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Ask Nick...
| Q: |
I heard you say long ago that your fee is only an issue when your value is in question. I completely agree - and whenever it is an issue, I know I must reflect on why, so that I can improve on how I work with and serve my clients. That being said, I have a client couple who are retiring. The husband is getting a lump sum that would increase my assets under management nearly fourfold. He values our relationship and wants the money to come to me. But the wife is having a hard time dealing with the fact that they will now be paying me $12,000+ per year. The husband asked me to enlighten the wife about the risks of managing this money without advice. I would also appreciate your ideas about how to respond. |
| A: |
By repeating the dollar amount of the fee rather than the percentage, you are
(unconsciously, I think) ceding the agenda to her, and if you do that you’re
going to lose. My interrogatory way of explaining the fee appears on pps.
232-235 of The New Financial Advisor. In substantially the same form, it
is archived in the October 2001 edition of this newsletter. I urge you to
stay very close to this verbiage, which (among other things) relentlessly quotes
the fee as a percentage of the assets: the minuscule one percent. Two cautionary
procedural tips: (1) Do not, under any circumstances, make this statement to him
alone. She isn’t listening to him (nor, I suspect, to you, but there’s only one
way to find out). Explain the fee to both or neither. If you are not looking
right into her eyes when you do this, I guarantee you’re going to lose. (2)
If, after you make the one percent statement, she says the dollar amount even
one more time, you can assume it’s over. Very politely thank them for their
time, tell them you’ll be happy to guide them on the terms you’ve described,
invite them to inform you of their decision at their convenience, and
leave. |
| First published in the March 2003 issue |
| Q: |
I have a client whose husband passed away and who received life insurance proceeds of $2 million. She is 37 and has three children under the age of six. She needs approximately $100,000 per year in income. Should a portion of the money be set aside to cover her income needs for the next two to three years, with the rest invested in a diversified stock portfolio to be drawn on three years from now? Should the money be dollar-cost averaged or fully invested right away? |
| A: |
All of the money should be invested immediately repeat immediately in a diversified portfolio of managed equity accounts from which she can withdraw five percent per year to cover her income needs. Dollar cost averaging lump sums is always a sucker bet, but doing so after three straight down years in the stock market (when there’s only been one fourth straight down year in the last century) is, at least statistically, criminal. |
| Q: |
I have recently encountered a prospect who has become paralyzed at the point of liquidating his current strategy and implementing my recommendation. He is not clear, but seems to be waiting for the existing account to “come back.” My line on this is that it’s always the right time to implement the right decision. I just don’t know of any other way to phrase it. May I have your thoughts on dealing with this issue? |
| A: |
There is no other way to phrase it. Tell him to call you when he’s ready, and don’t call him again. I doubt you will hear from him. Usually when a prospect can’t even articulate an objection, he’s objecting to you. |
Questions for Nick may be submitted by visiting the “Ask Nick” page of our
website, www.nickmurrayinteractive.com. Selected questions and answers will
appear in the newsletter.
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