What I’m going to talk about this morning is building an asset management practice. How many of you already do money management in your practices? Almost everybody, OK. You’ve made this conversion; I don’t know if there’s anything to talk about.

We made this conversion about 25 years ago. Unfortunately, I wasn’t smart enough at the time to figure out that I really should be putting a lot more energy into it. I stuck just to the life insurance side, and I let the money management side take care of itself. I really didn’t decide to put my energies into this until 2012.

The first thing I realized when I did that was that I needed to figure out how I could convert the success I’d had selling life insurance into money management. It is a different sale, isn’t it? Maybe somebody wouldn’t mind, or a couple of people would tell me a little bit about what you think makes the sale different. Any thoughts? Anybody want to share? This is an interactive group, right?

Audience: Well, I’m always looking for some stories, right. We’ve got a ton of life insurance stories, but there aren’t really many interesting money stories, you know what I mean? It’s a different type of sale.

Baker: Yeah, I bought this thing, and she rented up to such and such, and I was able to retire, and you know. You got one of those.

Audience: Yeah, but we all know a ton of life insurance stories which are in this room. Some of that is more emotional.

Audience: At least for our practice it’s a sale that happens on a recurring basis. We’re an e-based firm, so the sale happens every six months or every three months, and you’re not continuing to prove your work.

Baker: Yeah, that’s absolutely true. That’s a big difference, isn’t it, from a life insurance practice, where you sell something, and then maybe you keep in touch with them two or three times over the next period of years. Then maybe a new need comes up, or they call you because they want to increase their coverage or whatever. Does that ever happen? Yeah, once in a while it does.

That’s the tone of what I would like to share with you today. It is just some of those little nuance conversion things that we’ve learned that we feel the better we are at those, the better we’re going to be in terms of our overall mission.

I remember the first time Phil, our Past President from Maine, ever said this, “We’ve got to think about ourselves dealing with both sides of the financial statement,” and that you are not just risk-based planners if you’re a life insurance agent, you are an asset-based planner as well as a risk-based planner.

If you do money management, you are not just an asset-based planner, so if you were in here for Caleb’s session, he was talking about the integration of those licenses and what have you. How you do both sides of the financial statement is very important.

What do clients expect from their advisor? Suitable asset allocation. We’ve had a lot of discussion on that. Cost-effective implementation — they want to know that they’re getting a fair value for the work that you’re doing. They want you to rebalance; they want to make sure that their assets are in the right spots or if they should be in trust. Do we get it out of an IRM, move it to a Roth — those types of things.

What’s our withdrawal strategy? You know he showed the amount with the accumulation, decumulation. Do you have a decumulation strategy that you market to people while they’re still in the accumulation stage? I think that that’s an important thing to take into consideration.

Total return versus income investing — what’s the long-range game plan here, and how are we achieving it? Then, of course, I think we all know maybe more so than almost any other profession that our No. 1 job is behavioral management, helping people understand.

In fact, this is one of the things that I say to clients when you go through a choppy period like this last month. Fortunately, we didn’t have very many calls, and I’ll talk to you a little about that in a minute, but a couple did, and I can tell you exactly who they’ll be. I always say the same thing; markets go up, and markets go what?

Down. If you’re going to be in the stock market, they have to understand this, and they have to be willing to tolerate that type of volatility. The thing we don’t know is how much up and how much down is there going to be.

I remember seeing a comic representation of the story. People are going to be happy with this out of every 10 years two years. They’re going to not care about this maybe three years, and five years they are going to be unhappy with this or whatever those statistics are.

Expectation is the name of the game. We don’t have to deal with expectations so much with life insurance. There’s only one expectation, you’re either going to live or die. There’s not a lot of argument over it, but with money management, it’s an entirely different story.

You’ve got to be good at marketing, and of course this applies to us on the risk-based side as well, but you’ve got to be good at marketing, you have to be good at investment management, you have to be good at onboarding. This is a critical part of the process — getting people who have said yes to be happy as they go through that process and understand the importance of maintaining and building that relationship. Where do we get our business generally? Don’t we get it from referrals?

If you bring them through the marketing, they’ll love to talk to you; you take them through the investment management, and you tell them your story. Then if you mess up in the onboarding, you could undo all the work that you did, and then that oftentimes has a word-of-mouth effect. “Compliance” — I hate that word — and then client communication: How do you keep in touch with people; how do you maintain a relationship with them?

If you are running a fairly significant practice and you are doing both sides of the financial statement, we don’t have the time typically to have one-on-ones, so how do you delegate that? How do you communicate that effectively to the clients so that they know you care, that you are there for them, that you’re going to be able to help them deal with them and at the same time not be there? So interesting problem.

Like I said, two sides of the balance sheet. As advisors, we can choose one or the other, or we can be both. How many of you think you’ve made that transition to both sides? OK, so a number of you. Well, that’s good. Those of you who haven’t, pay particular attention to some of the issues that I’m going to share with you here.

As insurance advisors, we’re taught to look for the need, the ability to pay, insurability and access. I remember that when I started in the life insurance business, they taught me a sales track. It was after years of experience in specific mutual life insurance. There are two very important factors for today’s man to consider when he starts thinking about his life insurance: needability and insurability. Does a man in college really need life insurance? Why would I know that 52 years later? But I still do. I guess I still use it.

What are these as it relates to money management? Because just like we needed to have a criteria when we decided who we are going to invest ourselves in from a life insurance perspective, we need to have that same type of criteria for people who are the people that we’re going to invest in, in our money management practice.

