2007 SMA Advisor of the Year: Craig Randall

Like all elite producers, Randall says he truly loves what he does, and he's not afraid to share his knowledge. He is a well-known teacher who trains other advisors to duplicate his success through the Randall Marketing Group. In the following interview, he graciously shares the nuts and bolts of his approach, and explains why it has all worked so well for him.

SMA: You've been touted as a "Seminar advisor for the next generation." How did you develop the niche in seminars?

CR: Well, there was a point in time when I wanted to and needed to grow my client base as rapidly as I possibly could. I've always done client-based seminars. We did public seminars before; this was about six or seven years ago. Then it came to a point where I really had to grow the business and I had to figure out how to do them. I went to everyone's seminars. I went to attorney's seminars, I went to advisors, I went to doctors' seminars. Anyone that had a seminar, I went to it and tried to get bits and pieces from here and there, because there was really no one willing to tell me how to do it. People that know how to do it keep it to themselves. I started out and made a ton of mistakes and invested a lot of money in the seminar process. First I found that direct mail was the best way to get people in the room, that was the best form of advertising for me. It took awhile for me to figure out how to get people in the room. The direct mail company I was working with was giving me kind of average numbers on what to expect. They told me that when I do a seminar, if it was a good seminar, I should expect to set appointments with 40 to 50 percent of the people – that would be really good. And, I put together a seminar. I had to do that myself too, a PowerPoint seminar. The most important part of my business is exceeding my clients' expectations. I want to do more than they ever expect me to do. So I get to know them really well. I kind of know the psychology of the client. The people are afraid to make change. They don't like to be sold things. So when I was designing the seminar presentation, I put in there a lot of the things that I like to do and that I think clients like. It's the information, no product, no real close, if they like me they're going to come see me, if they don't like me, they're never going to see me again. That is kind of how I put the seminar together. We started off and we hit 40 or 50 percent. Family units were setting appointments with us. Everyone told us that was great, but it seemed to me that we should be doing a better job. So then I started thinking about subconscious connections and psychological connections that people have and started putting some of those in the seminar. It made the seminar process a little more fun for them. An evening out rather than going to a class. After about a year and a half of doing seminars, we finally hit the point where we were setting appointments with 80 to 90 percent of the people that came to the seminar.

SMA: This leads us into your three-stage appointment process. You don't typically accept business from a client until the third appointment. Tell us more about your process.

