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Category Archives: Business Development

Strategies and Rules for Successful Budgeting

Budgeting concept.


Successful budgeting can help an individual anticipate future financial needs and prevent financial problems like those that arise from taking on too many financial obligations and incurring too much debt. A budget is useful in helping an individual to achieve financial goals and can also be a tool for increasing net worth or for achieving financial security.


The Basics of Budgeting


The stages of the budgeting process are estimating income, estimating spending and planning for savings. Income can be estimated using gross income or net income after deduction of items regularly withheld from a paycheck. For a client on a salary or receiving a regular wage, estimating income probably won’t present much of a problem. But for a self-employed person, the fluctuation may require a low estimate of income for budgeting purposes.


Estimating spending is complicated somewhat by certain large expenditures that arise annually or semiannually. Regular deductions or contributions to a savings account may be required to pay for items such as an annual insurance premium or annual assessment of real estate taxes. In budgeting expenditures, some payments like rent or the mortgage are not subject to much immediate reduction. Other items like clothing, recreation and entertainment may be readily controlled. Additionally, one must always take into account the effects of inflation.


Savings should be planned as part of the budget and not considered a residual that will simply materialize if expenditures are controlled. Conscious effort is required to save. Financial planners often recommend saving 5% to 10% of income annually. The exact amount of savings needed to reach goals will be determined as part of the planning process. Arrangements can be made with a bank to transfer a specific amount each month from a checking to a savings account.


9 Rules for Budgets


The following rules can be helpful in preparing budgets:


1. Be reasonable in establishing goals.


2. Budget for fixed expenses like a mortgage payment or rent first.


3. Make saving a priority.


4. Necessities like food, clothing and transportation may be variable expenses but a high priority.


5. Set aside money over many income periods to spread out payment for large annual expenses.


6. Large expenses are not necessarily the easiest to cut.


7. Develop priorities for general categories of expenses and don’t try to account for every penny.


8. Records should be kept of expenditures after the budget is established.


9. Use it to measure and understand actual versus planned results.

If the estimated expenditures and planned savings exceed income, the financial planner and client should review expenditures to see where the expenses can be reduced. The budget should balance. Moreover, the budget will work only if the estimates have been realistic.

The Top 5 Factors That Affect FICO Scores

Credit information form

One way for planners to help clients access credit at lower interest rates is to teach them how to manage their FICO scores. This score can range from 330 to 850. The higher the score, the better. To get the best interest rates, clients should try to keep their FICO scores at 760 or higher. The score value is based on information from credit reports. Understanding how this information affects the score can provide an opportunity for planners to help clients make the right decisions to increase their FICO scores.


Payment History, Amount Owed and Length of Credit History


Payment history is the largest factor in the score. Planners should make sure clients understand the importance of making payments on time. When students enter college, they will typically apply for their first credit card. Students should do so with the understanding that failing to make timely payments can impact their ability to qualify for other types of credit like auto and home loans. This impact can continue well into the future.


The second major factor affecting the FICO score is the amount that’s owed. It’s an assessment of whether or not a borrower might already be overextended on credit. Being overextended means the borrower may have borrowed so much that he or she is unable to make the payments required on this amount of debt. Utilization affects the score positively if credit cards are used periodically and paid on time, but there is no effect on the score if someone has a credit card available but never uses it.


The longer the credit history, the better the score. In the example of the college student getting his first credit card and making timely payments, he’s also increasing his credit score for buying a home in the future by having a longer credit history from the credit card account.


Types of Credit and New Credit


Ten percent of the FICO score comes from looking at the types of credit that are used. These types include credit cards, retail cards, installment loans, finance company accounts and mortgage loans. Having a credit card and using it responsibly provides a higher score than not having any credit cards at all.


The final category that affects the FICO score is new credit. Opening several accounts in a short period of time can indicate a higher credit risk and will lower the score.


Checking a Credit Score


When a consumer checks his or her own credit score, there is no impact on the score, and it is recommended that clients check credit reports on a regular basis to identify and correct any errors and to ensure that there has not been an identity theft situation. Every individual is entitled to one free copy of the credit report from each of the three credit bureaus each year. A good practice to monitor activity throughout the year by requesting a report from a different company every four months.

How Simplification Can Help Advisors Increase Sales

Positive attitude word cloud

One of the most common questions that financial advisors have is what percentage of prospects should be closed after sitting down together. Although the exact answer may slightly vary based on who is asked for an answer, the general consensus across the industry is that the close rate for this scenario should be around 30%.