Of course, anybody who has ever listened to my “Why People Buy” stuff knows, I talk about problems not solutions. Most advisors whom I talk to say, “What’s the answer to the question to what is it that we do?” They say, “Well, we sell solutions.” Sure, solutions are a part of it, but if you sell solutions, you’re size 10 selling. If you sell problems, then you’re a counselor; you’re a consultant. You’re working with them to understand the pain of the problem.

When they understand the pain of the problem, then at that point in time they’ll do whatever they need to do to get rid of that pain. You are going to build a much deeper, longer-lasting and strengthened relationship when you sell problems not solutions.

Need, growing and sustaining wealth, and, of course, that’s on the accumulation side. On the decumulation side, then, you’ve got a consistent stable income for life. Ability: Do they have sufficient investible assets?

When I first started doing this, it drove me crazy. People would say, “Well, what’s your minimum?” And, of course, in the life insurance business, I didn’t have a minimum. If I sold a $5,000 policy, I was happy, right? It costs money to manage an account for somebody. A lot of times the smaller accounts will cost you more than the larger accounts, so you’ve got to figure out how to do that.

What we do in our practice is we’ve got a robo, so anybody under $100,000 we put into robo, and anybody above $100,000, then we’ll work with them on an individualized basis, depending on facts and circumstances.

I like the robo approaches. I don’t have to deal with the rebouncing; it just takes care of itself. It’s very low-cost, and we’re basically warehousing, just like term insurance. We’re warehousing clients for the future.

Audience: Guy, is that your own robo, or is that one from a shelf somewhere?

Baker: No, it’s not ours, but it’s not off the shelf either. We were a Dimensional fund advisor shop, so we use their global funds, which acts as a robo advisor.

All right. We wouldn’t get them to Betterment or something. Insurability — so the question on the life insurance side is, What’s insurability? The question on the asset management side is, Can you even get at the asset? I mean sometimes you get introduced to somebody, and it’s all locked away in a pension plan and a 401(k), and you can’t get it out because they’re not old enough or the plan doesn’t have the provisions in it.

Then access — unlike the life insurance industry, which I imagine most of you could attest to, there is no competition. I mean, you rarely ever run into another agent, especially if you’re at the higher end of the scale with value-added services like we all have. Here they’ve got somebody, they don’t have somebody, they’ve got maybe two or three in a lot of instances. How do you overcome that objection and do it in a way that makes you sound professional and gives them the ability to want to do business with you? We’re going to talk about that in a little bit.

OK, so the key to the life insurance sale is the needs. We all know these: liability coupled with creation, buyer-seller agreements, key management — we could talk about that whole list. [visual]

With AUM funding, the assets require similar skills, but there is a big difference. With life insurance, we’re protecting against loss; with investments, we’re protecting against both gain and loss. You’ve got the greed/fear paradigm going on here, and you have to be aware of how to talk to people about that in a way that will get them to trust you and want to do business with you.

When we prospect for AUM, the focus is on wealth building not wealth replacement. Life insurance deals with death, where wealth management deals with life. Again, you’ve got to reorient your thinking. What’s interesting is they’re really compatible; they do go together. You can make them work effectively in the same practice.

Prospecting for AUM means prospects must have a desire to change advisors, so you have to create that desire. Again, I’m going to show you some things that we do that will do that. Then a willingness to explore an alternative method for investing. They go together. We’ll talk about the elevator talk here in a little bit.

Who’s a prospect for money management? A transitioning executive, someone selling their business, a person who’s about to retire. Maybe they’re inheriting money. I mean, I imagine all you see this in some way, shape or form, don’t you? Money comes from all different ways, but if you haven’t, if you’ve locked in the relationship, you’re automatically going to be the recipient of those dollars. By the same token, maybe one of those is a triggering event that will cause them to come to you.

Look for life events — you never know about someone’s wealth until you start talking about their financial health. That’s a fact finder, so we have to do really well with our fact finders in order to be able to get into, burrow into, their life enough to figure out what’s going on.

Again, problems versus solutions. It’s too easy, I think, to fall into the trap with money management of dealing with returns — the magic of our asset allocations and how we put our portfolios together and all that type of stuff. When in reality — and we’re going to look at a survey that Dimensional did here in a little bit — that’s really not what they’re concerned about.

I mean, obviously it has to be competitive. It has to be good enough in order to be able to sustain that relationship over a long period of time. If you’ve got a good money management process, then you can pretty much show that what you’re doing is consistent with the markets to match up with benchmarks and those types of things. The problem has to go far, far, farther than just the returns.

With life insurance, who stands the most to lose if death occurs? The same thing is true in money management. What is it that we’re dealing with here in terms of their long-term goals and objectives? The answers to those questions will help you find the need for life insurance.

When you focus on money management, what’s the temperature for investing? How much risk do they have? We take this term “risk tolerance” as just a given, but in reality, a lot of times, as I’m sure many of you know, what they say is that risk tolerance isn’t their risk tolerance, so you have to dig deeper into that.

One of the things I do, for instance, is only ask five main questions. Then I will go into each one of them with them specifically and talk about the ramifications of those to get a better sense of who they are. Do they have a broker? Are they satisfied with the service they’re receiving?

One of the things I learned many years ago that was really interesting was that when I would start a conversation about life insurance with a client, and they would say, “Well, I have an accountant,” immediately that changed the tone of the whole entire conversation. He says, “I’ve been with this accountant for 20 years.” How many of you ever heard of all that?

