public-opinion polling, which made him famous, was always a money-losing proposition.

Gallup was also responsible for the biggest election-prediction faux pas, in 1948. His surveys had consistently shown that President Harry S. Truman was behind the challenger, Thomas Dewey. He assumed that the outcome was a foregone conclusion...and stopped polling two weeks before the election.

Truman won...and the day after the election, the president laughingly waved the Chicago Tribune headline that infamously announced, "DEWEY DEFEATS TRUMAN". Gallup never made that mistake again.

A Sorta, Kinda Unique Value Proposition

For grammarians, the word "unique" is an absolute term. The definition of "unique" is: one of a kind, without equal, or unparalleled. "Unique" is a term that cannot be modified by an adverb of degree, comparative adverb, etc. Consequently, the phrases, "rather unique", "quite unique", "more unique" are incorrect and meaningless.

With 664,000 financial advisors registered with the NASD...it has become increasingly difficult for advisors to position themselves with a "UNIQUE VALUE PROPOSITION" that is truly "unique". At the same time, it is imperative that financial advisors highlight those aspects of their practice, or themselves...that are singular and distinctive.

What's the solution?

One answer may be to abandon all pretense of arriving at a "Unique Value Proposition" in the strictest sense. However, advisors should strive to find those characteristics of their practice that are valued and perceived to be different and/or distinctive. Think of it as developing a Perceived Unique Value Proposition. To the extent that investors perceive that what you offer is singular  and one-of-a-kind...it's true (at least in their heads.) Moreover, if the advisor believes that what they deliver is unique...and says it often enough...it is so.

The other truism is that every advisor is unique in the sense that they bring a specific: value-system, background, experiential history, etc. to their clients. When crafting a Unique Value Proposition, advisors should also think about developing an "audio logo" that is memorable and tells the unique story that is who they are.

For example, if you have been in the business for 25 years...SAY IT...don't hide it. If you have a prior career in a specific industry that is interesting and/or relevant...by all means mention this too.

Finally, the tenor, tempo and tone of a Unique Value Proposition is as important as the words itself. If the words slip off your tongue with practiced confidence and verve, you are more than 80% there.

Free Prize Inside

"Candy-coated Popcorn, Peanuts, and a Prize...that's what you get with CRACKER JACK!"

Growing up when I did, the Cracker Jack jingle was ubiquitous. Even today, as I read the words above...the tune bounces around in my head.

Although I have to admit, Cracker Jack was a rare treat for my brothers and I. My parents forbade us from buying it...they maintained that the popcorn, peanut, and caramel concoction would "rot our teeth out." That didn't prevent us from jumping on our bikes and pedaling off to the corner store, where boxes of Cracker Jacks stood next to the Bazooka Bubble Gums and Three Musketeers.

We all loved the prizes of course...the plastic whistles, watches and other gee-gaws...that beckoned from the bottom of the box.

As a confection, Cracker Jack has been around for a bit. In 1893, Frederick Rueckheim and his brother introduced it at the World's Colombian Exposition, Chicago's first World's Fair. In 1908, "Take Me Out to the Ballgame" is composed by Jack Norworth with the line, "Buy me some peanuts and Cracker Jack." In 1912, the "free" prizes were introduced.

In his book, Free Prize Inside!, Seth Godin talks about soft innovations...the small ideas that anyone can think up...that make YOU stand out. Soft innovations (or free prizes) are not more of what the original product is, they are something extra and unexpected. Godin calls this sort of innovation a free prize because the revenue generated exceeds the cost of implementing it. Here are some examples:

• The ability to print an airline boarding pass at home before leaving for the airport.
• Amazon.com eliminating all TV and magazine ads, and using the marketing budget to offer free shipping.
• The lighted keyboard on the new MacPowerbooks.
• The way it smells inside a bakery.

Soft innovations are the small things that make a big difference. They aren't gimmicks because they offer something of value. "Free prizes" increase client loyalty, improve client retention and garner new clients through word-of-mouth marketing. They are the second reason to hire you...and the first reason to talk about you to others.