CR: We had so many people coming into the office, but I didn't feel like I was converting enough of them into clients. We're doing okay. We're paying for the seminars and making a living. But the appointment process was wrong. I got the seminar process down, but in the meantime, I was still doing business with people and still being able to help some of these people, but I didn't feel like I was helping enough of the people that came to see me, and that's how I came to develop the appointment process that we have where it is just take your time, take your time. I worked as a vice president of investments for a bank for many, many years, and it was pretty much someone came up to your desk, you talked to them, you did an app, you got a check and you're done. Well, in my practice, I don't even want a check in the first appointment. I just don't want one. I don't know them well enough. So I set up an appointment process to match the seminar process of friendly, nice, I'm the good guy, I'm here to help you. If you want help, I'll help you. If you don't want help, then I won't help you. Whatever you want, I'm fine with. So then when they started coming to the office, the appointment process changed a little bit where the first appointment, I was just getting to know them first. Then we touch upon the financial aspects of their lives, and in the seminar, I ask them to bring in a tax return. I ask them to bring in financial statements. Do they want me to review their trusts? Whatever they want me to look at, they need to bring in. At the end of the first appointment, I've touched on a few things and I looked at what they had and made no specific comments because I haven't really done any research on what they have yet. But then, at the end of the first appointment, if I really feel that I can add a value to their lives, I am going to set a second appointment. Under the reasonable expectation that I'm going to keep the material they brought for a week and I'm going to research their mutual funds, I'm going to look at their life insurance policies – whatever they brought in – I'm going to do my homework because I want to pull Morningstar reports, or S&P; reports on the stocks and do the trusts. Maybe I want to show their tax returns to our tax preparer, and see if he sees anything in there. I can look for any problem areas, any places where they haven't made adjustments. What I am finding a lot of times, way more often than I'd like to find, although it's good for business, is that a lot of these retired folks have the same investment strategy they had 20 years ago when they were accumulating this wealth. Now their life has changed and they are not in accumulation phase – they are in the preservation and distribution phase of life. They're retired, they're depending on the money to be there to get income off of it, so they're life changed but their assets haven't changed. They're still aggressively growing those assets or trying to aggressively grow them. You know as well as I do that in any market downturn, they're going to get hurt and they can't afford to get hurt. So a lot of times I'm finding that they haven't made the transition they made in their lives with their money. In the second appointment, I identify any issues that don't make sense to me or have further questions for them, but essentially what I'm doing is I am looking for the one spot, maybe they have five or six or seven different types of accounts, an IRA, a trust account, an insurance policy, a couple of annuities. What I'm looking for is the one spot that seems the most broken and easily fixed because I know that decisions are hard for people to make. Some decisions are easier than other decisions. To move $10,000 from one account to another account, not that big of a decision. To move $100,000 of your assets from one advisor to another advisor, that's a pretty big decision. So, the process I go through, I just want to go one step at a time with these folks. It works best for me, it works best for them. I'm just looking for that one area that seems to be the most broken, and then I'll certainly review everything they brought in and identify the problem areas, what does make sense, what doesn't make sense, here's the Morningstar reports on these mutual funds, whatever I'm looking at, here's the return you've been averaging, whatever comes up. I usually finish up with the piece that's the most broken. I tell them ?here's the most broken thing and here's why.' Then my close is, ?do you want me to fix it?' And 99.9 percent of the time, they say ?yes.' Then I just agree, and ask some questions. I need to find the risk tolerance and see how they feel about ups and downs of the market. Are they more concerned with safety? Do they want income? We talk about their taxes. I try to really find out what the perfect investment might be for them regarding this piece of money. Then I go do it. I set another appointment. Now I have to do my product research, because now I know enough about them to know what I'm looking for. Here's what's going to fit them. Then I have to go into the marketplace to find the best product. If it's a mutual fund, fine. If it is an annuity, fine. Whatever it might be, I want to make sure that whatever I use is the best possible fit for them, no matter what. So instead of doing the business then, which I probably could, I put them off another time and say ?okay, I want you to come back in another week. Give me time to do my homework.' They come back, I have a product that I know is going to be perfect for them. I know exactly what they need to know about the product. We start the relationship there. Then I begin process of transitioning that client to becoming a lifetime client with me, one step at a time. We just made the first step. The next process I go through with these folks is kind of a long-term agenda. I fixed problem No. 1. Now we still have problems two, three and four that we want to work on. Let's finish this one up and let's start working on problem No. 2, whatever it might be. Maybe it takes six months, maybe it takes three years. Eventually, we're through all these problems. We've corrected everything that's wrong. They've eventually moved all their assets over to me. I take it a little bit at a time. What I used to hear, when I would do two appointments, I would try to solve all the problems all at once. I got a lot of "I want to think about its."

SMA: Right.

CR: I knew what I was doing, I knew what was good for them, and it all made sense, but what I figured out is that it was too big of a decision for them to make. People who want to think about it usually end up doing nothing because they are frozen. That's a big change for them. Then I started doing one little thing at a time. Actually, I learned that from my dentist. I went to my dentist not too long ago. He found a couple of areas he thought that maybe they were cavities, maybe they weren't. They probably were, but he said ?well, there's a couple things in here that we're going to want to look at. Let's just get your teeth clean this time, next time we'll look at it again.' I was thinking ?hey, you know what, that will work with my clients.' I though I could apply that to my business. ?Here's the whole issue, but here's what we need to do today. This is the one thing that we have to fix because it is the most broken. We'll go and fix the other stuff as time goes on – there's no rush on the other stuff.' It worked.

SMA: Do you think that doing all the research is what sets you apart from the typical producer?