You get to the end of the conversation, and all of a sudden: “Well, I never get any tax ideas. My CPA just really pushes the pencil; he never comes out to see me.” All of a sudden, you hear all the things that they didn’t like about their CPA, but you never would have heard those up front if you’d taken that just at face value.

The same thing is true with a broker. Just because they say they have a broker doesn’t mean they really have a financial advisor, a wealth coach. It doesn’t necessarily mean that they have somebody who is going to provide the depth of services that we provide. You’ve got to get into the nitty gritty with this in that type of a question and find out: How long have you been? How do they pick their portfolios?

I had a guy in my office the other day who said he was with Sutro, he was with Merrill Lynch — I can’t remember — as an advisor, and he wasn’t talking to me. Right now, he’s with one of the big broker-dealers — LPL. He was telling me, “The types of things that you guys do in your organization, we don’t even come close to trying to do those things with our clients.”

He said, “Your language, your vocabulary, the way you educate people, your processes are entirely different than what I’ve learned in the 45 years that I’ve been in the business.” I’ve had wholesalers come in and sit down and listen to what I’ll be talking about tomorrow morning, and they had no idea what I was talking about.

We take for granted that they are a registered rep, that they’ve been in the business, that they’re with Merrill Lynch and whatever. There’s no consistency across the board on that at all, and, in many cases, if you can hang with the people long enough to talk to them and really find out what their needs are and who they are, you can blast through that pretty easily.

There’s a girl who works for us who’s part of my succession team, and she was with Merrill for like 15 years. She will consistently tell people that at Merrill all they did was push the products that they were trying to market and that there was really no desire to help the people beyond what the products were that they were selling. Now, whether that’s true or not, I don’t know. She believes it; she was there long enough.

My point isn’t to knock anybody; that’s not really why I’m saying this. Why I’m saying this is simply for you to appreciate and understand that if you’re having trouble in this area, you want to push through that broker objection and get to the reality the same way you would with a life insurance agent if one exists. Find out what they’re doing. Are they interested in finding a new way to think about investing?

We’ve heard about the power of education. Can you describe your investment process and how you make those decisions? Because the more capable and able you are to articulate accurately and definitively what you do, the more credibility and trust you’re going to develop. Then, what do they like about their current investment strategy, and is there anything that they want to change?

These are fact-finding questions that we really need to be talking to the people about. What we’re looking for is what? Dissatisfaction.

Surveys show, interestingly, and I’m sure you guys have seen this, that 80 percent of the people want to change. I mean, that’s an amazingly incredible statistic. The problem is that all the people I meet are in the 20 percent. What’s going on here? How can all these surveys show 80 percent of the people want to change, and yet we’re just talking to this 20 percent? I think the answer to that is exactly what I was just saying before. It’s that initial line of defense; it’s the resistance to “wanting to be sold.” We need to have a vocabulary, a way of being able to break through, that will then open up the discussion. I’ll show you a couple of the ones that I use.

How do we tap into their concern and create an opportunity for us to become the investment advisor? I guess, first off, what we really need to know is not what they need, but what they want. That’s why I started at what they need, but let’s look at what they want, so it’s the value of advice.

One of the investor’s four greatest fears, and it’s always good to take into consideration fears, is not having enough money to make it through retirement. I’m sure we all have heard this in one way or another when we’re talking to clients: “Will I have enough? Will I be able to make it?” You talk about inflation, longevity risk, sequence risk — I mean, all of the things that go into the decumulation strategy. They have a right to be afraid.

One of the things that I think is so powerful about our industry and as MDRT team members, and the background that we have as life insurance agents, is that we know how to build trust. We know how to build credibility, and we know how to tap into their concerns. Now the question is, Do we then have the skills to be able to do that?

When you sell a life insurance policy — I mean, come on, we don’t invest the money unless it’s a VUL or something, and then, hopefully, we don’t even get involved in that — it’s up to the life insurance company to invest the money, do the options, the IUL, all that type of stuff, and to deliver the death benefit. We can say, “We deliver on our promises.”

When we’re doing money management, it’s an entirely different story. Can you deliver on your promises? If you have concerns in that area, then you really need to rethink your investment process to be able to deliver the story in a way that’s credible, given the ups and downs of the market, because eventually that’s your report card.

Fear of experiencing a significant investment loss — I’m sure many of you have been exposed to sequence risk. If you’re not familiar with Wade Pfau from The American College, I would suggest that you look him up on the internet and tap into his newsletter and pay attention. He’s done a tremendous amount of research. I was fortunate to have him for a professor in this Ph.D. program that I went through at The American College, so I got to know him quite well. He is a rich resource for our industry, especially from the standpoint of delivering a consistent stable income through retirement.

They’re afraid of outliving their money, so that’s different than one because of lifestyle and incurring unforeseen expenses. I mean, that’s an obvious door for long-term care, additional life insurance and some of the newer products that are out now.

Dimensional did a study with 20,000 of its investors, and, I don’t know if you’re familiar with Dimensional, but they only go through RIAs. You cannot buy these funds on the open market, and, as a result of going only through an RIA, Dimensional felt that that gave a more consistent story, and it would keep the overhead of the funds down because people wouldn’t be as likely to try tying the market, trading in and out and what have you. That’s been their experience.

They interviewed 20,000, surveyed 20,000 clients, through these RIAs. The No. 1 thing that came out of that survey, what people wanted more than anything else — more than return, more than having an ongoing relationship with their advisor, all the things that we think about — was they wanted peace of mind.

