Most of us remember the story of the three bears. But did you know that baby bear had two siblings? Yes, there were two more bears born after the story was written. The three siblings were named Frugal Bear, Sensible Bear, and Lavish Bear. As their names imply, their personalities were quite different, though they all looked quite alike and had the same parents. If you were their advisor and were trying to gain each bear's trust, you'd have to be cognizant of their unique personalities, and modify your approach to each one. But let's get back to the bears. Here's the rest of the story.
Frugal Bear was 52, married with two cubs, owned a trucking company, and lived modestly in a middle class neighborhood. He had an annual income of $125,000 and a net worth of about $3 million. He had been a goal-oriented saver his whole life, something he learned from his father, Papa Bear, who lived a simple, balanced lifestyle.
Sensible Bear was 49, married to a wonderful sow, and had three cubs. He was a middle manager with a large corporation and had an annual income of $100,000. His net worth was about $2 million and he lived in a middle-class neighborhood. He received his sensible nature from his mother, who was very pragmatic and self-disciplined.
Lavish Bear was a 47-year-old physician, married with three cubs of her own, and lived in an upper-class neighborhood. She got a late start in her career because she was in medical school for so long. She also felt the pressure to "look the part" of a successful physician and because her annual income was $250,000, she was always able to drive a newer model foreign luxury automobile. Her family enjoyed numerous outings to the country club where they were members, and took several trips each year to exotic destinations. Her net worth was about $1 million. No one knows for sure where she got her lavish tendencies. Perhaps it's because she was jealous of her older siblings and was determined to outdo them.
They each had their goals. Frugal expected to retire at 65 and live on $90,000 annually. Sensible wanted to retire at 62 with $80,000 annually. Lavish planned to retire somewhere around 60 with an annual income of $225,000.
Frugal and Sensible both had written financial plans and updated them on a regular basis. They believed that having good advisors who provide good advice would more than pay for itself. Lavish, on the other hand, was so busy with her career that she hadn't taken the time to have a plan drafted. Instead, she took cues from golf buddies and invested in the latest hot stock and attempted to time the market. Lavish did not see value in taking time to invest in a financial plan or to consider the long-term time horizon.
When the time came to retire, Frugal was able to retire early at age 63 instead of 65 and live on $90,000 a year, which was just what he planned to have. Sensible retired on schedule, at age 62 with $90,000 annually, $10,000 more than he planned for. Lavish had to work an additional 9 years until she was 69 and then retired on $150,000 per year, which was $75,000 less than she expected. Needless to say, Lavish had to make some major changes to her lifestyle.
This story involved three cubs of the same parents, who grew up at the same time in the same forest, and yet were completely different. Just as with bears, these differences appear every day in our clients and because each client is different, each requires a different approach.
How to Get There
All advisors want clients who will view them as their primary source of advice. Before they will look at us in that way, however, the clients must learn to trust us. How do you gain this trust? While in some cases it could happen quickly and in others it could take some time, the outcome largely depends on meeting two criteria. First, you have to be the right kind of person for that client, and second, the client must have the capacity to trust. To figure out if you are the right kind of person, ask yourself this question: If you had two products (product A and B) that would each meet the need of a client and one pays a higher commission, but has higher internal fees, would you hesitate over your choice? Which would you buy if you were the client? If you are strictly a salesperson, only interested in the amount of money you can make on the client, you would likely choose the product with the higher commission, even if the internal fees to the client were higher. You may make sales, but what kind of relationship are you building? If the client has any intuitive skills, they will eventually realize your priorities are not their priorities, and you could be finished before you begin. I have known advisors like this who made a lot of money "selling" financial products, but eventually the truth came home to roost. Moreover, in the present environment of increased litigation, it is especially important to be ethical and act with integrity. In short, you must be the right kind of person.
Then there is the second criterion for gaining the client's trust–the client has to possess the capacity to do so. Some people, because of their personalities or past experiences, have more difficultly trusting others. These clients typically require more time and effort, but if you can gain their trust they can also be some of your best clients. Be careful, however, because if you move forward too quickly, they may back away emotionally.
Our goal–assuming we're the right kind of person–is to motivate the client to want to work with us and not feel like we're chasing them. Here are some real-world examples from my practice that illustrate this.
Lavish Bear Susan
An associate of mine introduced me to Susan and John. Susan was like the youngest bear, Lavish. A successful physician, she is married and earns over $500,000 per year. The couple live in an upper-class neighborhood in a beautiful home valued at well over $1 million. She and John came to see me, however, because they were consistently running out of money each month. They were going deeper and deeper into debt and said they desperately needed help.
I knew this relationship was not going to result in much revenue at first, but over the long term it had the potential to be very profitable. I suspected there weren't many advisors who would be willing to work with a client who had not yet amassed a large pool of assets. Susan validated my suspicions. I began our first meeting by asking about their parents. Were they wealthy, poor, or somewhere in the middle, I asked? How did they handle money? Which parent made the money decisions?
