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Customer relationship management

Customer Relationship Management

Executive summary

Before 1980, customers didn’t need to be loyal, they were automatically. My father always bought Fords, always voted Liberal and practiced his religion.

The early 1980s brought a paradigm shift that became more pronounced with each passing year, reaching its peak in the early 2000s.

Each customer had to be won back each time they renewed a product. Gone was the visceral attachment to a brand, the consumer was shopping around.

But the companies didn’t give up. They used several ways to bring the customer back to them. Customer Relationship Management (CRM) was born, with the primary aim of building loyalty among fickle customers.

The IT industry is developing increasingly sophisticated applications known as Customer Relationship Management or CRM software. This class of software supports companies in their quest to build customer loyalty.

Customer relationship management

The beginnings of customer relationship management date back to the 80s. There were a few discreet attempts in the 70s, but nothing more. Today, no company would dream of surviving without practicing the basic principles.

1.-       What is customer relationship management (CRM)?

It’s a set of actions taken by companies to build customer loyalty, develop their offering and generate referrals.

A little history

The prehistory of CRM

Until the early 80s, customer loyalty ruled the commercial world and many other aspects of our lives, including politics and religion.

As mentioned, my grandfather always owned Ford cars, my uncle Chevrolets. And they were proud of that loyalty.

At home, we ate Kellogg’s Special K for breakfast, nothing else. When we were good kids, my mother bought a box of Kellogg’s Frosted Flakes.

Recently, I saw a friend who had just bought an Audi. “I said to him, “Have you given up Mercedes? No,” he replied, “I’ve gone back to my old loves. Not a very loyal car buyer.

Paradigm shift

The 70s saw major social changes in terms of religious loyalty and the liberalization of behavior. In short, an era began that continues to this day. Consumers question their loyalty (allegiance) when the time comes to renew a good or service: cars, household appliances, food, even their financial advisor.

They ask themselves: “Am I satisfied with this supplier?

The latter are becoming increasingly aware of this, and are saying to themselves: “I have to win back my customers’ trust every time if I want them to buy from me”.

And so customer relationship management was born!

2.-       Customer relationship management since 2000

It goes without saying that to manage a customer relationship, you need to have a relationship with the customer. Calls, meetings, e-mails, birthday cards, surveys, gifts and content marketing are all part of the CRM process.

Today, many companies are focusing on surveys. Your customer contacts customer service, and a satisfaction survey is sent out immediately.

Grocery stores invite you to complete a survey on their invoice in exchange for a chance to win a voucher. Every time you visit, they want to earn your loyalty.

 

3 –       Customer relationship management in financial services

From the outset, it’s safe to say that this sector is lagging behind, even in 2023. Nearly five years ago, LIMRA (Life Insurance Marketing & Research Association) published a disturbing report on client retention among financial security advisors. The report revealed that a high number of Canadians would change financial advisors at least three times in their lifetime. Not because they were dissatisfied with their current advisor, but because he or she never contacted them.

Let me share Robert’s situation with you. In 1982, he bought term life insurance from a representative, let’s say Paul, that was renewable and convertible until he reached age 70. A few years later, Robert wanted to buy critical illness insurance. Having lost the contact details of Paul, who had never contacted him since selling the life insurance, Robert bought it from Joseph.

A year later, he bought an accident insurance policy from Pierre, since Joseph hadn’t given him any sign of life either.

Robert is approaching his 70th birthday and Paul doesn’t contact him to remind him of his life insurance maturities. Robert loses his benefits. He had to re-insure using Micheline’s services.

A few years later, Robert bought an annuity from another representative.

In this example, I’m not even mentioning the investment aspect.

Imagine all the commissions Paul would have earned if he had practiced the ABCs of customer relationship management: staying in touch with his customers.

4.-       Customer relationship management system

Manually managing all the relationships of a customer base of 100, 200 or even 500 customers will quickly prove to be an impossible task.

Customer relationship management (CRM) software soon appeared on the market. Initially limited and difficult to learn, today’s CRMs bring together a panoply of functionalities to ensure optimal management of relationships and business opportunities.

Most CRMs are suitable for any market sector: dentists, car dealers, the financial sector, cable operators… All you have to do is model them. Others, such as Equisoft/Connect, are specifically designed for a particular market: the financial sector.

Here’s a non-exhaustive list of features to look for in CRM software for the financial sector.

  • Business communications:

Whether during a meeting, a phone call, an exchange of e-mails or text messages, you exchange information that is critical to both you and your customer. You get to know them better, and their needs more and more. He gets to know you and what you can do for him.

A good CRM software package will enable you to consolidate all this information and the documents exchanged on both sides in one place. By the way. Compliance requires that you take notes of your meetings (in person or on the phone, keep your digital or paper exchanges).

You kill two birds with one stone: you meet certain Compliance requirements, and you make it easier to prepare for future meetings with this customer.

  • Do you know the 10-contact rule?

The ABCs of marketing dictate that you should communicate with your best customers at least 10 times a year. But communicate what?

Content marketing is a strategy used to attract, engage and retain customers by creating and sharing articles, videos, podcasts and other media relevant to certain customer interests. In our case, their finances. The number of such mailings can vary from 4 to 12 per year.

Imagine Robert looking for critical illness insurance and receiving a newsletter from Paul about changes in RRSP rules. He’s not interested in the subject, but Paul reminds him that he’s still active as a financial advisor. Robert calls Paul and tells him about his desire for critical illness insurance. You can guess what happens next.

  • Reminders

CRM software should facilitate the creation of reminders relevant to business development.

Imagine Paul has just closed his life insurance sale to his new client Robert, who is 35 at the time. He creates a reminder in his file on Robert’s 55th birthdayème .

On Robert’s 55th birthday, Paul called to wish him a happy birthday. At the same time, he says: “Robert, your life insurance policy is approaching expiry. I’d like to meet with you to discuss your options. Paul converts Robert’s term insurance to whole life.

  • Targeted marketing

A new product has just come onto the market, say, critical illness insurance for children. Robert decides to use his CRM software to identify all his customers who have children. He prepares a sales pitch on the benefits of this new product and sends it to these customers. A few days later, Robert calls Paul and says: “Paul, my daughter has two young children. I told her about your mailing. She’s interested. I invite you to give her a call.