What was interesting was that I attended a workshop that Dimensional did here about a year ago, and they had a fellow commander, I can’t remember what his name was. His whole topic was how to get referrals, how to build a relationship with your clients so that you became top of mind with them.

One of the things that he suggested doing was a survey with your clients and then asking them six or seven questions. Then make the seventh question “Would you refer your advisor to somebody else?” If they said yes, then follow up with a strategy for them to be able to do that.

What we’ve been doing is we have piggybacked onto the survey that we did. We’ve created videos, and I couldn’t figure out technologically how to get one or two of them up; they’re like two-, three-minute videos that are video business cards that the client can then mail to somebody if the topic comes up. You might say, “Well, how often is that going to happen?” It’s pretty interesting how much feedback I get.

“I was talking to somebody the other day, and I told him about your firm and what you guys do, and I don’t know if he’s going to call.” I said, “Well, give me his name and number,” and he said, “Well, I don’t know if I really want to do that.” I mean you get some of that.

Sending them the audio business card through email gives them an opportunity, then, to taste who you are, what you do, why you’re doing what you’re doing to at least break the ice so that they feel like they’ve met you. I found that that’s been a pretty good thing.

Anyway, we surveyed our Top 100 clients, and consistently across the board, the couple of things that we heard was peace of mind. They had peace of mind in what we were doing; they weren’t worried about their portfolios and the ups and downs of the market.

Then the second thing was, “We don’t know what Guy does; we just trust that he knows how to do it.” There’s a high level of trust that comes from the clients toward us. As long as you can sustain that trust, maintain that over the length of your relationship with these clients, the higher the probabilities are you’re going to retain them and, at the same time, get referrals.

One of the other things that we do is hold workshops. I’ll go into this a little bit later, but we hold workshops and dinners, and we ask our clients to bring somebody. We’ve been very successful in getting them to bring people whom they know, so that’s been a source of new business.

Audience: What topics are in these workshops? Is it interest related?

Baker: Well, we can either bring in outside speakers who are economic and business related, or I’ll talk about some aspect of what we do, you know, rebalancing, how we build our portfolios, what have you, usually a 20-minute talk, and it’s a refresher. You think people are going to retain what you’ve told them, in a way. They need to have updates on that.

One of the things that we’re putting on our website are videos of various aspects of what we do that are six-, seven-, eight-minute modules of what we teach them so that they can go back and review that.

Studies show that they’re focused on more than just investment performance, but most important, they want to know: Do you have their best interest in mind? So what does that sound like? Doesn’t that sound like the fiduciary standard? I mean, that’s what they want. They want to know that you care about them, that they’re not just a number.

I have a guy I’m working with right now who was referred to me. He owns a very successful construction company. I can’t tell how much he’s worth, but if I added up all the numbers, he’s worth a lot. I mean, I tell you I felt like I was in a deposition, in a lawsuit, as he was questioning me and wanting to know what we do and what it really boiled down to, and, more than anything else, he wanted a personal one-on-one relationship. He wanted to know that he could come in, sit down, talk with me about various aspects of his planning and that he wasn’t just going to be an account at some large bank or warehouse.

“Does the advisor care about me, and do I have peace of mind?” Those two have to go together. “Do they know and understand my financial situation?” Well, what are we really good at, right? Understanding their financial situation, fact finder. “Am I making progress toward my goals?” So help them establish a goal.

I don’t know how many of you have seen Curtis Cloke’s software called Retirement NextGen. If you haven’t seen that yet or plugged into it, it is absolutely, in my opinion, the best financial planning software I have seen in the marketplace. It gives you the ability to model every aspect of somebody’s financial portfolio, so whether they have annuities, whether they have investment accounts, whether it’s a Roth, whatever it is you’re able to put that money, you’re able to put those dollars into the buckets. Put in the tax brackets, set up the goals, and it creates an incredible report. We piggyback that onto some of the Excel spreadsheets that we’ve created in addition to that. We’ve got a very strong presentation to make to people depending on what they’re doing.

“Am I receiving a reasonable return on my investments?” That’s always an interesting question. What is a reasonable return, and over what period of time are we talking — one month, six months? Eugene Fama says that returns over a three- to five-year period are noise; you can’t tell anything about the performance of your portfolio in a three- to five-year window. They have to go out 30, 40, 50 years in order to be able to really look at the overall performance of a portfolio.

Granted you could tell a lot from your portfolio if it’s down 10 percent, but is that a trend, or is that an aberration or is that based on anomalies? There are all sorts of reasons that can show that; what’s the rest of the market done during that period of time? Then, what’s the difference between the S&P 500, for instance, and a diversified portfolio that has international and has bonds in it and what have you? This apples-to-apples thing is so difficult to do, but it’s the way people think.

I can’t tell you the number of people who have said to me, “Well, the market’s really up right now. The Dow is up 25,000 points,” you know, whatever it is. How many stocks are in the Dow? Thirty or 32, or whatever it is. How do you look at the Dow and compare that to a diversified portfolio that is spread internationally and domestically?

What do clients want from their advisors? They want a proven investment process that follows their risk benchmarks, so, again, we’re back to what I said before. You’ve got to be able to define that risk benchmark.

Client experience — this is code for “I want to have more of a relationship with you.” Of course, in the life insurance business, that’s a wee bit harder for us to do, especially if you run a high-volume organization where you’re dealing with executive benefits or what have you, and you’ve got 30, 40 people signed up, and you only know the owner of the company or the board of directors. This is a whole different mindset that we have to change to in order to be able to decode this client experience.

