Question Framing and its Role in Retirement Planning

Sue BerginSue Bergin

Many advisors attribute their success to their ability to listen and to ask the right questions.  Knowing the questions to ask, and when and how to ask them, are at the heart of the retirement planning and relationship building process.

When helping a client prepare for retirement, for example, you probably ask clients when they plan to retire and how long they think they are going to live.  You may not have realized this, but the way the question is framed impacts the answer.

John W. Payne of Duke University, recently found that people would give significantly different answers about their longevity depending upon how the question is asked.

questionsPayne’s study participants gave themselves a 55% chance of living beyond age 85.  When the question was framed differently, their answers were far more pessimistic.  Study participants gave themselves a 68% chance of dying by the age 85, which translates to only 32% chance of living to age 85.[1]

In her Harvard Business Review Blog, “How to Frame a Question for Maximum Impact,” Melissa Reffoni suggests that we think about the metaphor behind the concept of question framing.

A frame focuses attention on the painting it surrounds. Different frames draw out different aspects of the work. Putting a painting in a red frame brings out the red in the work; putting the same painting in a blue frame brings out the blue. How someone frames an issue influences how others see it and focuses their attention on particular aspects of it.”[2]

By framing the question in the, “what age will you live to” context, you bring clarity to the retirement planning task.  Their attention is focused on life post-work, not when they are going to die.

Finding Comfort Outside the Safety Bubble

Sue BerginSue Bergin

The late author Charles Bukowski once said that, “the shortest distance between two points is often unbearable.” The flight to safety that we have seen over the last few years is proof that this sentiment describes how many feel about investments.

The fixed income market has gotten a $700 billion boost in the last three years, and $300 billion yanked from equity markets.  These are sure signs that investors have found the volatility in markets unbearable.

While the comfort of the safety bubble might calm clients of their market jitters, it isn’t necessarily in their best long-term interest. While fixed income securities are generally “safer” than equity investments, they have a downside.  They may produce returns that do not keep pace with inflation.

safety bubble

There is, however, another option outside of the safety bubble.  By incorporating alternative investment strategies that are less correlated to the markets, clients’ portfolios may be protected from downside risk, yet still capture opportunities for growth.

When clients express an aversion to the equity markets, perhaps it’s time to talk about alternative strategies like absolute return.  Absolute return strategies seek to deliver a positive return regardless of market behavior.  Because they typically have low market correlation, they offer some shelter to the volatility that clients find disturbing.  While not right for everyone, a good absolute return fund can add balance and consistency to a portfolio.

Advance the Story with Correct Image Placement

Sue BerginSue Bergin

When presenting reports to clients, you probably spend a good deal of time making sure that you have the charts and graphs that best tell the story. Another factor that influences clients’ reactions to images is placement.

Proper image placement has the “before” image displayed on the left and the “after” on the right.

This advice comes from a recent study out of the University of British Columbia.  The researchers suggest that language direction dictates the way in which we conceptualize time.[1]

1.17.13_Bergin_Image_PlacementTo validate their hypothesis, researchers sought feedback on weight-loss ads with “before” and “after” photos placed in different locations.  The participants viewed the ads with “before” on the right more favorably (4.64 out of 7), than when the image appeared on the left (3.39).

While placing “before” images on the right will resonate best with English speaking clients, you’ll want to switch the image order for those clients who speak Hebrew or other right-to-left languages.

[1]The Future Looks “Right:” Effects of the Horizontal Location of Advertising Images on Product Attitude, January, 2013

The War Against Your Credibility

Sue BerginSue Bergin

While you were enjoying some quiet family time on Sunday morning, America’s most read magazine was advising its readership to dump you.

In an article “How to save $1,000 this year,” Parade magazine tells its 33 million readership that the average investor could save $750 if they moved to a self-directed IRA.

In case you missed it, here is the excerpt:advice ahead

Shed Investment Fees

It’s one of the quickest ways to save …. Consider rolling over 401(k) assets from old jobs into a self-directed IRA.  Since the average 401(k) is $75,0000 saving 1 percent makes sense.  Potential Savings:  $750 per year.

The article fails to mention is that the average U.S. individual stock investor doesn’t fare very well.  In fact, they typically get significant lower returns than the S&P.  Over a recent five-year period, the average U.S. investor got an annual return of just 1.9%, while the S&P 500 returned 8.4%.[1]

The do-it-yourself investment management trend is gaining momentum in the media.  This is just the latest example.  Know that there is a war being waged against your credibility and the value you bring to your relationships.

Fight back.