As Sailor Jack, and his dog Bingo announce...it's "A Prize in Every Box."

The Demise of the Stockbroker

No one wants to be a "stockbroker" any more. Think of the other various ways that registered representatives care to define themselves these days...financial consultant, investment advisor, etc. Never a "stockbroker." Stockbroker...bad. Wealth Manager...good.

Bill Nicklin, the founder of Horsesmouth, has a good column on this today, entitled, "Stock-Pick Your Way to HNW Clients." He points to the various reasons as to why the industry has moved away from the "stockbroker" terminology...as well as the regimen of picking individual stocks.

• From a legal and compliance standpoint, stock-picking has become difficult and riskier.
• From a firms point of view, the stock-picking skill is difficult to acquire...and it takes too long for rookies to become proficient at it.
• From the perspective of the academics, stock-picking is a fruitless effort on behalf of the investors who believe that they can beat the market.
• From the Financial Supermarkets vantage point, advisor's who focus on individual stocks do not use the other products and services on the shelf.

All of this has created an interesting phenomenon. Ask a financial advisor these days what they think of the stock market these days and, more often than not, they respond by very quickly saying, "Oh...I don't pick stocks." As a matter of fact, the advisor who will accept the "stock-picker" self-identification is the rare exception these days...a tiny island in a sea of asset allocators and financial planners.

By the way, Bill Nicklin's definition of "stock-picker", is NOT the advisor who buys penny stocks on rumor. He is talking about stock-pickers who select companies the old-fashioned fundamental way: based upon their expected earnings environment, business attributes, financial underpinnings, and who have the patience to accumulate this position over many years time.

There is no question that Bill Nicklin is a bit of an anachronism. Yet, he is a throwback with a indisputable track record of personal success. In addition to founding Horsesmouth, Bill is also in personal production...as a "stockbroker." At this point in his career, he has many hundreds of millions of dollars under management...and has generated more than $50 million in commissions over the course of his career. He must be doing something right.

Nicklin's other interesting point is that stock-picking and prospecting go hand-in-hand. He illustrates how his stock-picking prowess has led to strong connections with many, many affluent clients. In fact, he estimates that over 80% of his current book of business was acquired through his focus on stock-picking.

Being a stock-picker is not for everyone. Even in the "good old days", the industry was populated by folks who couldn't pick a stock to save their life. As a rookie trainee at Paine, Webber, Jackson & Curtis, I sat next to a gent who put everyone in his book...regardless of their financial circumstance...into just ONE company. I heard him tell the story of his favorite company countless times over the course of the day. This guy was a compliance nightmare, and he buried more investors than the local mortician.

However, today, September 19, 2005, with the term "stockbroker" being anathema to the industry...a vacuum has been created, and nature abhors a vacuum. If you are a financial advisor who dares to be different, and have the temperament and patience to pick stocks for your clients and prospects...you have a wide-open playing field in front of you.

Cocktail Party Effect

When delivering your message, oftentimes...less is more. This applies to your Positioning Statement, the theme for your next seminar, or a one-on-one conversation with an investment prospect.

This can be illustrated in a phenomenon that psychologists know as the Cocktail Party Effect.

We've all experienced the Cocktail Party Effect. Here's the scene: You are at a cocktail party...engaged in conversation with one person. All of a sudden, you hear YOUR name mentioned, in a nearby conversation. Now you can hear that conversation, but you no longer can hear the one in which you were involved. How is this possible? Auditorially, how can your brain suddenly begin to take in a conversation that you previously did not hear?

This is the Cocktail Party Effect. We cannot process two conversations at once. In the same vein, if you deliver two messages...in your Positioning Statement, a seminar, or a one-on-one conversation with a prospect...most people will process just one of them...at most.

Keep it simple. Less is more. Say one thing.

Industry Immersion

Bill Nicklin is the founder Horsesmouth, www.horsesmouth.com, the online Sales Prospecting and Best Practice resource for financial advisors. Nicklin is also a successful producing advisor. Over the past 30 years, he has generated in excess of $50 million in fees and commissions.