Surveys show they want contact three to five times a year. Now, that’s not necessarily a phone call, but have you seen AdvisorStream? That’s a great software program you can sign up for, and they will send articles based on The Wall Street Journal or Barron’s or whatever that are on topic to what you want. They’ll send out two or three very interesting articles a week. I usually get feedback from various sets of clients, and they’re not always the same people, on articles that we’ve sent out.

We’re in the process of creating a blog. I write a newsletter that goes out. Generally, I make the newsletter topical to something that’s going on. I’ll probably do one this week on the election and the impact. We heard some great things for a newsletter yesterday from our friend from Washington.

Audience: His name was Andy Friedman.

Baker: Right, Andy Friedman. Like I said, this is a cultural shift, so how do you obtain client satisfaction? Like I said, I use the phrase “Markets go up, markets go down” a lot. In fact, I get mocked for it. I had this one lady who, no matter what happens, will say, “OK, before you say, ‘Markets go up, markets go down,’ tell me what’s going on.”

The more you can train the people you work with to appreciate and understand what it is that we do, the better able you are to manage their expectations. We sell. Can you sell process and service, or do you focus on returns? We heard that from the stage yesterday; the process is really what’s important.

The returns are there. I mean, you’ve got to have good returns, but if you have a good process —Warren Buffet calls it an “intellectual framework” — if you have an intellectual framework that is defensible based on scientific methods and historical data and research and what have you, you can stand pretty strong against even your most outspoken critics when it comes to market performance over the last month.

Will you treat them fairly? What does that mean? Well, if a trade doesn’t go right, or you find there was an error a week later, two weeks later, what do you do? Do you step up and make it right, or is it their fault? I mean, they want to know that you’re there for them and that you’re protecting them, even as it costs us money out of our own pocket.

Have you disclosed their risks adequately? That’s a tough one to talk about. I think life insurance agents aren’t really keen on disclosing risks. When now you’re just talking about real risk as opposed to life insurance return risks, like luring dividends and IULs and appearing premiums and what have you, you’re dealing with risks at a much different level here that we have to be able to communicate.

Do you have an investment process? Are your fees competitive? There’s a very interesting question. There’s a lot of fee compression going on, and we heard from the stage that robo advisors are down to what, 25, 30, 35 basis points? Well, OK, so what? What do you get with that?

I have a marketing guy I’m working with; he’s giving me a lot of feedback on artificial intelligence (AI). I’ve basically told him that’s exactly what it is, artificial. That’s not to downgrade AI because, I mean, it’s very powerful, but I don’t think it’s very powerful for what we need for our clients. It’s one thing to use AI to manage the portfolio and what have you, but it’s behavioral coaching that AI isn’t going to do. It’s going to be helping people figure out what exactly they need to have in their portfolio. I’m not that concerned about AI. If anything, we’ll embrace it when it becomes relevant, so know your client.

Make sure you’re able to explain the range of services you have. We saw, I think, Caleb said that yesterday. He was talking about how one generation isn’t necessarily going to know what you can do for another generation or another generation, so that’s a very important point.

Then this consistent stable income — I’m sure many of you have, in one way or another, heard about or thought about the 4 percent rule, where you take 4 percent of the portfolio, and you pay it out every year. You just hope that the portfolio does well enough to be able to sustain that. Pfau has done some interesting studies using more current data that says that’s probably about 3.25 percent if you really want to create a sustainable stable income.

How do you protect against sequence risk? How do you reposition the portfolio in order to be able to create that type of an income that is going to be consistent with what they want, over a period of time, to be able to deliver on that promise? We need to have some good answers in this area, and the answer isn’t always an annuity because of liquidity issues that are involved. Don’t misunderstand me, I’m not against annuities, but a lot of people are, so you’ve got to be able to talk through all the issues to be able to show them the power of it.

Client referrals build the practice, right? Referrals come from satisfied clients, from confidence in what you’re doing, from an appreciation and understanding of process. If we’re educating our clients properly, in other words, we’re bringing them through the spectrum, we should be able to see evidence of this in the things that they say. Has anybody had any experience with that they might want to share? How you have engendered that with clients, or how you’ve seen evidence of it with your clients?

Audience: I think for me, I’ve built into my process intimacy with clients and their lives and what’s going on outside of confessional context of providing planning.

Audience: I think of a really good client of mine who thought of filing for a divorce. I could tell it really hijacked the family, and she was an integral part of the business. I know a really good counselor in Ontario, and they needed somebody who was geographically close to the family, and they were in the region, so I made the arrangements. That is a part of my process, is to be looking for ways to ...

Baker: That really had nothing to do with investments, it had to do with ...

Audience: No, but it’s very much a part of the process.

Baker: Sure, yeah.

Audience: The client then has that trust, and they are engaged, and you go back to the touch points, so daily, really, my job says trust me.

Baker: How many of you have found yourself in a similar situation? I imagine almost everybody in the room has. Being there for them on a personal basis. I’ve got one of my A clients; I’m moving him to C, I think. His son has had some problems, so I’ve been helping him find a good counseling service, probably a residential program. You get drawn into these things all the time.

I don’t think we should be afraid of that. I think we should embrace that because it’s out of that you build up capital that you may need later, which is why he’s moving to a C.