  • Added value

As a very successful consultant told me 20 years ago: “Over the years, I’ve accumulated hundreds of business opportunities in my CRM. Every week, two or three of them appear in front of me. My assistants prepare the files, and all I have to do is close the sale.

What premium would you be willing to pay to get your hands on a clientele organized in this way?

  • Dressing up the customer:

In conclusion, this representative added: “The phone never rings here. We call the right customer at the right time with the right product. First we sell him a tie, then we dress him from head to toe.” CRM software makes it possible to collate all a customer’s needs, throughout his life, and to call him at the right time with the right product.

CRM software is the fundamental tool that supports the paradigm shift mentioned above.

Customers want you to communicate with them.

CRM software collects all the information needed to communicate with customers. Whether by phone, text, e-mail, or mail.

CRM software records when to communicate with whom and on what subject.

 

5-What to look for in CRM software

A complete contact file: a good CRM allows you to see at a glance a customer’s personal information, well beyond their name, address and e-mail address. We also want to see :

  • Spouse’s first and last names and a link to his/her file,
  • The first and last names of thier children and a link to their file,
  • The name of the company, if heor she’s in business, and a link to that profile,
  • If not in business, employment information (employer, salary),
  • Significant liabilities such as mortgage.

We also want to see :

  • Its investments under our management,
  • Insurance under our management,
  • What is not under our management.

We also want to take a global view:

  • Fields to segment our customer base,
  • The ability to add or customize fields,

A good CRM enables us to consolidate all our activities with a given customer.

In terms of customer activities, we want to see :

  • A way to consolidate all our meeting summaries (telephone, in person or via Zoom),
  • A way of adding incoming and outgoing e-mails to these activities,
  • A means of adding documents sent or received from the customer (by e-mail, post or hand delivery) to these activities.

A good CRM comes with a library of procedures or functions that allow us to exploit our customer data.

In terms of included procedures, we want to see

  • A user-friendly search tool that lets you use all fields in a search,
  • A user-friendly report generator for preparing reports using search results,
  • A mailing tool (labels or e-mails),
  • A tool for creating reminders and/or activities,
  • If the software includes a Calendar and/or Messaging module, make sure it can synchronize with our smartphone,
  • The same applies to the Contact plug,
  • A customizable dashboard.

In short, CRM software lets you :

  1. Record all your activities with a customer in one place for future reference,
  2. Get a brief but complete picture of a customer,
  3. Find the follow-ups and sales opportunities to be pursued for each customer,
  4. Perform searches on all database fields and produce reports with the results,
  5. Facilitate the import of customer insurance and investment data,
  6. Ensure synchronization with smartphones.

Conclusion

Customer Relationship Management (CRM) technologies oversee all your company’s relationships and interactions with existing and prospective customers. The aim is simple: to optimize business relationships. CRM systems support companies in their efforts to stay connected to their customers, simplify processes and increase profitability.

A CRM solution helps you focus on your company’s interactions with various stakeholders (customers, employees, suppliers, etc.) throughout the relationship lifecycle.

With a technology tool like this, your enterprise value takes a major leap forward. When the time comes to plan your exit into retirement, you’ll be able to demonstrate the potential value of your clients. That’s how you justify a multiple at the top end of the range.

 

Martin Luc Derome, CEO

« Chief Emotional Office »

Queenston M&A Inc.

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Communicate, communicate, communicate…

Communicate, communicate, communicate…

We offer you a slightly pamphleteering dialogue on the importance of communicating with your customers.

We meet Paul, your potential seller, who immediately strikes up a conversation with you, the buyer of his block of business.

Paul: “You know I post regularly on LinkedIn and have a professional Facebook Page?”

You: “I don’t believe in any of that. It’s for teenagers and I don’t have time to waste on it.”

Martin Luc: “Robert, what if customers enjoyed following Paul on his social networks and found his posts interesting? Have you ever thought about that?”

You: “We’ll see!

Paul: “Every customer receives a card on their birthday. In addition, I call every Platinum customer to inform myself of any special plans they may have for their birthday.”

You: ” Frankly, they’re not children anymore. It must cost you a fortune in stamps?”

Paul: “No, because with us we automate”.

Paul: “I don’t dare tell you that I also send out at least six content marketing newsletters a year.”

You: “That makes them ‘dirty pitches’!

Paul: “This is content marketing. These mailings are designed to inform my customers about topics that may affect their finances.”

In 2022, the journal Finance et Investissement published the results of a study by Ycharts.

Among the dozen or so elements that customers consider most important when choosing an advisor, customer service and communication rank second, ahead of portfolio performance, according to the Ycharts study.

The factor that surpasses these two elements in the hearts of customers is a thorough understanding of their situation and objectives. This is closely linked to the quality of the communication we develop with them.

Are you still stuck in the old paradigm that says yield is everything?

If you focus on communication, you’ll be more successful. Delegate some of these activities internally or externally.

www.queenston.net

204-889-1189

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Business Growth Strategy Concept

Executive summary

Every entrepreneur wants to grow his or her business. The financial services sector is no exception. Right now, we’re in a favorable economic climate. On the one hand, many advisors are approaching retirement age and want to sell off their block of business; on the other, financing is available for acquisitions.

But watch out for pitfalls!

Potential buyers run the risk of buying a block of business for the wrong reasons.

Before entering the acquisition process, you need to ask yourself four questions.

If you decide to go ahead, you need to engage in a rigorous acquisition process. Don’t be seduced without doing your homework.

You wouldn’t buy a house without the support of an expert. Then do it for the acquisition of a block of business, contact us to represent you:

www.queenston.net

204-889-1189

 

Growth and acquisitions

Every company, no matter how big or small, wants to grow in the short, medium or long term. The financial world is no exception.

The growth of a financial block

There are three ways to grow a financial block.

1- Internal growth: you rely solely on your existing customer base to ensure sales growth.

  • New sales (insurance and/or investments)
  • Growth in assets under management during periods of market growth.
  • Referrals from current customers

This approach generally ensures steady but modest growth.

2- Active growth: in addition to relying on internal growth, some advisors actively seek  new customers.