CR: It could be. I'm just not closing on air, on just what I say. All the research I do, sometimes it is exhaustive. Sometimes if they own 20 stocks and eight different mutual funds, I have to pull charts and all that stuff. I have to evaluate them. How many stars does this one have? What's the average return and what's the risk factor and what's the five-year average of this stock return? There's a lot of work that goes into it. I think it's important that you present it in an organized way and don't overload the client when you're going over all the charts. If you overload the client, they're not going to be able to make any decisions. You've got to present it back to the client in a way that is simple and makes sense. But you've got to show them that you did the work.

SMA: Right.

CR: I'm doing a lot of work for free. These are free appointments. There's no cost to come see me. I'm not charging them an hourly rate. They appreciate the effort we're putting into it. I think that what they really see is that I did what I said I was going to do, I'm personable with them, I'm concerned about them personally and professionally. I want to take my time; I want to make it easy for them. I go well above what they expected me to do. If someone is sick in the hospital, we'll go visit them. If we have a spouse pass away, we'll go to the house and have an organized thing and work with their CPA on how to appraise the properties and do whatever they need to do. Whatever these people need, we'll do. Obviously, I can't do everything, but we have professionals around us. We have CPAs, we have attorneys we work with, and we have mortgage people we work with. Sometimes they'll come in and talk to me for an hour about nothing. It could have been a 10-minute appointment; I could've been just reviewing their account. They want to spend time, they want to come in. It's not only a professional relationship, but a personal relationship that we have with our clients. That's how you are going to keep a client for life. I don't have any product that is any different than anyone else. We all have the same products.

SMA: Right. It's the approach that can differentiate you.

CR: We all have different approaches to how we're going to build a clientele. People know at the seminars – they size you up pretty fast. That's how people work. Five or 10 minutes into the seminar, they've already sized me up. If they come in for the appointment, that means they can like and trust me; otherwise they wouldn't be there. We get such a nice group of people coming in that already like us. All we can do is increase that because we're not going to cause any trouble. It seems to work really well.

SMA: How do you generate referrals?

CR: Once you build your client base up to a large number, then the referrals start coming in. We get referrals by not asking for them, but by thanking people for them. I've tried every referral system in the world, I'm sure there's some great ones out there, but none of them seem to work real well for me. As soon as I stopped asking for them and started thanking people for the referrals that we're getting, all of a sudden we started getting a ton more referrals. It just builds on itself.

SMA: Out of the seminars, with 70 to 90 percent of the people setting appointments, how many of those people move on to a second appointment?

CR: Say we have 40 appointments set up [from a seminar], which is kind of typical. We're probably going to see 32 of them. Eight of them just drop off. Something will happen, they'll have to reschedule. I have another seminar coming up and I can't keep following up with them. We'll see 80 percent of people that set appointments. From first appointment to second appointment, it's different now because now I can be a little picky – if I don't want someone as a client, I don't have to take them. In the beginning, you want everyone. A thousand dollars or $50,000 dollars – you don't care. You just want everyone. Usually, I'd say 80 percent of the people that come in for first appointments, I'll make a second appointment with. The only people that I don't set a second appointment with is people that I can't help. Maybe they don't have any money. Maybe all the money is invested perfectly. Maybe they're advisor is doing a great job. If I find someone has an advisor that is doing a great job, I'm not going to take that money. It's just not right because that advisor is doing a great job. Whether they like me better doesn't make any difference. If I find someone is doing a really great job, I'll just let that money alone and tell them ?you know what, your advisor is doing a great job, don't ever leave them.' That happens from time to time. Not too often, but it happens. But probably 80 percent of the people will make a second appointment. For the second appointment to becoming clients, there I'm kind of looking for who can I really help. There are only so many hours in the day to service people, so I have to be a little careful. The number is probably close to 50 to 60 percent. And 100 percent of the people come back for the second appointment – there's no drop off there. Everyone's coming back for the second appointment because I kept their stuff. They have to come back. From the second to the third appointment, the people where there's something wrong there that I can fix, I'm sure the number is close to 80 to 90 percent saying ?yes, fix it.' Anyone that says, ?Yes fix it,' is going to become a client.

SMA: If clients are asked to describe you, what do you think or hope they are saying about you?

