Let’s take these issues one at a time.

What Is a Trusted Advisor?

In 1986, when I was designing the first edition of what we now call the Bill Good Marketing System^®, I was thinking about how to classify clients in terms of responsiveness.

I’d run into many account executives (as they were then called) who used the term “book.”  People would say, “This is my ‘A Book.’”  They meant that group was their best clients.  And people had different ways of defining that book, mostly in terms of assets, size or revenue.

As I worked my way through this idea, I realized there were two investor characteristics people were trying to measure with the “book” concept.  For some people, the “best client” was a rich one.  For others, it was a responsive person.

So in the computer program we created—Gorilla^®—we used two different measures of “goodness.”

The “book” field measures responsiveness.  An A-client is someone who does what the advisor says when he or she says to do it.  A B-client is someone who does that about half of the time.

Then we created a “wealth” field using a simple set of choices on a scale of 1-5.  A “1” is for those few clients at the very top of your wealth scale.  For some, that might be $500,000 and above.  For others, it could be $10 million and above.

The optimum client in this classification system would be an “A 1,” or a rich, responsive client.

Frankly, my early concept of an A-client was right on the money as far as the later concept of the “trusted advisor” is concerned.

A trusted advisor is one held in such high esteem that the client will do what the advisor recommends with full confidence that the advisor is acting in the client’s best interest.

So the people you view as A-clients are the same people who view you as a trusted advisor.

Creating the “Trusted Advisor” Relationship

The relationship between trusted advisor and client is complex at best.  From what I have been able to determine, it is a melding of at least three separate identities or perceptions.

You must first be perceived as an expert financial advisor.  You must also be perceived as a caring, well-mannered individual.  And you must be perceived as a good citizen.

Imagine being a trusted advisor without one of these characteristics.  Suppose you’re perceived as an expert financial advisor, but a jerk.  Obviously, you will not enjoy the trusted advisor relationship.

Or suppose you’re perceived as an expert advisor and a caring individual, but on Monday morning, your clients read you’ve been arrested for a DUI.  All of your expertise and your otherwise good character disappear in a flash when the DUI announcement is published.

Creating the Expert Financial Advisor Identity

When I use the term “identity,” I mean the perception one person has of another.  In this case, we’re talking about the perception your clients have of you.

The first identity that must be created is “expert financial advisor.”

Interestingly, you can be an expert but not be perceived as one.  My remaining comments are going to assume you are an expert who needs to strengthen your perception as such in the minds of your clients.

The identity of expert financial advisor is created first and foremost by what your clients perceive in your office—how you demonstrate through personal interaction that you know your craft, and especially how you answer questions.

When people come into your office, one of the very first things they should see is your “brag wall.”  This is where you display evidence of your advanced degrees, as well as recognitions you have received for your good works and your community service (all part of the caring individual and good citizen identities.)

A good part of the expert identity is created by the way you position yourself with the other professionals in your life.  When people go to see a doctor, they’re given a physical exam before they get a diagnosis.  In your scheme of things, before you begin selling products or making other recommendations, you first do a very thorough financial physical. 

Part of the expert identity is built with the quality of the set of recommendations you present.  Once this identity is created in person, it may be months or even years before you see the client again.  So in order to sustain the identity of expert financial advisor, you have to deal with the “out of sight, out of mind” phenomenon.  This is obviously done by telephone and through written contact, either by email, fax, or preferably letter.

To build and sustain your financial expert identity, you should, at least once a month, send your clients information that educates them and which they will find helpful.

Your objective is to fill the mental space for finances with your expert commentary and advice so others cannot get in and supersede your influence.

Creating the Caring, Well-Mannered Individual Identity

Hopefully, you are a caring, well-mannered individual.  But it is obviously possible for you not to be perceived as one, especially when “out of sight, out of mind” is operating.  This identity seems to be created in “the little things.”

For example, let’s say a relative of a client passes away.  You handwrite (or type) a condolence letter.  You go a bit beyond the usual condolence cards that get stacked up and thrown away.

Birthdays, anniversaries, weddings—all of your clients’ important occasions get acknowledged and remembered.

You further build this identity by some of the things you don’t do.  You don’t throw little clients off the truck just because they’re small.  That would prove to any who cares to look that you are NOT a caring or well-mannered individual. 

Creating the Good Citizen Identity

I hope that you are a good citizen—that you’re active in your community, that you contribute to local charities, that you are visible.  Here is where you need to give your presentation some thought.  What can you put on your brag wall that will further this identity?