  • “Cold call”
  • Participation in organizations such as chambers of commerce, charities, etc.
  • Telemarketing outsourcing, etc…

3- Growth through acquisition: this type of growth aims to significantly and rapidly increase a company’s turnover. There are risks and benefits involved, which we’d like to discuss in this text.

 

Two phenomena are driving a wave of acquisitions in this sector. First, the aging of financial advisors who want to retire or semi-retire. Secondly, the concentration of mutual fund brokers, such as Investia, Assante and Raymond James, who are willing to facilitate the retention of blocks within their organization. In economic terms: the barriers to entry are low.

 

Three worst reasons to buy a block of business:

Buying a block of business in the financial sector is becoming disconcertingly easy, as supply and demand grow almost daily. But beware of the pitfalls that await you. Here are the three worst reasons to buy a block of business.

1 – Find a new niche in the market.

As if Coke began producing Palmolive soap! Above all, don’t laugh. As a financial advisor, you can’t effectively serve just any client. The proof: you don’t. Resist the temptation to spread yourself too thin. Instead, buy a clientele that complements the one you already have.

A:     “Listen, Martin Luc, I can buy a clientele of doctors, and the current consultant will help me’’.

Q.:    He’s been serving this clientele for 30 years. “He knows his stuff”, not you.

Instead, look for a clientele similar to your own! It’s a win-win situation!

2 – Buying customers to save your sinking ship

Has your block of business taken a beating because of the ups and downs of the markets? Acquiring a new block isn’t the way to rectify the situation. First, work on getting your practice back on track. Then you’ll think about acquiring. And don’t worry, there will always be good opportunities on the acquisition market.

3 – Looking for a shortcut to higher profits?

Don’t buy a new block of business. Work on your current one. Your company’s profits won’t magically increase by acquiring a new block. You’ll have to work hard, and probably for a few years, before seeing profits materialize.

The cost of acquisition is likely to eat into your profits in the first two or three years.

As you can probably realize, you don’t fall into any of these categories! Let’s continue our journey.

The four killer questions!

Increasing assets under management is not a sprint, it’s a marathon.

Remember that most advisors consider their customers to be family. You must first demonstrate that you will take care of them as they have done. Forget the rest, it doesn’t count at first.

Before you begin any acquisition process, ask yourself the following questions.

1 – Can you acquire a new clientele?

The acquisition will require you to set aside a large part of your existing clientele to concentrate on the new one. Will your support staff be able to handle them adequately?                     

Do the files of this new clientele rest in 22 filing cabinets or in the cloud? If the first case, will you need to move to larger offices?

“I can recruit some of the vendor’s support staff”. Where will you accommodate them?

The killer question: “Will your current situation cause you to lose some of these new customers while alienating your existing ones? The new office space, did you consider this cost addition in your financial projections?

2 – Who are my current customers?

How well do you know your core customers, representing your financial practice? Why do they do business with you? Your strengths that they appreciate. Will you be able to promote them to new customers? What kind of customers do you most enjoy working with?

The killer question: do you see yourself as a chameleon who can adapt to any type of customer?

3 – Who will finance your acquisition?

Have you analyzed the cash flow required for this acquisition? On what factors does the support of the financial institution that will lend you the money depend?

The killer question: have you done your homework?

4 – What is this block of business really worth?

Think outside the “x times revenues” paradigm. Is this an elderly clientele that is making substantial annual withdrawals? Will you be able to recover the assets when the majority of customers die?

The paradigm is that a clientele is worth between 3 and 5 times the revenues generated over the last 12 months. Remember, this is a paradigm, not a rule.

The killer question: are you able to establish the real price of the clientele you intend to acquire, and especially the future cash flows?

Queenston is the leading Canadian firm specializing in mergers, acquisitions, transfers and valuations in the financial products distribution industry.

You’ll only buy one or two business blocks in your lifetime. Queenston is involved in the majority of transactions in Canada.

Our fees pay for themselves

Visit our website: www.queenston.net or contact us.

204-889-1189

5 – Due diligence audits

  1. a) What is an acquisition audit?

Let’s say you’re planning to buy a 4-unit building and intend to live in one of the units. You hope, rightly or wrongly of course, that the rents on the other three

Let’s say you’re planning to buy a 4-unit building and intend to live in one of the units. You hope, rightly or wrongly of course, that the rents on the other three units will cover your overall expenses. You will :

  • Have the building inspected
  • Check the solvency of tenants
  • Analyze the sale price of similar buildings in the neighborhood

You do due diligence or an acquisition audit. The same applies to the acquisition of a financial business.

  1. b) Software or paper?

Paper: 3 times, software: 4 times or more the net annual recurring revenue

Will customers be delivered to you in file cabinets or in a software package such as Équisoft/Connect, formerly Kronos?

It’s impossible to pinpoint the exact value of a clientele on paper, as factors such as the age of customers, the number of families and a host of other factors can influence the price.

Dealing with a paper-based clientele will require a lot of time and money to numerize all files. A seller with a paper clientele would be well advised to scan it into digital format before starting to sell it.

  1. c) The lifetime value of customers

When a salesperson tells you that the revenue generated by his customers is close to $250k per year, he’s only talking about the day on which the calculation was made. Six months later, will this value be $255k or $225k?

The notion, and I do mean the notion of lifetime value, can help you estimate income trends.

Let’s take a client, Paul: his assets under management are estimated at 1M. He’s still contributing, but as he’ll be retiring in five years’ time, he’ll be in a period of disbursement.

He will end his disability insurance policy in five years, as well as his critical illness policy, without converting it to long-term care insurance. He plans to buy a condo in Florida when he retires.

Being single, he will leave everything to his children, who have their own advisor.

If Paul represents the desired clientele, no bonus on the sales multiple!

Let’s take another customer, Robert: same assets, will retire in five years. Will sell his condo in Florida to travel with his wife while his health allows it. Will convert his critical illness policy to long-term care policy. His wife is his sole heir.

Robert will generate significantly more cash flow (income) than Paul over the next 10 years.

If Robert represents the desired clientele, add a bonus of 1 X on the net annual recurring revenue’s multiple.

Since you expect to repay the lender over a 10-year period, the cash flow generated by a business block today does not necessarily guarantee the cash flow it will generate in 5 or even 10 years’ time.