[1] The Most Destructive Behavioral Bias, Summer 2012, The Journal of Investing

What Does “Help” Look Like to Your Clients

Sue BerginSue Bergin

When someone asks for help they usually have something specific in mind.  For example, when I hit a website “help” tab, I want a contact number.  I don’t want to engage in an online chat.  I don’t want to hunt through generic questions and answers to find one that resembles my issue.  And, I certainly don’t want to send an e-mail and wait for a response.   Others may find these alternatives helpful.  Not me.  I just want a number.

The same can be said for financial advice.  An advisor may provide clients with all kinds of helpful information, data and insights yet the client may still feel dissatisfied.

For example, you could have an in-depth discussion about the fiscal cliff.  You could wax poetic about the political winners and losers, and long and short-term economic impact.  Unless you discuss precisely what it means to her financial situation, the client may describe the conversation as interesting … but not helpful.

BlackRock recently surveyed plan sponsors and plan participates and asked whether sponsors had done enough to help participants achieve financial security.  In the plan sponsor camp, 76% said they believed they had done enough.  Only 40% of participants felt the same.


Three dangerous assumptions that can lead to client dissatisfaction:

  1. Presuming to know what the client wants
  2. Assuming the client will proactively disclose what they are seeking in the relationship
  3. Assuming (without confirmation) that the client’s needs have been fully met

Always remember to ask clients how they want to be helped.  Once you define what “help” looks like to that client, you can tailor your approach. At the end of a meeting or conversation, ask if you have met the client’s needs.   Find out if you have been helpful as they define the term. These simple questions will close the kind of gap in perception that exists between the survey participants in BlackRock’s study.

Preparing for a New Year: The Importance of Goal Setting

Bev FlaxingtonBev Flaxington, The Collaborative

Whether you run an advisory firm with two people – or 200 people – setting goals and determining your desired outcomes for 2013 is critical. Most people think about goal setting in terms of the numbers – how many new clients do we want? How much in AUM? What should our profitability per client be? These are all very important and should be included, but don’t forget to put an emphasis on qualitative goals, too.


What are qualitative goals? You want to think about things such as:

(1)    What do you want your advisory firm to stand for? It seems to be a given that you would want to be trustworthy and responsive to clients, but what else matters to you? Do you want to be leading edge in investment offerings? Do you want to be known as proactive and anticipatory of client needs, instead of just responsive? Do you want to be a value provider – low cost with high service? Think in terms of reputation and define what you would like your firms to be.

(2)    What kind of culture do you want to have in your firm? Many people think culture evolves naturally and cannot be defined. Culture evolves in a directed way, when the firm puts emphasis on it. Aspects of firm culture could include team orientation, or fast decision-making, or a willingness to take risks (with compliance support of course!) or innovation. Take a moment to examine your culture now – see if you can identify the traits associated with it. Now take a moment to define what you would like it to be. What is the “gap”? Where do you need to make shifts? Note these and incorporate them into your planning process.

(3)    What is the client experience at your firm? When writing marketing materials we often ask about the client experience. What is it like for a new client to join your firm? What happens to them step-by-step? Again, this can evolve as your firm goes about its daily business of serving clients, but it can be a powerful aspect if you define it at the outset, instead of just letting it evolve. How often do you want to touch clients? What do you want to be doing at each touchpoint? How do you want clients to describe their experience in working with you? What three words would best capture what it is like to be a client of yours? Be illustrative in defining this so that someone else can actually picture or imagine what it feels like, or looks like to be a client of your firm.

(4)    What is the firm’s mission for this year? What do you want to accomplish in addition to serving clients well and finding new revenue? Do you want to be a market leader? Do you want to be known among the competition in a certain way? Do you want to raise the firm’s profile and be more engaged in PR (public relations) and media relations? Think outside of just the business development goals to broader, market-oriented goals

Thinking about these qualitative aspects takes time. It can be a great exercise to have other members of your firm join you in identifying these aspects and defining them. Even if you have only one other person in the firm, bring that person into the planning process. Most importantly if you take the time to think about any of these qualitative pieces, take the time to write them down. Use them as your guideposts for next year to help you navigate where you want to go.

Good luck for much success in 2013.

What to Do With All Those Gift Cards

Sue BerginSue Bergin

While the number of unused gift cards has shrunk over the last couple of years, an awful lot of money is still wasted on them. 5% to 7% of gift cards go unused each year. While that may not sound like much, it adds up quickly. In fact, from 2005 to 2011, $41 billion worth of gift cards were unredeemed. This breaks down to an average of $300 worth of unused gift cards per household.

Managing gift cards is low on most clients’ priority list. It is a “low-reward” activity that, if ignored, typically results in momentary levels of frustration at missed opportunities.

