You have heard the expression “hard wired.” If you have trouble getting the Wi-Fi signal from your router, you appreciate having a wire connecting your terminal to that device. Some prospects have hard wired opinions about financial advisors and what they do. Sometimes they think the services advisors provide are simply window dressing to rationalize recurring fees. If you are a good advisor, the services you provide can convey great benefits. Sometimes you need the right analogy to get that point across and create an “aha” moment.
1. Annual portfolio reviews are similar to your annual physical with your family doctor. Regular checkups are all about preventive medicine. Your doctor requests blood tests ahead of time. You look at the numbers to see if you are in the acceptable range. They compare these numbers with last year’s numbers. They seek to identify and address problems early.
Advisors: Portfolio reviews often track progress to goals, asset allocation and weighting of different sectors in the portfolio. The objective is to keep you on track towards your goals and identify problems that need attention.
2. Time in the market is similar to buying real estate. You have heard the expression, “You don’t wait to buy real estate. You buy real estate and wait.” You have heard Warren Buffet’s comment about sitting in the shade because someone planted a tree long ago. Investing in stocks should be viewed as a long-term endeavor.
Advisors: Unlike real estate, stock prices are published daily. This gets people scared. They would not impulsively decide to sell their house because prices moved dramatically. It’s a big, expensive endeavor, so they sit tight. They should view investing in the stock market the same way.
3. Periodic calls with your advisor are similar to your periodic calls with your parents. You might not see your parents face to face as often as you did previously. You might live across the country or have young children requiring constant attention. You still keep the lines of communication open. Both you and they want to confirm everything is OK and neither has suffered any setbacks.
Advisors: Regular calls between advisors and clients reminds the client the advisor is paying attention and sees the client as an individual, not a name on a list. The advisor asks questions to determine id anything significant has changed in the client’s life. If so, this might require modifying the financial plan.
4. People will put an addition onto their house to increase its value. Adding money to your investment portfolio should be viewed the same way. Real estate agents often value houses in terms of square footage plus the number of bedrooms and bathrooms. People invest in their homes as a way of building future wealth.
Advisors: Where does it look like you will get the best return on your money? If you have a good advisor providing great advice, the return you have gotten compared to other alternatives makes the case you should put more money into the stock market.
5. Buying a mutual fund is like buying a mixed case from your wine merchant. You know what you like when it comes to wine. You tend to buy the same wines. You may find yourself priced out of the market if prices go up. You want to try some new wines, but don’t know if you will like them. Your wine merchant knows your tastes and suggests a missed case. Some are winners, some are average and you didn’t like a couple. The case purchase spread the risk.
Advisors: When you buy an ETF or mutual fund, you are getting a broad range of exposure to stocks in a specific sector, country or size. You aren’t simply choosing one and hoping for the best. This should improve your chances for success.
6. Buying insurance is like owning a bullet proof vest. Let us assume you work in a field like law enforcement. It is unlikely you will be shot on any given day, but if you look at a longer time period, like a couple of years, the probability rises. Police officers routinely wear bullet proof vests while on duty as a form of protection. It’s common sense.
Advisors: “peace of mind” and “protection” are two terms often associated with owning life insurance. You might not need it, but you are happy knowing it was in place if the situation arises.
7. A good accountant is like having a big brother nearby. You have seen plenty of movies about the kid who gets bullied in the schoolyard. The next day, their big brother turns up and evens the score. Having a good accountant filing your taxes is like having that big brother.
Advisors: This example actually refers to accountants. It is easy for people to file their own taxes. They cut out the middleman by filing online. Suppose they get audited. In this case, the bully is the IRS and the accountant is your big brother, who stands up to the bully on your behalf.
8. Having a good advisor is like having a good personal trainer. Everyone thinks they can “figure out” exercise and do it on their own. Some people lose interest. Others go to the gym and socialize. Some don’t stick to their routine. Others do, but “cheat” in the exercise, losing much of the benefit. Some people hurt themselves. A good trainer keeps you on track and helps you improve incrementally.
Advisors: A good advisor helps keep you focused and motivated, especially when the stock market isn’t cooperating. They can protect you from yourself, assuming you talk to them before you make risky investments on your own.
9. A debt reduction plan is like a diet plan. It has been said a budget is something everyone wants in theory, but doesn’t want to stick with in practice. Debt is like fat. It is easy to add and difficult to remove. In both cases, success is measured by results.
Advisors: Clients might have debt reduction built into their financial plan. With some diet plans, you meet for regular weigh ins. When an advisor meets with a client and reviews their numbers, they can tell if the client is doing their part. This can help keep clients on track.
10. Using limit orders is like buying at auction. Many collectors buy at auctions. Online auctions have taken off in popularity during the pandemic lockdown. It is easy to get auction fever, paying too much and suffering buyer’s remorse. Limit orders help rein in that impulse.
Advisors: Teaching clients about limit orders puts them in a position to buy dips while not overpaying in the heat of the moment. It’s a professional skill advisors bring to the table.
11. Scheduled maintenance vs. running your car into the ground. Your client likely brings their car back to the dealership on a schedule. They also do a multi point inspection when they get an oil change. Scheduled maintenance extends the life of the vehicle. It also costs money.
Advisors: Periodic reviews are an opportunity to confirm the portfolio is in balance and address issues needing attention. Some people make investments, lose interest and forget about them. They can literally ride them up and ride them back down again.
12. The family doctor and the specialist. It is easy to doubt the value of your family doctor. If they detect a problem, they often refer you to a specialist. Why can’t they solve the problem themselves? They likely could, but it’s not their area of expertise.
Advisors: You often encounter situations when you refer your client to the mortgage specialist or the trust specialist. This usually requires another meeting. They have a deeper understanding and may be able to find a solution unique to your client’s needs. If you attend that meeting alongside your client, that should make them feel more comfortable.
Using the right analogy can help create the “aha” moment for your prospect or client.