As part of the acquisition audit, you or a Queenston expert can help you estimate future cash flows.

  1. d) Customer meetings

When you buy a multiplex, you can visit the premises and meet the tenants. If you’re buying a 500-customer block, this is more difficult.

You can, however, have access to their files.

Plus or minus one half of the net annual recurring revenue’s multiple.

  1. e) Compliance of the business block

Once the sales contract has been signed, you’ll have to live with the seller’s compliance defects. Has it already been inspected? Can you see the inspection report? Have there been any customer complaints? What was the outcome?

You won’t be able to say to regulators or a judge, “I didn’t make that mistake, the person who sold me the block did.”

Some organizations will take on these defects or errors in order to keep the block in their fold. Not always reassuring.

We simply want to draw your attention to this aspect that you should not overlook. Make sure you choose a legal advisor who knows the business.

Plus or minus one half of the net annual recurring revenue’s multiple.

Conclusion

Buying and selling customers in the financial services industry should always be a win-win situation, provided you go about it the right way and let the experts guide you.

Some financial advisors buy a clientele, say 4 or 4.5 times the revenue, and go after the opportunities. To do this, you need a solid team to take care of the existing clientele.

Other representatives won’t adapt a proactive attitude, content to be reactive.

What kind of buyer are you?

Martin Luc Derome, CEO

Queenston

Sources: Beatrice Paez, Investment Executive, September 28 and 29, 2016

 

 

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HERE’S AN EXAMPLE OF THE JUDGES RESPONSE:

Cyberattack: two credit agencies cannot be prosecuted for breach of security.

The Ontario Court of Appeal has ruled in favor of Canadian credit monitoring agencies who argued that they could not be sued in two class actions for the tort of intrusion into the privacy of plaintiffs regarding a leak of their personal data.

The Ontario Court of Appeal rules that Equifax and Trans Union cannot be charged with the tort of invasion of privacy.

Two class action lawsuits filed in Ontario involve violations of Canadian privacy laws following two cyberattacks in 2017 and 2019.

Alina Owsianik and Michael Obodo are attacking Equifax Canada and Trans Union respectively for the trouble such violations of their privacy and the security of their confidential information have caused them.

However, on Friday (November 25, 2022), the Court of Appeal ruled against Ms. Owsianik and Mr. Obodo, finding in favor of Equifax and Trans Union, thus confirming the lower court rulings.

Clearly, the leak of personal data was perpetrated by hackers, and the agency could not have knowingly participated.

The two credit agencies cannot therefore be considered indirect accomplices, even if they apparently failed in their duty to ensure that the plaintiffs’ personal data was secure and properly stored.

The Court of Appeal points out that the plaintiffs’ accusations are merely allegations, and that no facts have been proven in a court of law.

Source : Radio-Canada / Jean-Philippe Nadeau / July 25, 2022

 

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Types of cybersecurity incidents affecting businesses, Canada

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2019

2021

The company has been affected by cybersecurity incidents

20,8

18,1

Incidents to disrupt or disfigure the company or its Web presence

3,2

3,5

Incidents of theft on personal or financial information

6,1

5,9

Incidents to steal money or demand payment of a ransom

8,8

6,7

Incidents to steal or use intellectual property or company data

1,6

1,8

Incident involving access to unauthorized and privileged areas

3,7

3,8

Incidents to monitor and track business activities

1,2

1,6

Incidents with no known cause

7,9

7,0

Source : Statistique Canada

 

cyber secutiry

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During the month of July, we want to make you aware of the growing number of scams of all kinds, and the importance of developing a preventive attitude. Whether it’s through your day-to-day use, or during a merger, acquisition or dealer transition process, stop thinking that it’s only happening to others.

We are all, each and every one of us, responsible for the success of cyber attacks! “Is it our fault that Desjardins and Mackenzie were hacked? No, we agree.  But…

Identity theft

Information (last name, first name, e-mail, even SIN) that may have been hacked at Desjardins and Mackenzie is being resold for around $50 a piece on the Dark Web. What will the buyer do with this information? They’ll try to borrow money on your behalf or sign up for a credit card. What will the financial institutions do? They’ll check your credit file at Equifax or TransUnion. Have you blocked your account as recommended? Here’s the first one!

The lure of easy money

You’ve probably heard of the African princess who needs a thousand of your dollars to free up her bank accounts. In exchange, she promises you a staggering sum. Did you know that this scam still works, in its original form or in many variations? You’ve succumbed to the lure of easy money? That’s two!

Hacking into your e-mail address book is relatively easy if your protection isn’t up to date!

Emotionality

Scammers write to everyone on the address book saying they’ve been attacked, robbed, and injured. “I’m in the hospital, I need to pay $500 for an urgent check-up, I’ve had everything stolen,” says an acquaintance. You must send prepaid card numbers. Listen only to your heart… And that’s three!

Fear of taxes

You receive a letter from Revenue Canada. You can hardly open it, you’re trembling with fear. Revenue Canada never calls you first. They send you an e-mail saying there’s a message waiting for you in your “Clic” zone, or a letter asking you to contact them.

A little tip: when the phone rings, make sure you recognize the number on the caller ID. If you don’t recognize it, or if it’s an unfamiliar number, don’t speak first – say “Hello”, for example. Remain silent. Automatic messages are triggered by the sound of your voice. This will help you avoid almost all telephone scams. And that’s four!

Passwords

How many of you have passwords that are more than 20 years old? Yet there are password vaults that make life easier for you and harder for hackers. When quantum computers become commonplace, no password will be able to resist them. Other protection techniques will have to be found.

You are responsible for protecting your customers’ personal information. This starts with good management of passwords giving access to this data. And that’s five!

This article is not intended to make you feel guilty, of course. Our aim is to make you aware of your responsibility, whether active or passive, in the face of cyber-attacks.

If everyone blocked their Equifax and TransUnion accounts, there would be no more theft of personal information. At least, a lot less would.

Safety comes at a price!

You protect your home and its contents by purchasing high-quality locks. You even invest in an alarm system. You have your car chiselled…

Cybersecurity is everyone’s business, mine, and my team’s first. That’s why we only use virtual data room to obtain information sensitive to your professional practice. Never send confidential documents by e-mail.