CR: I think I can tell you what the clients are saying because they tell me. Some of them I coach. Some of them are really good referrers. I coach a little bit. But they just say, ?Craig's a really good guy, we're really happy with him, you should go see him.' That's all they say. We do a good job. We give them good returns and they're happy with us. They just say ?Craig's a great guy; you need to go see him.' It's because we have developed a personal relationship.

SMA: Switching gears here a little bit, what about your take on the debate on the NASD wanting fixed index annuities to be regulated securities. What is your opinion on that, or how does that affect you?

CR: You know, it really doesn't affect me at all because I'm securities licensed, too. You know, index annuities are not securities. I mean, they're just not. The NASD wants to get in and regulate as much as they can, which is fine. I always look at them as they are there to protect us, but sometimes regulators can go overboard. But I really think that if someone is going to be in this business long term, they ought to expect that these things are going to happen and the NASD could certainly take control of the fixed annuity business and if you continue to want to be in this business, you likely are going to need a securities license to sell. I can't fault the NASD because I'm assuming they are trying to protect mom and pop out there. That's why they are being a little more aggressive on their regulators. Just like any other business, there's good people and bad people out there. Doctors, dentists, lawyers, advisors – there's good and bad. Regulators sometimes overreact because there's a few bad and a thousand good. But I just don't see how they can say a fixed annuity is a security because it is definitely not. It's not a security, we all know that. If they do deem them a security, they will. If people want to sell them, they'll have to get a securities license, which is not unreasonable. I think the future of the business for the people who are here for the long term, and I'm hoping that a lot of people that are in our business are here for the long term because there's no better way to make a living than helping and liking your clients and making money along the way. It's a great business. I think if someone's going to be in it for the long term, they've got to be prepared for these changes. They have to be able to do more than indexed annuities for their clients because not everyone fits into a round hole. Maybe they're a square peg. They need something else. I really think to be a good advisor, you have got to have more than one thing you can do. You've got to diversify your product line a little bit. It's easy to do without being securities licensed. But if the NASD comes in and says ?okay, you need a securities license to use this product, then you get a securities license to sell it.

SMA: Annuities and advisors who concentrate on selling to the senior market seem to be under constant attack in the mainstream media lately. How do you overcome this negative perception perpetrated by the media if prospective clients bring it up to you?

CR: Yeah, they do and you know what? I always found the best way to handle anything like that is to agree with them. I've had clients bring in articles about a person that was running a Ponzi scheme where people thought they were buying an annuity, and they were actually buying nothing. The guy was just collecting money and was running off with all the money. You have to agree with them and say, ?yeah, that stuff happens. There's lots of people out there that do stupid stuff.' I may list a couple of other professions, but I find that the best way to handle that type of situation is there is no need to be defensive, because I have nothing to defend. I'm a good guy.

SMA: Ethics is an easy thing to say, but it is a little more difficult to demonstrate. How can you make clear your commitment to ethical behavior and practices in your process?

CR: You know, they kind of understand throughout the interview process, the appointment process, that I'm getting so much information about them, I'm telling them exactly what I'm going to do. I'm getting all the information I need to find what product fits them, and I'm going to do my product research and then I'm explaining the product to them. They know everything I'm doing, but you know what? They would've never come in for the first appointment if they didn't already trust me. Because if they come to a seminar, and this is where the seminar becomes so important, people know if they can trust you or not. If they came to the seminar and they felt they couldn't trust me, they wouldn't have come to the first appointment to begin with. Once they've come into the office, I already know that they trust me. Sometimes I have someone that is very skeptical or maybe they had some identity theft issue or someone has ripped them off before, and they may ask for a couple referrals from some of my clients. I have three or four clients that have agreed to have me give their phone number out if someone does ask for a reference or a referral. These have been clients for 15 years. What I find more often than not is that if someone is really skeptical or someone doesn't trust me after the seminar, after the first or second appointment, if I haven't gotten their trust yet, maybe I'm never going to get it. I'm just going to move on to the next person. Life is too short for me to spend hours trying to convince someone to trust me when I know I'm a good guy. I'll have another seminar two weeks away and I'm going to set another 40 appointments. I don't need to chase that person.