Well, photos are the best things.  If you attend a special rally for the Rotary Club, get a picture.  If you receive a recognition from the city council for doing a cleanup on your block, get it framed.  Your good works as a citizen attest to your character.  People care about that, especially given the negative publicity that has hounded this industry for the past several years.

Conclusion

Smaller accounts can be very profitable if managed correctly.

Sometime in the early eighties I first encountered an interpretation of the 80-20 rule that I now believe to be nearly fatal to an individual business and possibly the cause of major damage to the industry itself.

The 80-20 rule, as I'm sure you know, simply says: 80 percent of an advisor's business comes from 20 percent of his or her book.

But the interpretation went like this: Since much more than 20 percent of our time is spent on the 80 percent that produces just 20 percent of our business, then production should go up if we just eliminate the bottom part of our book. Over time, various trainers have recommended this, various firms have institutionalized book pruning, and countless RRs have practiced it on their own.

Bad-Year Phenomenon

I began to suspect something was wrong with this interpretation when I started to run into what I called the "bad-year phenomenon.'' In the course of a conversation with an RR, I would find he or she was having a bad year. But this was during the years of the great bull market, and bad years were unusual. In time, when I would encounter the "bad-year phenomenon." I would find myself asking the following questions:

Bill: A few years ago, did you give away a bunch of accounts?

RR: As a matter of fact, I did. For the past couple of years, I've been purging the bottom 20 percent of my book. Every January, the new kids are lined up. I just don't have time to talk to everybody. So I give them away.

Bill: What happened to production?

RR: Well, it initially went up, but for some reason, it's down now.

I'll say more about this connection below.

Morality of Book Pruning

Personally, I don't think a lot of the ethics of book pruning. If someone confided in you and trusted you, I think your continued care and attention comes with the territory. And as I'll show you, even the smallest accounts--the ones you want to prune--can be highly profitable.

But even if that weren't true, I think it's a fairly low act to dismiss a client simply because they don't do sufficient business. How would you like it if the service department at your car dealership wouldn't deal with you because you didn't have sufficient damage? They'd have to tie you, gag you and bind you to keep you quiet.

Well, what about your client who calls in frequently, but who buys only five units of a bond fund once every two years? That client is your worst nightmare, isn't he? Lots of work. Little return.

No one forced you to open that account. Unless you turn it down from the beginning, that little client is, in my book, entitled to the same first-class treatment that you give Mr. Big.

Now, having said all this, let me pose an even bigger reason:

Discounters and No-loaders Love Your Marginal Accounts

I cannot prove what I am about to say, but I believe it very strongly. The rise of the discounters, no-loaders and low-loaders exactly parallels the rise of the book pruning movement, and has contributed substantially to the competitive problems you now have.

As individual RRs have neglected or abandoned their small accounts, Fidelity--like the carnivorous plant in Little Shop of Horrors--kept singing "Feed Me, Feed Me!" In thousands of ads, the no- and low-loaders told small investors: "YOUR MONEY IS WELCOME HERE!" Many of the smaller accounts, wooed by this competition, grew up and became big accounts.

And as trillions of dollars pass from the WWII generation to their baby-boomer heirs, many of those accounts will become the "affluent investor'" market that you have been urged to abandon your smaller accounts in favor of:

Even More Reasons to Keep Smaller Accounts

So far, we've got two really good reasons for keeping all accounts:

1) Abandoning smaller accounts is a crummy thing to do.

2) Feeding your competition creates monsters.

These should be sufficient reasons NEVER to give up a client, but in case these don't bite, I have a couple of other reasons:

You Never Know Where Next Year's 80 Percent is Coming From

I owe this insight to my friend, Bill Tennison.

Some years ago, I asked all the seven-figure producers I knew to tell me their experience with the 80-20 rule, because there was something about it I still didn't understand.

One day, I asked Bill T.:

Bill G.: Tell me, Bill, does the 80-20 rule work for you?

Bill T.: Absolutely. In fact, for me it's more like 90-10. But I never, ever throw away a client because I never know where next year's top 20 percent is coming from. Bingo! I had it. This was the complete explanation for the "bad-year phenomenon'' I had wrestled with.