Yikes!  But the banks always pay back!

Watch out, they’re tired of doing it! If they can prove negligence on your part, I’m not convinced they’ll pay.

In a future post, we’ll look at the thorny issue of e-mail security and how you can make it secure.

Threates and Opportunities in the Financial Service Industry
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THREATS AND OPPORTUNITIES IN THE FINANCIAL SERVICES INDUSTRY

By Jerry Butler 

 

Introduction:

Are you aware of Robo Advisors? Robos are experiencing very good growth and taking market share from conventional distribution channels but so did discount brokers 30 years ago. Regulation, shrinking fees, increasing compliance yet the industry and many advisors continue to grow their businesses and build very successful practices. Why?

30 years ago you could open an account over the phone, the account form was one page, A signature was not required and you could buy the client an investment with no money in the account. Regulations have changed dramatically and we are not going back to the “old” days and those days were not necessarily better!

 

THREATS TO YOUR BUSINESS

Consider the following threats to the way you currently do business:

  1. Many consumers currently consider investment advice a commodity. They see little difference between an independent advisor or broker or a bank or a “career agent”. That is why many will deal at the bank with an advisor with 15 – 20 ……… hours not years of experience. The reason is the amazing branding banks have done (they have had a 100 years!). Banks are trusted. The advisor might leave but the bricks are still in the same place therefore who sits in front of the client has become less relevant.
  2. Shopping on the internet has become ubiquitous and financial products are on the shelf as well. Many check out term insurance prices and follow their investments on the internet.
  3. Returns have been replaced by fees as the selling point for many institutions. Advertisements tout their lower fees and do not talk about returns. ETFs have become the vehicle of choice for many consumers, advisors and businesses.
  4. Right now, there is a large part of the population being neglected by conventional advisors. They are the younger person with little savings now. These are the people who use technology for every facet of their life. They depend on technology and that way of life. Will they continue to use technologies for their financial decision making when they have lots of money?
  5. Technology is cheap now and always getting cheaper especially on a per transaction basis and cost of storage. Large businesses with generic products have economies of scale and can manage hundreds of thousands of clients that can be slotted into a finite number of boxes where the algorithms do the bulk of the work. Artificial intelligence will continue to carve out “tasks” in our industry giving a competitive advantage to the large and well capitalized.
  6. The middle of the distribution channel – broker, dealers, mga, exempt market dealers – is squeezing advisors. They are cutting payouts and pushing costs and liabilities down to the advisor. While they are raising revenue expectations they are also cutting payouts. Lower revenues and higher expenses appear to be the trend. The survivors who will thrive are the advisors who are willing and able to change and adapt.
  7. Trust. Our industry has done very little to place the advisor in the community’s mind eye as a knowledgeable, helpful and trustworthy professional. As a CFP I wonder where and what that organization is doing. I see very little return on that “investment” both from my perspective and from the “client” perspective. That also goes for Advocis (though they have done some) and the Canadian Securities Institute.

I am sure I am missing many other threats but the above should give us all pause. Until the early 90’s the consumer marched down to the closest bank or credit union and got a guaranteed double digit return. Then they all poured into mutual funds and basically got double digit returns through the 90s. Expectations of the consumer were off the charts. “Snap back to reality!” The 80s and 90s were not the norm. Consumers are better educated and more aware of choices and competition in the market place.

OPPORTUNITIES IN THE INDUSTRY

An important issue to remember is that technology like Turbo Tax or Quick Tax did not put accountants or tax preparers out of business. But the accountants who did not evolve into a more sophisticated business model did feel the pain. There are always disruptors in every industry. It is important to look at your business model and your skill set and figure out how you can change your business to bring a value added proposition to your clients.

Do not forget that many people want personal service and most need it. Statistically we know that individuals with an advisor save more and get better advice therefore advisors need to keep evolving to the new ways of the industry

Here are some opportunities as I see it:

  1. Join the lower total fees revolution. Change your compensation model and show your clients how you can give better advice and competitive fees. What is your value proposition?
  2. Your business model has to reflect your strengths. Are you a generalist? Maybe a financial planning model. Are you or can you be a Specialist whereby you stand out from the crowd? There are many successful business models in our industry but the model has to fit your strengths. Know the different business models and figure out what works for you.
  3. Know your target market. Know who they are, where they are and what they want (need). I think too often we define a market by the size of their savings. It is impossible to only prospect million dollar accounts because the owner can be from all walks of life. Your target market is who more than how much. If you are targeting trades people or brain surgeons – than you will know where to find them. The other factor is what are your interests? Your best clients will be the ones with the same interests. You can translate your hobbies into friends and maybe clients.
  4. Have a clearly defined Service Proposition and how to communicate it to clients. How are clients treated? How many touches? How many appointments? Be sure your team is on the same page. Compensate staff based on the service of clients expected and provided.
  5. Be more than a one or two trick pony. Don’t just work with investments and insurance to replace income. Bring more to the table. If you have a situation outside of your comfort zone – have a referral ready (Center of Influence).
    That can cover mortgage, income tax, property insurance, debt management, estate planning, succession planning, etc. – become the relationship manager for all things financial.
  6. If you have a speciality and are in a niche market than that should be communicated to your target market. Your target market may be other professionals to refer to you. Know your value added.
  7. CRM. This is the most important feature (especially to increase value) no matter what your business model. This gets everyone on your team on the same page.  This is both in the client’s personal life and their financial life. You should know that Bill is a hockey fan and that his mortgage term is up in 3 months. One of the most ignored facets I encounter is advisors who want to grow their business but do not have a prospect list. Build a list with social media. In addition, the more you know about your prospects – the better chance they become a client (especially if their interests are congruent with yours).
  8. Use technology as a way to lever sales and service. Financial planning, contact management, investment analysis, income tax software, etc. can all be used to efficiently and effectively help you with your clients. Present information with charts and graphs – most people are visual learners.
  9. Have a Strategic Marketing Plan. Make social media part of your marketing. Relationship Marketing is the most effective business builder right now. It does not matter who your target market is as you can create touches with clients and build a prospect list. Host client education and appreciation nights. The more touches the better. Your marketing plan should have a referral program; identify centers of influence, charitable function projects, etc. The most important aspect = measure and monitor the results comparing budgeted and actual. Analyze how you are doing and know which areas to improve.
  10. Think outside the box. Offer free financial planning advice to your client’s adult children. Show them the benefit of starting early. Have their tax returns
    done. What differentiates you from your competition? Find the value added and tell everyone.
  11.  Educate and communicate. Tell your clients the different options they have available to them. Explain products and compensation and alternatives. Make your clients feel you are not hiding anything.
  12. Clearly communicate your value added every chance you have. You and all your employees should be able to concisely and clearly explain your value proposition.
  13. Bottom line – don’t have a book of business; have a business.