SMA: We've been hearing a lot about the scrutiny that a lot of industry designations, particularly the ones that emphasize seniors or retirement planning are getting these days as well.

CR: You know what, I think designations are fine, but I have a master's degree in business and I don't put MBA after my name. I'm not a CFP. I'm a registered investment advisor. I don't put that after my name. I guess it just depends on how you market. When I'm doing my marketing, I'm not marketing product, I'm not marketing my credentials, I'm marketing me. Just me. Not Craig Randall, MBA. Not Craig Randall, I've been doing this for 20 years. Not Craig Randall, managing over 100 million dollars in various accounts. Just Craig. That's all I'm marketing. Now, the designations, certified senior advisor and those kinds of things, those are good. Certainly there are classes you take and there are fees you pay for any continuing education that you do. I think that's all great. But I hate to think that people are misusing them as ?well, he's a certified senior advisor.' Well, what did he have to do to get that? Just like certified financial planner – CFP is a more extensive program, but there's a lot of CFPs out there that are not really advisors. That is not what they do. I think a lot of this stuff you just learn from experience and years in the business. I can certainly understand regulators worried about, again, taking advance of these things while the thousands of people do a great job. So I don't think that having designations are a bad thing. I think they are a good thing. It means that you have identified that your market is a senior market and you've gone to this extra effort to become a certified senior advisor, or whatever it is you want to be. I think the one designation that people are going to want is registered investment advisor. I think that's the one thing they're going to have to get, actually, because in today's world, if you are insurance licensed only, this is my understanding of the law, you cannot talk about variable products. You cannot talk about variable annuities. You cannot talk about their stocks or their mutual funds. You can't move money from a variable annuity to a fixed annuity. You just can't. You'll be in trouble. If you are a registered investment advisor, which is just a matter of taking one exam, now you can talk about anything you want to. You can talk about variable accounts, you can talk about their stocks, you can talk about their mutual funds, and you are in the realm of doing things legally. You can also, as a registered investment advisor, work with money managers, if you don't want to manage money yourself in a variable account. I think as far as designations go, I would certainly be a registered investment advisor. Other designations are nice, but they don't let you do anything. A registered investment advisor is a good thing and it lets you do things.

SMA: What do you think can be done by the industry carriers, the marketing organizations, and advisors alike to combat all the negative media attention that the industry seems to be getting? Do you think the industry is in need of a more unified approach in dealing with its PR problems?

CR: The negative stuff kind of comes and goes. It's not geographic. It kind of flows across the United States from time to time. Right now there's nothing really happening in California, but I'm sure lots of places there are things happening. In our business, there's not a lot of people looking over our shoulder 24 hours a day. Regulators come in and you may get audited or you may not get audited. But I think as advisors, what we can do is always, always, always do the right thing for the client whether anyone's looking or not. Whether you make money or not, do what is best for the client. If you're always doing what is best for the client and not worried about your commissions, in the long run, you are going to do better, the industry is going to be cleaner and you are going to get paid. When I set my goals for the year, I'm not going to look at income goals. I look at action goals. I look at activity goals. When I'm working with a client, I'm not thinking about what I'm going to make, I'm thinking about what I can help them with. If I make money along the way, great. There are other advisors out there that are looking at the highest-commission product they can use. That's where you start running into trouble. The client has to be the key to our prosperity. If we're not doing the right thing for the client, something's going to come back and get us – it's going to happen. When we're doing the right thing, we're going to be in business for a long time and everyone is going to do well. As far as the marketing organizations, what they can do is make sure that the people who are doing business through them are doing good business and they're ethical. As far as the regulators, there's always going to be a few bad apples in the barrel, and the regulators are always not going to like that. That's just how it is going to be. I think on the advisory level, which is where I am at, if we always do the right thing, no matter what, we don't have to worry about regulators, we don't have to worry about bad things happening because nothing bad is going to happen to us. There are always going to be bad people in every business. But if we are doing the right thing, nothing bad is going to happen to us.

SMA: Shifting gears again, you mentioned in your finalist interview that you've seen an industry shift towards managed money and asset fee-based models and away from 100-percent commissions. Can you tell us a little bit more about the shift?