Consider the source of next year's top 20 percent:

This year's top 20 percent. You can absolutely count on some repeaters.
Referrals from this year's top 20 percent.
New clients from prospecting campaigns.
Bottom 80 percent clients who either had money stashed somewhere or got more.
Referrals from bottom 80 percent.
Bill T. told me about an elderly client of his who did a very modest amount of business. One day her sister, Velda Oldebucks, called. One thing led to another, and before long. Bill had one of his top 10 accounts.

So, by neglecting or pruning your bottom 80 percent, you cut off two out of five feeder lines into next year's top 20 percent. And that's just plain dumb.

If you still need more reasons for not feeding the Fidelity monster, try this:

You can do $2 Million Per Year on Smaller Accounts

That's right. You didn't misread this. No, you can't do it by yourself. You have to have a team. But consider the following example:

Suppose you've got a bunch of accounts that do $5,000 every two years of some fund or other. That's $200 a year in commission.

IF you have a team in place;

IF you stay in touch by direct mail; and IF you only talk to your clients when they're ready to buy; then this little account is suddenly very profitable.

Ask yourself this: If my sales assistant calls every three months: if my smaller clients get letters every month: if my service assistant promptly handles any service requests: then how long will it take to close a $200 order?

Answer: 10 minutes.

Question: What's your hourly rate?

Answer: $1,200 an hour.

Question: How many hours a day do you work?

Answer: About eight.

Question: So if you could spend your day handling $200 orders at the rate of six per hour, how much would you make gross a day?

Answer: $9,600.

Question: My calculations show that that's $48,000 for a 40-hour work-week. If you did that for 40 weeks, that's $1,920,000 a year, plus 12 weeks of vacation. Are you doing that now by throwing away your smaller accounts?

Smaller accounts can be VERY PROFITABLE if managed correctly. Don't abandon them. Don't give them away. Don't throw out two sources of next year's top 80 percent.

If you get an uncontrollable urge to waste valuable resources. I have another option. Just send me a check! You'll be better off. I'll be better off. Your clients will be better off. So there will be a net social gain. Got it? Great!

Thankyouverymuch.

Bill Good is Chairman of Bill Good Marketing, Inc., a firm based in Draper, Utah, devoted to helping financial advisors maximize business. He designed the Bill Good Marketing System® and has developed the H.S. Dent Adviser’s Network® in partnership with Harry S. Dent, Jr. For information on BGM or Dent products and services, call 1-800-678-1480.

By Bill Good

Here’s one of those fundamental questions for you: How many prospecting leads do you need a week?

It’s one of those questions that is so basic, everyone thinks everyone else must know the answer. And so, not wishing to appear to be a member of Densa (the opposite of Mensa, the national group of self-selected geniuses), no one even asks the question!

So let me ask it this way: How many names should you have in your prospect file for follow-up in the next seven days?

And to answer, let me tell you something about Muhammad Ali-something that, if it isn’t entirely true, should be.

The Muhammad Ali Prospecting Principle

Some years ago, I recall hearing about a TV interview that Howard Cosell did with Muhammad Ali. As the story was relayed to me, Ali and Cosell were shown walking along the beach at Martha’s Vineyard (or some such piece of heaven), and Cosell asked Ali about his famous left jab. Ali allegedly said, "Howard, I don’t ever try to hit a man in the face. I always aim for the back of the head." And that’s the principle. Thankyouverymuchandhaveagreatday.

Got it? Hmmm. All right, then. Here’s a little more explanation, and then I’ll formally state, for all time, the "Muhammad Ali Principle of Prospecting."

(You’ll understand the "Ali Principle" better if you have a good handle on different types of prospects. And to get a really complete handle, you ought to read my book, Prospecting Your Way to Sales Success. Chapter 8 outlines how to manage a callback file.)

Grades of Prospects

Some years ago, when I was doing a seminar for an office in Atlanta, I decided to conduct a "prospect census." I wanted the advisors to know how many of the different kinds of prospects they each had, and I gave them the following definitions of prospect "grades."

Grade A = Active. Anyone in your prospect file for follow-up in the next seven days. These may include Cherry cold-call leads, referrals, seminar attendees, leads from previous weeks that are still active, etc. The key word here is "active." An old "pit card"-one you keep setting ahead in your file-is not active!

(Editor’s note: In Bill’s terminology, a Cherry is someone with interest and money now. A Green Cherry has funds due at a known future date.)

Grade B = Green Cherry. Anyone from a previous week’s prospecting who has money due at a known later date. Ideally, you’ll know the amount; but you’ll certainly know the date.