CONCLUSION

When CRM 2 started being bandied about Queenston got tons of calls from the arrogant – advisors will be running for the hills. We told the uninformed that Financial Advisors are resilient, knowledgeable and able to adapt. And you have!!

The next disruptor will result in anxiety but be met with the same adaptable business savvy.

Queenston has been successfully helping our clients increase their businesses value with several of our services. Check us out.

 

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Building a Strategic Business Plan
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Building a Strategic Business Plan

By Jerry Butler 

 

Introduction:

Read over the italics and use as a guide of what to consider for the actual Strategic Business Plan.

 

A. Develop Your Vision:

When developing your Strategic Plan you need to consider the following:

  • Your marketplace – who are your best and favourite clients. What is the common thread? Is the market large enough for you to be a niche marketer?
  • Your competition – Who is your competition? What do they do? What do you do better? How can you differentiate yourself from them?
  • Your current capabilities – no sense having a goal of 50 appointments a week if that is impossible. No sense being a stock trader etc.
  • Your personal definition of success – has to be quantifiable, measureable and realistic.

These are the general parameters to stay within when developing your plan.

  • Tying it together – using the above as your perspectives will allow you to develop a strategy that will allow you and your firm to:
  • Respond to your market;
  • Differentiate you from your competition;
  • Build on your core capabilities; and
  • Fulfill your personal definition of success.

B. Define Your Focus:

Who is your target market? How will you “introduce” Limestone? Maybe you want to concentrate on your own files because there are so many? If so, rather than see everyone when 6 out of 10 may be a waste of time – what is your process?

What is the objective of each appointment? What is the service experience? In the book Spin Selling – every appointment should have a goal of finding a need/problem/issue and therefore a potential sale – in other words always have the objective of another appointment. (unless they are willing to buy now!)

 

C. Evaluate the Gaps and how to close them.

If you want a $1,000,000 in sales and you are currently at $500,000 – what has to be done to close that gap and how long will it take.

The best way to analyze the gap is to consider the strengths and weaknesses of your business. List them. Attempt to design a plan that will enhance the strengths and improve the weaknesses.

 

D. Execute the Plan

Remember the goals have to be measureable and realistic. I had a client whose sales were $200,000 and every year he would set a goal of $1,000,000 in sales and his sales never changed. I am sure 10 years later nothing has changed.

AIso use increments that are bite size. If you want to increase your sales $500,000 over 7 years than that is $71,500 per year and $6000 per month or $1400 per week – $6000 per month seems more likely than just saying increase $500,000. Each month have a different sales concept  – for example let’s say my goal is to sell x  new insurance contracts. I will make a list of 50 people age 35 – 50 and have my assistant book 25 appointments. I will talk to each about their insurance needs and have a goal to take 8 aps and earn $6000+ in sales commissions.

 

E. Monitor and Measure Results

It is very important to keep track and analyze the results. Again be realistic in your goal setting so you don’t get discouraged. But good or bad analyze the results.

 

F. Leveraging Your Business to Increase Sales and Value

There are several ways to leverage your business:

  1. Buy another business.
  2. Merge with other businesses.
  3. Licensed Employees generate revenue.
  4. Sales Associates.
  5. Technology.

Firms can use all of the above to close the gap between their expectations and current reality. Keep in mind Queenston gets dozens of calls every week to “find me a business”. Easier said then done.

  • Building Value

The key is to build a business that will last – reduce transition risk when ready to sell and/or merge. The way to do this is to have increasing and stable recurring income. Profitability should be consistent and in line with averages. A systematic process should be in place for customer service, new clients, etc.

The branding goal should be that every client when asked who their financial advisor is answers the name of your company not your individual name. This can be done by promoting the name of the company. Also having clients meet with different advisors and/or licensed staff or associates.

Other factors to increase value include: location of your office (especially if your clients come to your office); reputation (branding); leveraging of licensed employees (long term)and technology, a complete and comprehensive CRM of clients and prospects; clearly defined and consistent client service model; unique and successful marketing program.

 

STRATEGIC  MARKETING PLAN

 

  1. OVERVIEW

Limestone currently has two (three?) offices and …….

  1. VISION

Where do you want to be in 5 or 10 years into the future. What kind of a business do you want? Sales, advisors, etc.

 

FLOW CHART

GOALS

Strategic goals are an expression, in measureable terms, of what your business intends to achieve. There are Hard Goals and Soft Goals. Hard Goals address financial goals – the Urgent and Important. Soft Goals refer to the less “Urgent” but Important goals such as employee issues, infrastructure issues (CRM, Technology, Facilities, “different plans”, etc.).

Hard Goals:

Breakdown the “important” products eg.

Insurance Sales                    increase sales revenue by x to y

Investment Sales                   “

Income Tax Sales                   “

Fee business                           “

TOTALS                                    “

New Clients                            “

New AUM                        “

Total AUM                              “

New Term Ins Policies                “

Reduction of Expenses         “

Etc.

 

You get the idea. Pick those issues that you feel is important.

 

SOFT GOALS:

Sales and Marketing – appts per week, appointments – selling #; service # – seminars, etc.

Strategic Alliance

CRM – clients

CRM – prospects

ETC.

Goals have to be measureable and have to be reviewed to actual vs goals. Then it is important to adjust what you are doing in order to hit objectives.

PRODUCT MARKET FOCUS

The key here is the FOCUS part. In your Plan you casually mention a few products – insurance, segs, income tax, etc.

It is not just what but who and how and how many.  You may want to focus on a specific product at least for a quarter.