For those of you who subscribe to Horsesmouth, and are familiar with Nicklin's frequent observations, you will know that he overwhelmingly endorses Industry Immersion as the means for financial advisors to build relationships.

He writes about Industry Immersion again this morning in a piece entitled, "Seeking HNW Clients? Industry Immersion is the Answer."

For what it's worth, The Prospecting Professor wholeheartedly endorses Industry Immersion as a vehicle to build a stellar client list. There are two reasons for this:

1. It is different, and distinctive. For whatever reason, not many advisors do this today. The industry seems to be moving to a generalist, all-things-to-all-people, asset-gathering model. Advisors who practice Industry Immersion go against the grain. I think this is good.
2. It works. Industry Immersion is interesting for the advisor because, presumably, because they are pursuing an avenue that engages their attention. Moreover, Industry Immersion makes connections with affluent investors...which is the name of the game.

Action Step: Below I attach a link to Bill Nicklin's article on Industry Immersion. Go to the article...read it thoroughly...and also click on every hot-link in the piece (there are eight of them). This way, you will have a library of nine articles that will give you the foundation of how to build a practice using Industry Immersion.

By the way, Horsesmouth is a paid-subscription service. If you are not a member you will need to join. You may do so by taking advantage of their 30-day trial offer.

(In the interest of full disclosure, I have been a past contributor to Horsesmouth myself. However, there is not a financially remunerative contract that exists between The Prospecting Professor and Horsesmouth. My recommendation to join Horsesmouth is due to the fact that I believe that it is the single best resource for financial advisors who want to build a thriving advisory practice.)

Seeking HNW Clients? Industry Immersion Is the Answer
http://www.horsesmouth.com/linkpo/76929_18.htm
Not only will you meet many high-net-worth prospects through industry immersion, you’ll also anchor yourself to a community of individuals who will fully rely on your knowledge, insight, and expertise. New business will develop naturally as a result.

Generalist or Specialist?

"An expert is a man who has made all the mistakes, which can be made, in a very narrow field"...Niels Bohr

Over the most recent 5-10 years, the financial services industry has emphasized the generalist financial planner/asset gatherer philosophy...as the path most likely to lead an advisor to become a top producer. The rationale for this approach is:

• Good client service requires a comprehensive view of the client's total financial situation,
• The generalist planner is well-positioned to capture high "wallet share" and gather more assets,
• In the long run, the name of the game is asset gathering,
• Narrow product expertise can always be "rented" from specialists.

However, in a recent study by CEG Worldwide, it appears that advisors who have a "wealth management" practice are much more likely to have higher income levels than those who are "investment generalists."

Of the 1000 advisors surveyed by CEG, 90.2% were generalists, and the remaining 9.8% wealth managers. In 2004, 2.1% of the generalists in this sample earned net incomes in excess of $500,000, while 26.3% of the wealth managers bested the $500,000 mark.

Looking ahead, as the baby boom generation ages and advisors deal with more new retirees and pre-retirees, the breadth of needs will expand still further. Moreover, if the focus shifts from investing to other issues, interpersonal skills and the ability to inspire, motivate and lead clients will become valued skills.

In the view of the Prospecting Professor, a focus on "wealth management" is not the only path that will lead the advisor to the realm of the Top Producer. Other avenues include:

• Focus on a "micro-market" or niche,
• Super Networking,
• Focus on very specific "applications",
• or Leverage, via use of sales assistants, cold-callers, or functional specialists.

Either way, at some point in the advisor's career life cycle, they will need to become more selective...and seek the training and education in areas that bolster their emerging specialization.

In the words of  Napoleon, "As the twig is bent, the tree is inclined."