In the recipient’s mind, gift cards usually fall within one of two categories: unwanted, or intended for use at a later point.

shutterstock_41604499 [Converted]Unwanted gift cards can be ignored, donated to charity, re-gifted, or exchanged. Services such as Plastic Jungle, GiftCardRescue, and Cardpool facilitate exchanges between those who want cash for unused cards, and those who want to buy cards cheap.

Many gift card holders have no interest in selling or trading. They intend to use the card at some point…they just never get around to it. Along the way, the card gets lost, partially spent, or forgotten.

In today’s digital era, where there is a problem, there are one, two, twelve or twenty apps to solve it. Swagg, Passbook, GiftCards – Balance Tracker, Bamboo Wallet, GoWallet and MyMiniWallet are all apps that help manage gift card balances. There are many others. Some have features to manage loyalty cards, event tickets, and coupons along with gift cards. Some even offer an alert system to notify users when a gift card balance is about to expire.

Many of your clients may have put financial organization on their resolution list. Take the opportunity to spread the word about how easily gift cards can be managed.

There’s Mud on Your Face: The Advisor Smear Campaign

Sue BerginSue Bergin

Remember when you were a kid how snowball fights typically erupted totally unannounced?  You’d be hanging out at the bus stop when – WHAM! – out of the blue you got smacked right on the side of the head with a snowball that you didn’t even see coming.  When it happened, you’d quickly dust the snow out of your eye, set your sights on the assailant, and launch your counterattack.

While you didn’t know it at the time, you were, in fact, honing an important skill that might now come in handy to help you defend your practice.

The advisor profession has been hit on the proverbial head by a whole lot of mud.  Our credibility, integrity, and worth have been called into question in a smear campaign launched by companies that profess a noble mission: to help Americans become better financially prepared for the future.

They are going about it by “reinventing” financial services and eliminating the need for an advisor.  They are giving consumers tools to learn more about financial management, become better organized, and evaluate the effectiveness of their portfolios.

The functionality and sophistication of these personal financial management sites and mobile applications are evolving at warp speed.  Take SigFig, for example.  SigFig aggregates all investment holdings and then makes recommendations based on current holdings.  It compares the holdings in a user’s portfolio against other investments in the same category and share class.  It then suggests different, less expensive investments that perform better than the user’s current holdings.  It even goes a step further.  After reviewing the user’s trading patterns, it evaluates the brokerage fees.  Advisors are evaluated according to the fees assessed and the performance obtained.  This functionality has led to all kinds of provocative headlines, such as the one inviting you to “Find Out if Your Financial Advisor is Overcharging You.”

Another media darling is Jemstep, which served up this headline: “Use Jemstep to See if Your Broker is Wasting Your Money.” Jemstep’s ranking engine analyzes 80 attributes of more than 20,000 mutual funds and ETFs.  Jemstep helps clients identify their financial goals, provides a ranked list of the “best investment options,” and tracks aggregated investment performance.

While the functionality of these tools may have been the baton that the media picked up in launching the smear campaign, Personal Capital marched to the front with its own marketing efforts.  Personal Capital is a little different from some of the other personal financial management sites because it actually manages money.  It positions itself as the next generation of financial services that has evolved by moving away from a paternalistic, craftsman-like approach.  Its pitch is that clients should move money to them because they can invest it in cheaper, better performing funds while giving clients full transparency.  One of its hooks is the “How Much is Your 401(k) Costing You?” calculator.

These services and dozens of others are gaining in popularity.  They are free or come at a modest fee, and they have seized the attention of both venture capitalists and the media.

If we have learned anything from schoolyard snowball fghts and political campaigns, the best way to deal with an attack is to launch an immediate counterattack.  If the suspicion, exaggerations, and fear prompted by the smear campaign are left to linger, credibility is destroyed.

It’s time for those in the business of giving financial or investment advice to wipe the mud from their faces and launch a counterattack.  Here is an effective, three-pronged approach to take with clients:

  1. Ask clients whether they would be willing to turn over their life savings to a computer program. Most personal financial management services offer a mathematical approach to an emotion-filled process.  They aggregate holdings, use algorithms to evaluate investments, and spit out recommendations based on a computer model.  It is not only black and white and cold; it ignores the uncertainties of life.  It also ignores the single most important role that a financial advisor fills: to act as a sounding board for clients throughout their lives.
  2. Demonstrate the enduring value of the professional advice model. The premise of many personal financial management sites  is  that  the computer can do all the work better than an advisor.  It has never been more critical than now, therefore, that you demonstrate your worth.  You are your expertise.  You are the knowledge, resources, and guidance that you provide.  A computer program can’t begin to offer the sense of comfort and confidence you deliver to clients.  Remind your clients that you are savvy and accessible, and that you genuinely care about their goals.  Because the smear campaign seeks to create doubts about your motives in recommending certain products and solutions, make sure to remind clients that you always have their best interests in mind.
  3. Deliver a better online experience. An estimated 30,000 Americans are flocking to personal financial management sites every day! The word has spread.  An organized, online financial view helps make money management easier.  Personal capital, however, is asserting that advisors are unable to offer clients an online experience.  The CEO has been quoted as saying that personal financial advisors are still stuck in “pre-electronic practices.”