Eg. Term Insurance – we have X Term contracts. We will convert Y policies to either new terms or permanent. We will sell Z new contracts. You can even define the market you are targeting.

 

VALUE PROPOSITION

What is important to your customers? You cannot be generic. What seperates you from dealing with the Banks or Credit Unions?

“Limestone has xx years of experience and yy education and therefore we are able to help our clients achieve their financial planning goals and objectives.” If you were sitting down with a new prospect is what you tell them going to convince them that they should deal with you?

Should be short and to the point – kind of an “elevator sales pitch”.

The second part is you have to deliver that propostion.

 

CORE ACTIVITIES

What are the value adding activities that your business intends to perform and how does it intend to perform them?

Eg. Financial Planning including – retirement planning, debt analysis including mortgages, investment and risk analysis ….. for all clients with revenue greater than $1000.

 

ELEMENTS OF THE PLAN

 

  • Marketing Plan – who is your target market? what will be done to increase profile, increase appointments, etc. promotions – email blasts and seminars; advertising; social media; etc. A clearly defined service model should be developed both proactive and reactive.
  • Operation Plan – CRM, Employees, junior advisor, expense reduction, etc.

 

  • Financial Forecasts – spreadsheets

I would recommend doing Quarterly projections broken down by product/service including recurring revenue. Also, set your expense goals in the same manner for the first 4 quarters and then annual for 4 more years for a total of 5 years.

IMPLEMENTATION

There are two categories to list actions in order to prioritize what and when actions should be done.

  • Important and Urgent – these are the items that are in “crisis and/or critical” mode. They should be addresses first but not at the exclusion of the day to day operations.
  • Important but not Urgent – these are the items that are very important for the long term success of the business but not in crisis mode. This is where a business wants to be as these are the activities that will prevent having to be in the urgent list.

 

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The Robo-Revolution and Other Threats To The Way You Do Business
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The Robo-Revolution and Other Threats To The Way You Do Business

By Jerry Butler 

Are you aware of Robo Advisors? They are currently taking market share in the US – one firm Wealthfront is bringing in $100,000,000 per month. What do they do? They use algorithms to evaluate clients risk parameters and make Index recommendations including re-balancing all for .25% of assets. Does your business model bring enough value added to justify the extra fees your clients are paying?

The argument against Robo Advisors succeeding is the need for individuals to have personalized service. I agree most people want personalized service especially the older clients. Two groups that are using Robo Advisors in the US are those working at the technology companies and pro athletes (see “Wealthfront deal with 49ers is a big marketing score”; Investment News).  They are young and high income clients that trust and are comfortable with technology.

When I came into the industry 20 years ago I could open an account over the phone, the account form was one page, I did not need a signature and I could buy the client an investment before I got a cheque. Have times changed? I often ask myself – with all the regulatory changes – who is better off? But that is a discussion for another paper. The point is times are changing.

When we combine this Robo/technology threat with the changes in regulation and the financial product distribution industry it probably means we have to make structural changes to our own business model.


THREATS TO YOUR BUSINESS MODEL

Consider the following threats to the way you currently do business:

  1. Many consumers currently consider investment advice a commodity. They see little difference between an independent advisor or broker or a bank or a “career agent”. That is why many will deal at the bank with an advisor with 15 – 20 ……… hours not years of experience. The reason is the amazing branding banks have done (they have had a 100 years!). Banks are trusted. The advisor might leave but the bricks are still in the same place therefore who sits in front of the client has become irrelevant.
  2. Consumers are getting used to “shopping” for financial products. Many check out term insurance prices and follow their investments on the internet. How many of your clients have or will leave the institution where they have their mortgage for 1/8 of 1%.
  3. Historically investment managers do not beat the Indices especially on a risk adjusted basis. According to the Economist (August 9, 2014) based on two studies in the Financial Analysts Journal (July/August 2014) that fewer than 25% of managers even last 5 years. The main reason cited for under performance is that the managers are compared to all of the other advisors – therefore they are not trying to beat the index they are trying to beat the average.
  4. Right now there is a large part of the population being neglected by conventional advisors. They are the younger person with little savings now. These are the people who use technology for every facet of their life. They depend on technology and that way of life. Will they continue to use technologies for their financial decision making when they have lots of money?
  5. Technology is cheap now and always getting cheaper especially on a per transaction basis and cost of storage. The economy of scale is significant as there can be hundreds of thousands of clients but they can be slotted into a finite number of boxes where the algorithms do the bulk of the work.
  6. The middle of the distribution channel – broker, dealers, mga, exempt market dealers – is squeezing advisors. They are cutting payouts and pushing costs and liabilities down to the advisor. While they are raising revenue expectations they are also cutting payouts. Lower revenues and higher expenses appear to be the trend. The survivors who will thrive are the advisors who are willing and able to change and adapt.
  7. The industry has done very little to place the advisor in the community’s mind eye as a knowledgeable, helpful and trustworthy professional. As a CFP I wonder where and what that organization is doing. I see very little return on that “investment” both from my perspective and from the “client” perspective.

I am sure I am missing many other threats but the above should give us all pause. Until the early 90’s the consumer marched down to the closest bank or credit union and got a guaranteed double digit return. Then they all poured into mutual funds and basically got double digit returns through the 90s. Expectations of the consumer were off the charts. “Snap back to reality!” The 80s and 90s were not the norm. Now consumers realize if the long term returns are going to be 6 – 8% that if they can reduce costs they are actually increasing returns.

 

INDUSTRY DISRUPTORS

The white paper by Deborah Fox of the Fox Financial Planning Network “How To Build A Robo-Shield For Your Financial Advisory Firm” describes how Robo Advisors are disrupters of the status quo. The four stages of Industry Disruptors are:

  • Stage 1 – The Disrupter enters the Industry – a few years ago there was the start of robo advisors but no one took them as threat to the status quo.

  • Stage 2 – The Disruptor gains transaction in the Industry – The disruptor captures a small but significant market share. The status quo takes notice.

  • Stage 3 – The Disruptor becomes entrenched in the Industry. More disruptors pop up. The top firms in the status quo implement evolutionary changes to their business model.

  • Stage 4 – The Disruptor forever changes the Industry. The firms that evolve out of the status quo will thrive. Those that don’t evolve lose market share or cease to exist.