Does your process have elasticity? Can you show them a logical workable process that will protect them? This is really key; this goes back to what I was saying before about Eugene Fama and intellectual framework. You’ve got to be able to show them why you’re using this process of investment with the clients. Once they’re satisfied, once they feel confident in that process, you probably won’t really ever have to talk about it again. It’s important to be able to articulate and delineate that process.

How you communicate your plan and how you execute it will retain clients and attract new ones. Don’t be afraid to talk about how you grow your business and referrals. One of the thought processes that I’ve heard through the years that I love is the fact that if my clients help me grow the business, I can spend more time with my clients. I think that that’s a very powerful communication tool to help people understand — that they’re an integral important part of the success of your firm.

Client preferences are a blueprint for building a successful practice. I love this question, and I start every conversation with a client with it once I’ve gotten them into my web: “Are you a speculator or an investor?” Have any of you ever used something similar to this? Have you ever tried it? I see some heads shaking yes and some heads shaking no.

Again, part of our fact finder is what? It’s to find out who we’re dealing with and how to read their temperature. If we start with speculator and investor, what I find happens is that I’m able to point out ... My education process is interactive, so when they answer questions, they will either answer it as a speculator or an investor. As we point this out to them through the education process, I feel like I’m able to bring them closer and closer to an investment mentality than a speculator mentality.

You might think of speculators as buying plenty of stocks and going to the moon or something like that, but in reality the speculator mentality manifests itself over the last month. The elections are coming; it’s time to go to the mattresses; the Democrats are going to win, you know, whatever tapes are playing in their head; and they want to go get out of the market and run to safety.

Daniel Kahneman wrote a book called “Thinking, Fast and Slow.” They did some studies on fear and the relationship of fear and greed. What they found was that the life and excitement over good returns was about half the emotional intensity of fear. In other words, fear was two to three times greater in magnitude in the brain than excitement and delight over higher returns.

In other words, they forget the good days, and they remember the bad days, right? We have to position them for “markets go up, markets go down,” which is what I say, and then we have to remind them: “Are you a speculator or an investor?” Those are two very, very key thoughts that I replay frequently with clients, depending on where I sense they are and the types of questions that they’re asking me.

If somebody asks me, “Well, what do you think we should do now that the election is over?” My response to them will not be an answer. My response to them will be, “Are you a speculator or an investor?” And they know immediately what I’m saying. They understand that in the context of what we do. And what will they say? If they get it and they understand, they’ll say, “I’m an investor.” Then I’ll say, “Well, what do you think we should do?” “Well, all right, we’ll just hang in there” is the response.

Audience: I had a client during a period of vulnerability. I called him, and I said, “Neil, you’re feeling OK? If you’re real good, why are you calling me?” I said, “Well, the market has been bouncing all over the place, and you haven’t called me,” because he always used to call me. He said, “Maybe after all these years, you finally got the train.”

Baker: That’s good I like that. Yeah, that’s very good. Thank you for sharing that. Somebody else had a hand up?

Audience: How do we get more on top of that, because I get a lot of clients call whenever the market’s bottle because they listen to business news. They listen to Bloomberg; they listen to CNBC or Fox, whatever they’re reading or watching. All they really want is just a reassuring voice that says, “This is normal.” I say, “So what do you say?” “Well, we go down.” Once in a while, there’s an existential risk. When are those possibilities out there that we could see crisis in the bottom line, or is it a banking crisis like we had 10 years ago? I don’t see anything that says any suggestion we’re worried about that right now.

Baker: Yeah, I agree with you. It’s a good answer. How many of you heard the Brinker presentation? Almost all of you. You heard him say a number of times from the stage that they’re the experts; they study this stuff; they know what’s going on. They’re positioning themselves exactly as both of you were talking about. They’re positioning themselves to be the person that can bring calm to the storm, because we’ve seen this before. This is nothing new; there’s nothing going on out here.

Bubbles don’t happen all that often, and there are two types of bubbles, by the way: There are the good bubbles and the bad bubbles. And both hurt by the way. The good bubbles are the technological bubbles; it was the breakthrough of the printing press, the Industrial Age. Now we’re seeing it with the internet and all of those types of things. Then you’ve got bad bubbles, which was the mortgage crisis, and that was a government-inspired bubble that had really bad ramifications all the way.

Audience: My answer is turn off the damn television.

Baker: Yeah, really, and the internet. You have to have a philosophy. I think you can hear my philosophy in some of the things that I’ve said. If you replayed back what you’ve heard me say a number of times here this morning, that’s my philosophy, and I follow that philosophy, and I communicate that philosophy. Do you have a philosophy?

Let’s take a minute here, and on a piece of paper — I see most of you have notes in front of you — write down quickly what your philosophy is as it relates to markets and how to deal with risk. Just take a moment and write that down. OK, so your philosophy should incorporate how you make decisions and how you deal with risks.

The reason why this is important, more than anything else, is because your clients expect you to handle their portfolio. They have delegated to you the responsibility to handle their portfolio. If you don’t have a philosophy for how you make decisions and how you’re going to manage that portfolio, you could get trapped in the fake news. Various things that Mark was mentioning with Bloomberg and all the rest, Cramer and all of them.

It’s important that we be a rock, a solid rock in our philosophies so that when the clients come up against it. They know that we’re not changing just because of events. There are always going to be events.

I’ll tell you, I was in Philadelphia here a couple of years ago when MDRT was there, and we had a dinner at its oldest club, and downstairs was a museum. I walked around the museum, and they had — I don’t know if they were real or if they were just lithographs or something — newspapers. You could walk around, and you could see the headlines that were up there. Then I took the time to read the articles.