Grade C = Pitch and Miss. Former A's and B's that didn’t buy. They still seem qualified, but you can’t or haven’t found what they really want.

Grade D = Other Advisor. As you prospect, lots of people will tell you, "I already have another advisor." You save those names because the person most likely to buy something is the person who already owns it!

With these definitions in front of my seminar attendees, I had everyone drag out their callback files and answer the following questions:

1) How many Grade A prospects do you have?

2) How many Bs (Greenies) this month?

3) How many Bs in the next 90 days?

4) How many Cs scheduled for a call this month?

And here’s what I found:

Results of the Prospect Census

Most of the 12 or 15 advisors in the seminar had seven to 10 As, just a few actual "Greenies," and tons of Cs that they’d been wrongly classifying as A’s.

But a couple of them had over 100 Grade As; or, as it turned out, prospects who had been As but had not closed.

With these results in mind, let’s take a look at...

Four Prospecting Conditions

With respect to prospects, there are four possible conditions for RRs. As you will see, most of those in my seminar fell into the first of the four.

1) Not Enough

This condition is disastrous for two reasons; one obvious, one not.

Obvious: With only a few leads, you can’t open many accounts.

Not-So-Obvious: With only a few leads, RRs are driven to a "scarcity of leads" mental state, in which they hang on to what they’ve got. They’re actually afraid of going for the close because it risks a scarce lead. This is one of the main reasons for bloated, pit-polishing phone calls.

Not enough leads also creates the worst menial condition for a salesperson: "needing prospects." Prospects sense this, and run like a rabbit from a hungry coyote.

2) Enough

I’m listing this condition even though it really doesn’t exist!

"Enough" leads would mean that at the end of the week you’ve opened your target number of accounts and all leads have been contacted-that is, you ran out of leads exactly as you hit your target.

Will this condition ever exist? If your closing rate on new prospects is one in seven, and if you want three new households per week, will you achieve it if you get only 21 new prospects a week?

No way! Situations will always come up that make it impossible for you to have "Enough" leads according to my definition.

"Enough" leads would be "the face," in Ali’s terms. (Starting to get the picture?)

3) Too many

"Too Many" is the optimum number of leads to have. Call it "the back of the head."

As with the "Not Enough" condition, there are an obvious and a not-so-obvious result of "too many" leads.

Obvious: You can definitely achieve your target number of accounts, because you won’t run out before the end of the week.

Not-so-obvious: When you have too many leads, you develop an attitude of abundance. Not only do you open enough accounts, but also you have so many leads that you don’t give a hoot about anyone who plays hard to get. Prospects will sense that if they don’t toe the line, you don’t need them.

Let’s put it still another way. If your time and creativity are infinitely available, they’re worthless; if they’re scarce, they have value. The only way to communicate that it’s scarce is to actually have more prospects than you can follow up on.

So, "OK, Bill," you say, "exactly how many is Too Many?"

Well, since you insist:

For a new advisor: 50 Grade A’s to follow up on in the next seven days.

For an RR in the $200-$250K range:

Maybe 25.

From $250K on up: Maybe as few as 10.

And of course as you increase your production, you can afford to hire others to dip, disinfect, rinse, dry, and gussy up your leads.

4) Way Too Many

A couple of RRs at that seminar many moons ago had at least 100 leads each they were trying to follow up on.

How on earth could they get that many?

Answer: By not closing.

If you’re a new advisor, your prospecting system should be producing about 20-25 new leads a week. After you’ve produced at this rate for a while, you’ll find you have about 50 A’s each week as long as you’re systematically closing.

If your callback box is jammed, you’ll find you quit prospecting. And that means you’ll wind up with a group of "swamp gas" prospect cards. These people will talk to you, sound good, promise things-but when you grab for them, they’re gone just like a puff of swamp gas.

If you’ve fallen into this condition your best bet is to call every single one of them, asking them to buy something or set an appointment. If no go: Thankyouverymuch click rip rip rip.

With all this in mind now, it’s time, once and for all to formally state . . .

The permanent, Once-and-for-All

Version of the

Muhammad Ali Prospecting Principle

"Always aim for the back of the Head!"

Bill Good is Chairman of Bill Good Marketing, Inc., a firm specializing in innovative marketing and organizational solutions for Registered Reps and Financial Advisors. He is also the author of Prospecting Your Way to Sales Success (Scribners, NY). For information on BGM products and services, call 1-800-678-1480.