Though still at Stage 1 in Canada, Robo Advisors may be close to Stage 3 in the US. The US has been very fee sensitive for a while but certainly it is becoming an issue in Canada as well.

CNBC released their 50 Disruptor List for 2014 recently (http://www.cnbc.com/id/101734664). All were technology companies and 11 were directly related to personal financial planning. One firm; Personal Capital does a financial plan, investment plan and the client can track all their expenses through the same site.

The other elephant in the room is CRM2 which I get calls about daily. Many think it will force advisors out of the business but I personally give advisors much more credit than that. I feel the effects will not be as dramatic as we fear. The key to not having to compete on price is to have consistent and excellent service. The second part of your value proposition has to be clearly communicating that value to your clients. If you are constantly competing with “what and where is cheaper” than
your clients are viewing what you bring to the table as a commodity. Your clients will be looking for the cheapest.

 

YOUR BUSINESS MODEL

An important issue to remember is that technology like Turbo Tax or Quick Tax did not put accountants or tax preparers out of business. But the accountants who did not evolve into a more sophisticated business model did feel the pain. There are always disruptors in every industry. It is important to look at your business model and your skill set and figure out how you can change your business to bring a value added proposition to your clients.

Here are some ideas to reduce the effects of CRM2 and/or Robo Advisors and /or any other disruptor:

  1. Your business model has to reflect your strengths. Are you a generalist? Maybe a financial planning model. There are many successful business models in our industry but the model has to fit your strengths.
  2. Know your target market. Know who they are, where they are and what they want (need). I think too often we define a market by the size of their savings. It is impossible to only prospect million dollar accounts because the owner can be from all walks of life. Your target market is who more than how much. If you are targeting trades people or brain surgeons – than you will know where to find them. The other factor is what are your interests? Your best clients will be the ones with the same interests. I have a friend who  translated his love of cars, boats and snowmobiles into specializing in the transportation industry.
  3. Know your Service Proposition and how to communicate it to clients. How are clients treated? How many touches? How many appointments? Be sure your team is on the same page. Compensate staff based on the service of clients expected and provided.
  4. Be more than a one or two trick pony. Don’t just work with investments and insurance to replace income. Bring more to the table. If you have a situation outside of your comfort zone – have a referral ready (Center of Influence).
    That can cover mortgage, income tax, property insurance, debt management, estate planning, succession planning, etc. – become the relationship manager for all things financial.
  5. If you have a speciality and are in a niche market than that should be communicated to your target market. Your target market may be other professionals to refer to you. Know your value added.
  6. This is the most important feature (especially to increase value) no matter what your business model. This gets everyone on your team on the same page. This is both in the client’s personal life and their financial life. You should know that Bill is a hockey fan and that his mortgage term is up in 3 months. One of the most ignored facets I encounter is advisors who want to grow their business but do not have a prospect list. Build a list with social media. In addition, the more you know about your prospects – the better chance they become a client (especially if their interests are congruent with yours).
  7. Use technology as a way to lever sales and service. Financial planning, contact management, investment analysis, income tax software, etc. can all be used to efficiently and effectively help you with your clients. Present information with charts and graphs – most people are visual learners.
  8. Have a Strategic Marketing Plan. Make social media part of your marketing. It does not matter who your target market is as you can create touches with clients and build a prospect list. Host client education and appreciation nights. The more touches the better. Some experts say as high as 70 contacts a year. Your marketing plan should have a referral program; identify centers of influence, charitable function projects, etc. The most important aspect = measure and monitor the results comparing budgeted and actual. Analyze how you are doing and know which areas to improve. Everyone says to me – “I need more referrals” but when asked they do not have a plan to achieve more referrals.
  9. Think outside the box. Offer free financial planning advice to your client’s adult children. Show them the benefit of starting early. Have their tax returns
    What differentiates you from your competition? Find the value added and tell everyone.
  10. Educate and communicate. Tell your clients the different options they have available to them. Explain products and compensation and alternatives. Make your clients feel you are not hiding anything.
  11. Clearly communicate your value added every chance you have. You and all your employees should be able to concisely and clearly explain your value proposition.
  12. Bottom line – don’t have a book of business; have a business.

CONCLUSION

In conclusion the industry is changing dramatically. As an aside; but an example of industry changes are the current regulatory problems with Warren Buffett’s Berkshire Hathaway. Mr. Buffett’s motto has always been put trust in your people but be careful who you trust (isn’t that great). Well they have been late filing reports (that don’t mean anything except to lawyers at the SEC I guess) on some of their investments and have been fined. Mr. Buffett has always been proud of the fact that he runs BH on a skeleton staff and does not use a computer (easy for him with his brain). But it looks like the processes of head office may have to change.

For those of us without Mr. Buffett’s personal capacity we have to adjust and change our processes sooner rather than later.

       

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Quantum of Economic Benefit
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QUANTUM OF ECONOMIC BENEFIT

By Jerry Butler 

 

Quantum of Economic Benefits = Economies of Scale + Strategic Advantage + Financial Synergy

This could be the most important formula you will have ever learned. This is how you can grow your business’s value. Think about the average advisor’s office – how much more business would you have to do before you needed more space, more employees, more computers, more telephones, more …. I am sure you get the point.

Think of this – rather than 3 or 4 advisors having one assistant each – why not have one licensed assistant processing trades, one marketing assistant booking appointments and managing your data base and one administrative assistant. Probably with those three assistants your office could handle not 3 or 4 producers but 5 or 6. That is Financial Synergy. What about advertising, bulk purchases, and promotions? All of these are more manageable split 4 or 5 ways. That is Economies of Scale. Finally, you can have product and concept specialists which is much more productive than everyone selling a little of
this and a little of that. This could be a major Strategic Advantage. This is a business model that can do business when you are not there – the goal of every businessman.

Plus you have a built in Continuation Plan, Successor Plan and a story of long term stability to tell all your clients. How many times have you been asked “how long are you going to be here?” even if you could answer a question with no real answer wouldn’t they feel better if you had a business model that would guarantee the firm would be around for a very long time. PLUS the larger the company the higher the multiples – merging will increase the value of all the businesses involved.

       

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