As I was reading those articles, I thought I was reading about today. I think we saw that from the Main Stage yesterday where they were talking; it was the Brinker guy, I think, who did that.

Yeah, right, and resignations and all that type of stuff. That stuff has existed forever, and if you invest based on that type of thing, you know where it’s going to end. I’m preaching to the choir here, but it’s important for us to be stable in our thought process so we can communicate that effectively.

OK, so speculators assess the market’s temperature, investors select a strategy based on proven metrics, risk tolerance. They wait for the market. They wait for the market to come to them, and they run with the market. I said tomorrow I’m going to be talking a lot about being the market.

Common characteristics, investor, speculator; attitude toward investing. Types of decision makers: Are they early adopters, late adopters, never adopters? Then propensity for action; logical and rational, emotional and relational and/or semi-hybrid. Those are the basic categories I find people fall into.

Now, I will tell you that half of our portfolio of clients are engineers. Now, you’re going to understand this; none of my clients were engineers as life insurance clients. I couldn’t deal with them from a life insurance point of view, but from an investment point of view, they love what we do because they love probabilities and mathematics and all of that type of stuff.

You’ve got your left-brain investors, you’ve got your right-brain investors, and then you’ve got your no-brain investors. What I try to do is isolate in on the early adopters and the people who are logical and rational. If I can find early adopters and people who are rational and logical, I’ll make a sale almost every time. It’s very, very rare that I will lose that client. Once they come on board, they’ll stay forever.

I have made the mistake, I will readily admit, of bringing on emotional, relational clients, whom I tend to gravitate toward because I like the emotional, relational side. I know that’s hard for you to believe, but I do. They’re terrible; they are the ones who call up; they are the ones who are unhappy; they are the ones who are more likely to jump to some other philosophy that sounds good to them at the time if we held their hand longer, those types of things.

Know who you are. Do an analysis of your client base and look to see where they fall in this range. Are they investors? And if the predominant clients are in that one area, start prospecting fundamentally for that area. If your business is big enough and you don’t have to be continually bringing in new revenue to make overhead and what have you, start calling and start adding and you’ll have a much happier practice five years from now, I guarantee you.

We just made a change in custodians, and I lost about 5 percent of my assets in that change. I applauded when they left. I mean, I didn’t like losing the revenue, and I didn’t like losing the assets, but I was so glad that I wasn’t going to have to deal with them anymore. It’s important to be selective and know your clients.

This is Bobby; he’s an attorney. [visual] Most of you wouldn’t like Bobby. He’s a litigation attorney. He came to a dinner briefing; he heard the investment primer and wouldn’t do anything. He liked it, talked about it visually, became unhappy with what he was doing, and that took over a year to get him to that spot. He was a long-term investor, he had a long-term investor attitude. He had speculator tendencies, which is a trap.

You’ve got to break them off that habit. They have to see the inconsistencies of being a long-term investor with speculator tendencies. You have to educate, set the proper expectations. He was a late adopter, obviously. We kept that guy in our inventory and cultivated him, and he had actually been a friend for many years. We finally got him up to the trough. He was signing all the papers, and then something happened, and he backed off. We still don’t have him under management, and it was a really big case. I think it was around $100,000 or something, but anyway.

You can get sucked in, and you can waste a lot of time on people you think will be good, long-term prospects. You’ve got to make sure where they are in this stratum. Logical, rational or was he emotional, and, again, I mentioned to you that this fear factor is so intense compared to the exhilaration over returns.

If you’re going to successfully build an asset management practice, assess the emotional makeup of your client. With life insurance, we appeal to emotions; people buy life insurance because they love someone or something. The purchase of life insurance is a character assessment, you know what I mean? If you think about who does something for people whom they love, they’re not going to really benefit from it, unless they’re going to get long-term care out of it now, but that’s a little different. They’re really doing something for someone else, so they love someone or something.

With asset management, they’re doing something for themselves, and it’s a different mindset. You have to be able to make that differentiation.

You don’t want to build a client base you cannot manage. Define your management style and philosophy. Life insurance clients are passive, and they’re demanding information on a regular basis. They don’t need a lot of hand-holding, typically; we talked about that. Asset management requires a lot of tender loving care, so you’ll have to build an organization that can provide this service.

If you’re not into this, you need to have somebody who can do that. Fortunately, I have a 37-year-old daughter who is the epitome of relationships, so I put her in charge of all the relationships. Then what she does is, when there’s a problem, she alerts me to it. You need a good client advocate, a good client relationship builder, in your practice, I believe.

With life insurance, repeat sales come from growing problems and money management; you grow the assets by continuing to nurture them. Frequent contact builds relationships and brings referrals.

Ask a lot of questions. Bad money management clients can cause you a lot of problems, so a little redundancy there. With money management, you still need to establish the need, do a good fact finder, provide analysis, make a recommendation, get a decision.

In my book “Why People Buy,” I like to talk about the buyer’s process and the seller’s process, so this is the seller’s process. The buyer has a process that they’re doing at the same time. They start in denial: “I’ve got all the solutions I need for all the problems I’ve got.” We have to be able to break through that denial and get them to start thinking about it. That’s the second step of the buyer’s process: enlightenment.

In other words, they come to a place where they say, “Uh-oh, I do have a problem.” Then that point in time is when we usually make our biggest mistake in the sales process. It is when we assume when they acknowledge that they have a problem and they have this uh-oh moment. What oftentimes happens is we’ll then start showing the solutions or start addressing the implementation or what have you when, in fact, they have not completed the third step.

