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Category Archives: Client Relations

Useful Behavioral Finance Information for CFPs®

Mid adult couple smiling while looking at female financial advisor at desk in office


The concepts of behavioral finance are applied increasingly in our world. Governments are using decision-making psychology to encourage behaviors like saving more for retirement. This type of psychology is also used by a wide range of businesses to help maximize their profits. Although plenty of behavioral interventions do work, others fall short of expectations or even backfire. Understanding what creates these differences is essential for CFPs® who want to provide the assistance clients need to make the right financial decisions:


The Role of Emotional Triggers


Both governments and businesses that use behavioral finance strategies have to overcome the challenge of getting people’s attention in a world that’s full of distractions. To cut through the noise technology is being developed using systems that trigger emotional responses.


One example of these types of triggers has been developed from the concept of loss aversion. The theory of loss aversion states that people react more strongly to the threat of a loss than the possibility of a gain.  Using this concept, app developers have found that  the average person doesn’t want to use something that solely tracks their failings without any positive reinforcement.


Another example arises from the realization that nudges become less effective over time. It’s standard practice for app developers to do extensive testing to figure out exactly what works best with users. But as many technologists have discovered, what’s fully optimized now may not be nearly as effective in a few years. Dealing with this issue is why more resources than ever are being put towards creating and delivering experiences that are highly personalized.


Using Behavioral Finance on a Big Scale


While behavioral finance is something that has a lot of appeal to smaller technology companies looking for a big opportunity, it’s on the radar of larger financial institutions as well. Designing more effective savings products, small-dollar loans, and automobile loans with lower rates are all things that established financial companies have enlisted help with from behavioral finance experts.


One interesting aspect of all the attention on this topic is the realization that this attention will eventually reduce the effectiveness of behavioral finance. While these practices currently have the ability to improve outcomes by ten to thirty percent, experts have stated that consumer suspicion is something that may eventually make it more difficult to achieve these results.


By taking the time to test out some of the apps and other types of technology being developed in the area of behavioral finance, CFPs® can gain some hands-on insights that they can pass along to clients.


Retirement Planning is Key for Security

Businessman Brainstorming About Retirement Planning

Retirement planning should be an important consideration for all workers, even those who think they’ll never retire, or who intend to work as long as possible. In reality, nobody can predict the future, so no one can say how long ‘possible’ will be. Unexpected events such as layoffs, disability, or the need to care for an ill or dependent family member can bring an end to people’s working years long before they thought it would happen.

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How to Talk About Long Term Care with Clients


Long Term Care


Nobody wants to get old or require prolonged healthcare. Unfortunately, that’s the reality of life. And given that an increasing number of people will likely require long-term care in nursing homes that are already crowded, this is an issue that financial advisors need to be able to discuss with their clients. Although it can be a delicate and challenging subject, finding the right way to approach this issue can be one of the best things that trained financial advisors can do for certain clients.


The Current State of Long-Term Care


The issue of long-term care is one that will come to the forefront of national discussions over the next decade. The reason is the increasing number of people who need this care but are unsure how to secure it without completely depleting their funds.


Already, many long-term care insurance holders are receiving notices of insurance premiums spiking as much as 40% or even 60%. For reference, many of these policies were bought ten to fifteen years ago. At that time, the average daily cost for local nursing homes was in the $150-$200 range. That average amount has swelled to over $400 every single day, which means many baby boomers are footing bills for over $12,000 a month.




Starting the Conversation with Clients About Long-Term Care


Far too many people have found themselves in a position where all their plans implode as a result of someone needing care. Since that’s obviously something certified financial planners want to help their clients avoid, the best way to start this conversation is with two questions: “Do you need it?” and “Can you afford it?”


If this conversation leads to a determination that a client does need to plan for long-term care, some form of an insurance policy is generally the best way for clients to get the most value for their money.


An increasingly common strategy is for people to use their investment account to pay for a policy. If an account gets a dividend, it can be used as cash in hand to cover any premium hikes that occur.


Given that more and more people are going to be actively looking for a way to strategically plan for long-term care, this should be a useful area for financial planning professionals to focus their attention and some of their marketing efforts throughout 2016.

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.