Prove him wrong. Show clients that an organized, online financial view is most beneficial when it is part of a wise collaboration with a trusted advisor

Republished with the permission of eMoney Advisor.  For more information about eMoney, visit

Budgets Get an Extreme Makeover

Sue BerginSue Bergin

The tight economy and some hip personal financial management tools have done the impossible.  They’ve made budgets sexy.

No one ever used to admit that they liked to budget.  Creating a budget was tedious and uncool; sticking to it was even harder.  Thanks to recent technology, however, budgets are being seen in a new light. Today’s economy has made it necessary for more Americans to know, with certainty how much money they have coming into and going out of their household.  As consumers delve into the budgetary process, they are realizing it isn’t nearly as overwhelming and time consuming as they may have thought.

A recent study showed that most Americans follow a spending plan. Nearly half (48%) say they “loosely” follow a budget.  25% “strictly” adhere to their budgets.” Only 27% say they have no budget at all.

Household income is the primary determinant of whether someone will commit to the budget discipline.  36% of those who earned under $30,000 annually followed a budget faithfully.  Only 18% of earners whose salaries exceed $75,000 a year were as vigilant about the budgetary process.

Personal financial management sites such as Mint, Betterment, MoneyDesktop, Yodlee and PNC Virtual Wallet have given the budgeting process an extreme makeover.  They’ve simplified the budgeting process, brought it to life, and even made it fun.  Financial planning software such as the offerings by eMoney Advisor and MoneyGuidePro includes budgeting tools that make it easy for financial advisors to offer an insightful analysis to their clients on how to maximize savings and create user-friendly budgets.

The key innovations that have revolutionized the budgeting process are account consolidation, aggregation and automated expense characterization.  Once accounts are linked and tracked in many of these services, the expenses are automatically pulled in, categorized, and updated regularly.  This simplifies the task of routine budgeting and offers huge relief when it comes time to preparing mortgage and loan applications.

The transparency these services offer into actual spending habits may also be behind the positive ranking survey participants gave to inquiries about their financial holdings.  Nearly half (47%) claimed to know their checking and savings account balances, and 48% have a “rough idea.”  Only 5% say they “do not know”.

When it comes to spending, 36% say they can calculate the “exact amount” while 58% has a “rough idea” of what they pay out each month.  6% had “no idea.”

Innovative technology offers a gateway to help clients become more mindful about spending.  Until a website or mobile app comes along that effectively prevents people from overspending; however, the face-lift offered by technology is simply cosmetic.[1]

[1] Survey statistics mentioned are from CashNetUSA, September 5, 2012

The Seven Deadly Mobile Phone Sins

Sue BerginSue Bergin

Prospects have always looked to attire, office location, furnishings, and framed degrees to get a sense of an advisor’s expertise. While those things are still influential in shaping perception, they are often trumped by the role technology plays in making an impression.

Technology can make you look smart. It gives you access to more information and helps you deliver better service. You can perform research in minutes that used to take you days. You have access to answers and can get those answers to clients quickly. Technology makes you appear progressive. You may have insights into the next cool trend that the client or prospect is eager to learn about.

Turn Off Your PhoneOn the other hand, technology can tarnish your image. Commit the seven deadly mobile phone sins, and you may leave clients with the wrong impression of you.

The Seven Deadly Mobile Phone Sins:

  1. Taking a call or returning a text or e-mail during a meeting with a client or prospect.
  2. Checking your cell for anything other than an update on the client’s portfolio.
  3. Making your digital device the star of your pitch.
  4. Leaving your headset in your ear during any client interaction. It’s distracting.
  5. Taking your device with you during a meeting break. It implies that your return will be delayed because you are too busying doing making a call, returning an e-mail, Tweeting, checking a sports score, or any of the other gazillion things you can do on your phone.
  6. Blaming technology as the reason you failed to respond to an inquiry. Clients buy the “my system crashed” excuse as often as a teacher buys “the dog ate my homework” excuse. Even if it’s true, they just won’t buy it.
  7. Forgetting to shut off or mute your device. There is little more distracting during a meeting than a constantly ringing or vibrating phone.