Advisors with a close rate significantly above this percentage should give themselves a pat on the back for already having their sales process nailed down. For advisors who are closing far less than 30% of the prospects they sit down with, this benchmark shouldn’t be viewed as a source of defeat. Instead, it should be thought of as an opportunity for significant improvement.


The good news for advisors who are currently below this close rate is there’s generally a clear reason why. That reason is the sales proposals an advisor is using for their investment proposal is too complex. As the financial planning industry has become more complex, many advisors have assumed that their proposals need to as well. This thinking has resulted in advisors presenting clients with proposals that are 30 or more pages in length.


What trained financial advisors forget is their proposal presents the last step before a client is closed. That means even if prospect has been properly qualified and all communication has been positive up to that point, an overly long proposal can overwhelm a prospect and cause them to get cold feet.


Here’s exactly what certified financial planners with proposals that are preventing at least 30% of prospects from being closed need to do to reach this benchmark:




This classic acronym stands for Keep It Simple, Stupid. Although it’s not the most elegant phrase, it’s a good reminder to not overthink and instead simplify. Advisors should keep in mind that making a proposal simple can actually take quite a bit of hard work.


2. Aim for Under 10 Pages


One of the reasons that proposals are so challenging to simplify is there’s a lot they do need to cover. So while it’s not realistic to attempt to make a proposal fit on 1 or 2 pages, keeping it under 10 pages is definitely something that can be done.


3. Use An Outline to Guide the Structure


A big part of striving for a simplified and shorter proposal is so potential clients can actually evaluate everything in it. Another way to help them do that is by using a clear outline as the structure for the full proposal. Putting the proposal in this format will ensure they don’t miss any important information.


4. It’s All in the Presentation


By getting a proposal down to an optimal size, it can be used as part of a strong sales presentation. At this point, the final step for an advisor is to practice and perfect their actual pitch.


By putting the above steps into action, financial advisors can transform their proposals from a roadblock into an asset that helps them increase sales.

What’s the Best Way for Advisors to Handle Client Disputes?

Break at business meeting


There are a lot of rewarding aspects of being in the financial planning industry. But that doesn’t mean everything is rosy for financial advisors. As with any profession, there are challenges that trained financial advisors have to face. And in some cases, advisors have to deal with very unpleasant circumstances and handle client disputes.


One example of a very unpleasant circumstance most certified financial planners have to deal with at some point in their career is a client who thinks their advisor harmed them. While advisors already act with a fiduciary standard, there’s no guarantee that every client will think that’s enough. The reality is if something goes very wrong for a client, chances are they’re going to blame their advisor.


When this occurs, it can create a significant headache for an advisor. It’s important to understand that the fallout from this type of situation can happen regardless of whether it’s the client or advisor who’s in the right. The worst case scenario is if a client escalates the matter to the point where it has to go to court. Dealing with an arbitration panel can also be a very stressful experience.


Financial Advisors Need to Be Proactive


Many financial advisors assume that if they treat clients well, communicate clearly and adhere to ethical standards like not misrepresenting any aspect of an investment, they won’t have to worry about any significant client disputes. Although that approach and desired outcome will hold true for the majority of clients, there are always going to be problematic clients looking for a financial advisor.


The best case scenario of working with a problematic client is they only waste an advisor’s time. The worst case scenario is this type of client drags an advisor into arbitration or an other legal venue. Since trouble clients present a lose-lose proposition, the best thing an advisor can do is learn how to avoid them.


Manipulative behavior, constant victimization, major delusions, radical moods or goals that are disconnected from reality are all signs of a truly problematic client. If any of these behaviors are exhibited during an initial consultation, the best action an advisor can take is politely declining to take on the individual as a client.


Despite their best efforts, it’s not always possible for an advisor to avoid taking on a dysfunctional client. There are plenty of examples of clients who don’t start showing the major warning signs of trouble until they’re already in a relationship with the advisor.


If major issues start to arise with a client, advisors need to go the extra mile to ensure they document everything. By having comprehensive documentation, advisors can protect themselves in the event that things get escalated to arbitration.


In addition to carefully documenting everything related to a problematic client, advisors shouldn’t hesitate to look for the right opportunity to amicably end their relationship. By being proactive with these kinds of actions, financial advisors can minimize their negative interactions and focus their energy on all of the things that make this profession so great.