Franchisees

In yesterday's NY Times business section is an article entitled, "Franchisees With Advanced Degrees." The gist of the article is a description of the mini-trend of individuals who have attained advanced degrees, e.g. MBAs and law degrees, who are attracted to the rough-and-tumble life of owning a franchise. The allure of franchise ownership is that it is a lower-risk form of entrepreneurship. The turn-off is that there is some societal stigma for a Stanford MBA grad who is making his/her living pumping ice cream for a Tasti D-lite franchise.

The article does not touch upon another interesting trend...corporate refugees who start a second career by becoming a franchisee. This is a significant development. In fact, a recent study by AARP, (a national membership group for persons over 50), shows that the, of the 13.8 million self-employed in the United States, 40.5% are over 50 years old. If you consider the demographics of the Baby-Boomers, this is also a trend that is very likely to accelerate.

Financial advisors who position themselves as experts in franchising will place themselves in the midst of these two very interesting market niches.

There are many resources at hand for advisors to do their own 'due diligence' to become an expert in franchising. One interesting source is, "The Entrepreneur's Source", which is itself a franchise. The Entrepreneur's Source bills itself as the "premier source for self-employment options, franchising information, education and training." As part of this package they offer five free, online training courses on franchising basics:

1. Building the Entrepreneur in You
2. Fire Your Boss: Start Your Own Business
3. Designing and Equipping Your Home Office
4. Franchising Basics
5. Set Up a Wireless Home Network

The courses last for one month...in fact today, June 3rd, is the first day for the next course session. It's not too late for you to sign  up!

Financial advisors who position themselves as experts in franchising should also position themselves as experts in the financial  needs/concerns of the franchisee. For example, I would suspect that corporate refugees who have worked in a cube for the past 25 years would have significant rollover assets...and would want advice on how to generate a "bullet-proof" income stream should their new venture falter.

Have a great weekend. Ciao!

Pension Sinkholes: Sad Opportunities

On Tuesday, a US bankruptcy judge entered an agreement with the Pension Benefit Guaranty Corp. to terminate employee retirement accounts for United Airlines. If this agreement goes through, it is likely to spread throughout the airline industry...given the competitive advantage that United would gain versus other airlines. The reversal of fortunes for the airlines since 9/11 has been stunning. In 2000, airline pensions had a collective POSITIVE balance of $3 billion. At the end of 2004, there was a NEGATIVE balance of $31 billion.

This event must be sending shuddering reverberations throughout the US pension system, which is underfunded by $450 billion. Certain industries, e.g. the big US auto makers, might be especially vulnerable as they face a continued market share slide to the Japanese manufacturers. GM's pension obligations alone are $89 billion.

Sadly, this circumstance may present long-term opportunities for advisors who position themselves as resources to the employees of the affected industries. Anecdotal evidence suggests that employees in the companies most susceptible are looking at their exit strategies...from their industry altogether. The most obvious opportunity for financial advisors comes from assisting these employees with retirement plan rollover decisions.

When an employee leaves a company, they usually make a decision as to what to do with their retirement plan assets within a six-month window...i.e. 3 months before, and 3 months after they leave. Since the sales cycle for decisions like this can easily extend to 6 months and beyond, the advisor should build their connections to the employee well before the decision to depart.

Regarding the airline industry, there are a number of different employee constituencies...each represented by their own union, e.g. pilots, flight attendants, machinists, service workers, etc. Of course, in the case of airline executives, there is no union representation. For the advisor who is interested in learning some of the hot-button issues of the airline employees, one of the best sources is the union website. Below, I have listed some of the principal unions involved in the industry:

• Assn. of Flight Attendants, www.afanet.org
• Professional Flight Attendants Assn., www.pfaa.com
• Assn. of Professional Flight Attendants, www.apfa.org
• Delta Flight Attendants, www.delta.org
• AirLine Pilots Assn.,www.alpa.org
• Int'l Machinists and Aerospace Workers, www.iamaw.org

Rather than embarking upon a mass wholesale campaign, advisors should begin to make connections within these groups one-on-one...starting with someone that you know, and spreading out from there. Otherwise, you will give the appearance of "ambulance-chasing"...not a desirable positioning image. Referrals are always the more effective route.