Five Ways You Allow Prospects to Take Advantage of You

2. Free advice in the first meeting

There’s a delicate line between giving out a little snippet here and there and acting like you’re their advisor before they sign the papers. By overcommunicating in the first meeting, you become your own worst enemy.

How to avoid getting taken advantage of:

There should be a clear agenda and the goal should be to come up with a list of questions, not answers, that the prospect needs to hire you to find answers to.

Here’s how to put together a first meeting script that will help you avoid falling into the advice-giving trap.

3. Free analysis

It drives me bonkers when advisors provide free, in-depth analysis to a prospect.

Prospect: I’d like you to review my entire portfolio, recent tax history, and estate plan, pretending as if you’re my financial advisor, although I have no intention to pay you for it. But if you make it your very best work, I’ll show it to my existing wealth manager who I’m paying 1% of my AUM.

Advisor: Email it to me.

Prospect: Can you write this in Iambic Pentameter?

Advisor: Sure.

Prospect: And the next time the market crashes, is it okay if my advisor calls you for advice on how to handle my portfolio?

Advisor: Absolutely.

No! Never agree to this. Aside from the obvious fact you are asking to be exploited, it’s not going to set you apart. Advisors don’t reeeeallly do anything different one to the next. You’re not unveiling the Fibonacci series. Maybe there are slight differences but nothing that would come through on paper.

How to avoid getting taken advantage of:

The biggest draw is the way you communicate. Your entire focus should be improving the quality of live, person-to-person interactions, not on trying to show off or set up a sale with fancy paperwork.

If you truly feel you need to do an analysis to understand how you can serve the client, that should be for a fee – hourly or flat. It doesn’t even matter how high the fee is, just as long as you make it so that they have to sacrifice something to compensate you for your time. This will eliminate the DIYers and the people who are just “shopping” around.

4. Start low and I’ll give you the rest later

Prospect: I’d like to come onboard as a client.

Advisor: Great!

Prospect: I’m only going to start with $250,000 though. If it goes well and we like how the performance is, we’ll hand over the remaining $2,500,000 at a later point.

Advisor: Well…okay.

You’re being breadcrumbed. Yet, most of you accept this treatment without fighting back.

Nobody goes to the doctor and says, “My hair is falling out behind my left ear. I only want you to fix that part, though, so I’m only paying for one quarter of the treatment. I want to wait and see if the rest of my hair starts to fall out and then I’ll place the order for the rest of the bottle.”

They’re jerking you around by seeing how far they can push you, because somewhere along the line you failed to understand their real problem.

How to avoid getting taken advantage of:

Many of you set yourselves up for this by relying too much on performance or products in your pitch, and by moving too quickly through the initial conversation. Same as #2 (too much free info), it has to do with how the first meeting was set up.

Slow down and make sure you have identified the major issues. This process starts immediately after they set up the meeting. See my four-part pre-meeting regime.

5. I want to see your references

There was this one prospect who burned me on references. Actually, it was my fault; I let her burn me.

She asked me for a couple of references, called them all, extensively talked to them, and then I find out that she was never seriously considering me in the first place. Like so many of you, I handed out my businesses’ most valuable asset – my trusted client relationships – to someone who hadn’t really earned the right to them. But I learned.

Do you realize what people are really after when they ask you for a reference (whether they realize it or not)?

They want to see the kind of person you work with so they can figure out how they stack up. Remember that at the core of it, we’re all a little bit competitive.

How to avoid getting taken advantage of:

Create a tracking sheet that displays information about the types of clients you work with. How educated are your clients? Do they donate to charity or volunteer? Did they inherit the wealth or did they earn it? Give this sheet to them as your first response when they ask you for references.

And if they persist, give them the names but don’t let them take it casually.

• Never give the prospect more than one reference. If they ask for more than one, negotiate down to one.

• Don’t give out a reference until you get a verbal commitment or they are in the process of signing the agreement. Before that point, refer them to the tracking sheet mentioned above.

• Tell the prospect this is a three-week process. Your client’s time is valuable, and they can’t be at your prospects’ beck and call.

• Ask the prospect to make a list of the specific questions they intend to ask the client. Pass this on to your client.

• Call your client personally before you release their contact information to the prospect.

• Ask the prospect to notify you after they speak with your client.

When the SEC testimonial rule comes into full effect, this will help.

Sara’s upshot

Don’t let anybody tread on your dreams.

I teach advisors how to market thoughtfully. Read my e-book, join my membership, or schedule a consultation if you want to know more.

Sara Grillo, CFA, is a marketing consultant who helps investment management, financial planning, and RIA firms fight the tendency to scatter meaningless clichés on their prospects and bore them as a result. Prior to launching her own firm, she was a financial advisor.

Read more articles by Sara Grillo