Wealth Protection

Building Trust Fortifies Client Relationships

Address money's emotional aspects to deliver more value

Financial professionals often overlook the emotional aspects of helping clients manage their money, despite their importance in building an enduring client-advisor relationship.

In 2020, Vanguard published a research paper assessing the role of emotions in the advisory relationship. Researchers estimated that emotional factors, such as trust and personal connections, account for 40 percent of a typical investor’s perception of the professional advice they receive. The other 60 percent comes from functional activities, such as planning and portfolio management. Moreover, Vanguard found that having a relationship with a trusted advisor contributed 72 percent of the client’s perceived emotional value, while the service aspects of the financial advisement process accounted for the remaining 28 percent.

“In our industry, it's all about trust and confidence,” said Elliot Kallen, wealth manager and registered principal at Prosperity Financial Group Inc. in San Ramon, California. “Those are the two pillars of the client relationship. If you don't have their trust and confidence, you won't have the client anymore.”

Kallen founded Prosperity Financial Group in 1993 to help business owners make money and keep their money. Today, about 60 percent of the firm’s clients are entrepreneurs while the remaining 40 percent are pre-retirement or already retired. The independent Registered Investment Advisor now has 1,200 clients and about $300 million dollars in assets under management.

“Our clients have trust and confidence that we will do the right thing for them,” Kallen said. “We rarely lose clients because we convey that trust. We also communicate with them over and over again, so they know what we're doing on their behalf.”

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One reflection of that approach is the firm’s solid retention rate, both with existing clients and with those clients’ children. Across the industry, after clients pass away, 98 percent of those clients’ children do not stay with the parent’s advisor, Kallen said. The reason: the children lack confidence and trust in someone they considered to only be their parent’s advisor. “We are the opposite: we keep the next generation,” he continued. “About 80 percent of our clients’ children stay with us. We have been reaching out to them and including them in everything we do all along.”

Much of the firm’s success stems from addressing the emotional side of money, which many in the industry prefer not to talk about, Kallen said. Parents understand that they will not have a good relationship with their children if they do not deal with emotional issues, he noted. A solid relationship helps create and manage expectations, and the children buy into those expectations. “That's exactly what needs to happen on the money side,” he added. “Clients want to know that our arms are figuratively around them; that we're listening and paying attention to them; that we're part of their lives and not just talking at them.”

Honest discussions around the purpose of money, as well as the emotional value money brings to people, are what’s missing in the financial industry today, Kallen continued. Industry advertising focuses on security and financial roadmaps, but that approach neglects the social aspects of money for family members.

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One example arises while advisors help clients planning for retirement and the possible expense of longer-term care. Older Americans are living longer than their parents did and, mathematically speaking, many will spend some portion of their lives in nursing homes. Kallen said families need to discuss how they would finance long-term care while still funding other priorities, such as helping children attend college, taking care of aging parents, or traveling after retirement. “This is not just a financial drain, but also an emotional drain” he added. “We have that very difficult conversation over and over with our clients about the emotional drains on their finances and on their energy. Where will that money come from: out of retirement savings? These choices are as much emotional as they are financial. That's an area where I believe we do a really good job of managing emotions and expectations.”

Leading these types of personal conversations are more important for setting Prosperity Financial Group apart from other firms than features such as financial planning software, Kallen added. He said half of his conversations with clients do not focus on money or financial details. They range from upcoming holiday plans to taking a COVID-19 test to the turmoil people on both sides of the political divide experienced during the recent national elections. “

It’s those ongoing conversations that make the difference,” he said. “It’s how we listen and then do what we said we would do: actively manage their portfolios to meet their needs. There's a lot of fear in the marketplace because of politics and the negative 24-hour news cycle, but we're able to keep our clients happy.”

The current environment has also made increased communications with clients an even higher priority. Fortunately, Prosperity Financial Group was already positioned for 2020’s world of sheltering-at-home and virtual relationships. In 2019 the firm decided to shift from the traditional marketing approach of meeting clients at luncheons and dinners to new business models. “We invested heavily on creating an entire Marketing Department at our firm,” Kallen said. “We wanted to stay in touch with clients through social media and online portfolio platforms. We wanted to take advantage of the quickly-changing times that we saw coming.”

When the impact of COVID-19 began in March, the firm had already built in their marketing department and reformatted its portfolios around technology. Advisors began conducting Zoom meetings immediately. They also continued operating from the office, rather than closing the doors and working from home.

zoom 1000“We over-communicated with clients,” Kallen said. “We went from weekly to semi-weekly newsletters, covering what was going on in the market and how we were dealing with it. Most of our clients had never used Zoom before, so we did several Zoom meetings a day to explain what we’re doing and how we're doing it. Now our clients are used to doing Zooms with us all the time and it's the wave of the future.”

That trend has helped many client portfolios enjoy record growth during 2020, he added. He said advisors got out in front of the market trends and actively managed each portfolio to meet clients’ risk profiles. Kallen said Prosperity Financial Group offers eight customized portfolios. It places each client in one of those portfolios depending on their level of risk and what they want to do with the money. “You can’t have 200 different portfolios for 200 different clients,” he said. “We are not buy-and-hold people, and we’re not stock jockeys. We are much more sector-oriented. We basically cherry-pick the sectors we think will provide each client the right stability for the next three months or the next three years. So we use strategy to figure out how we build the portfolio. Then we watch that portfolio every single day.

Nobody's perfect, but we've stayed ahead of the game.”

Beyond finances, the firm also spends a great deal of time involved with philanthropy and has consistently donated 10 percent of its revenue to various charities, Kallen said. He also runs A Brighter Day, a charity that helps teenagers deal with stress and depression. “People feel very comfortable talking to us about their own stress and what goes on in their lives: money, family dynamics, COVID-19, stress, whatever it might be,” he added. “That's why we have truly become a trusted advisor to our clients and not just a financial advisor.”

For more information on Prosperity Financial Group, visit prosperityfinancialgroup.com


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