That’s the one that I find most people miss, because the fourth step is, I want to do something. So what’s the third step? The third step is grieving. In other words, they have to come to a place emotionally where they give up their solution, and they say, “I don’t have a solution.”

Just because they have enlightenment, just because they see the problem, doesn’t mean they have given up their solution. They actually have to go through a process of giving up their solution that isn’t working for them. What we have to do is time these steps to the buyer’s process, and you’ll know when they’re through with the grieving because they’ll ask one very simple question in some permutation and that is, “Where do you think we should go from here? What do you think we should do next?”

When they ask that question, then you know they have thoroughly internalized everything that you’ve been saying, and they’re ready to move forward. It’s important for us to be able to get them to that point, and that is that you need a critical angle. You have to get their attention.

Take a minute and write down, if you will, what your critical angle is, I mean, if you’ve got one shot at somebody to get their attention, to get them into an interview with you so that you can start talking about process and fact finder and whatever in your elevator talk. What is your critical angle? So write that down, and then I’ll show you what mine are. Anybody want to share their critical angle?

Audience: My very first client is still with me 25 years later. My business card might have changed, but as I’ve grown and evolved, so I have grown and evolved with my clients’ needs.

Baker: How would you frame that to a client, as in your elevator talk, as the reason to talk to you? What would you say?

Audience: Regardless of the name on the door, I’m the consistent factor in my clients’ life.

Baker: Do you think if you were at a cocktail party, and they said, “Hey, Mark, what do you do?” they finally get to that place? Is that what you would say to them?

Audience: You know, not really prospecting anymore because it’s all coming in as referrals.

Baker: That’s good. You stay away from cocktail parties, OK? Yeah, well, I’m going to show you mine here in a minute. Anybody want to share theirs? What happened to our sharing group?

Audience: Help people with their serious money.

Baker: Their serious money, OK, and that usually elicits a response, right?

Audience: Yeah, what do you mean “serious money”?

Baker: Yeah, just like they probably ask him, “What do you mean ‘cat food’?” OK, yeah, I like that serious money; that’s a good one. Anybody else want to share?

Audience: I help clients with their investment to their personal benchmark.

Baker: Help clients meet their personal benchmark, that’s good. Yeah, so what’s a benchmark, they probably would ask. See, the whole idea here is for them to take whatever you say to them and turn it around into a question back to you. That’s the key. The key to the critical angle is that you have created enough of a question in their mind that they’re going to come back to you.

Whether you’re like Mark and you’re getting a lot of referrals, you still have to have that critical angle. If you can’t get them curious and coming toward you, then it’s going to be very difficult to break through that first step in the buyer’s process, which is denial. When you say “serious money,” where do you go from there when they say, “What’s serious money?”

Audience: We know some people put money away that they’re using right away, and others have money put away for something that’s important in their life. Do you have any serious money you’re accumulating?

Baker: The art of our business is a question. The better able we are to ask questions and get people to respond to those questions, the better able we are to really find out what they’re thinking. When we’re a monologue and all we do is talk to them, you never know where they’re at. That’s why the question process is so important.

I’ve thought about this a lot, and I try to relate to how in the life insurance side I was successful in creating that critical angle. Again, remember most of these people are going to say, “I have somebody handling this for me.” Anybody who has significant wealth probably has somebody.

I know we saw some statistics there that say two-thirds of the people don’t have a financial advisor. Well, that’s because they don’t have anything to advise. The ones who have something to advise have an advisor in some way, shape or form. People don’t care about the solutions, we’ve said that. If you sell solutions too soon, you’re going to lose, so you have to educate before you solve, so we’re trying to get them into that.

When I get them into the critical angle discussion, we have what I call our “couch meeting.” That’s part of my office, and then over here is a big huge TV screen, so I have a PowerPoint presentation that I take them through. [visual] The first question is, “Which one do you think; are you a speculator or an investor?” That’s the very first question that I put up there when we get started on this, and that’s where we start the process.

Discuss the problem, show them the analysis, show them the options, that’s all. My critical angle is, do you know how much risk you’re buying? Now, you might say, “Well, that seems a little esoteric,” but that’s the point what you ... A good question is going to be one that’s going to elicit a response, and the one that the response I’m most interested in is the one that deals strictly and specifically with what? Their fear.

If they have risk in their portfolio, and they don’t understand it, and they don’t know how much they’re buying of risk — and I’ll deal with that in a second — you’re playing right into the fears. The serious money comment you made is somewhat similar to that because do I differentiate between my monies? How many people think you buy risk? No hands, OK a couple.

What do I mean by “buying risk”? If I put money under my mattress, how much risk have I bought? Yeah, inflation, house burning down, right. If I put it in the CDs, how much risk have I bought?

Audience: Purchasing power.

Baker: There’s risk associated with absolutely everything that they can do with their money. The question is, “How much risk have you bought in your portfolio? If the amount of risk that you’ve purchased in your portfolio isn’t consistent with your risk tolerance, you’ve got a problem. You’ve got disparity there.”

What we do is we help people figure out how much risk they’ve bought and whether it’s consistent with their risk tolerance. Every client needs to have what in writing? An investment policy statement, an IPS. You would be amazed how often that IPS is out of sync with their portfolio for a number of reasons; it wasn’t rebalanced, it wasn’t set properly, some of the friends went out of business, whatever it is. They slashed over to a new fund that had a different risk profile.

Usually, the reaction I get to this is, “What do you mean buy risk? I don’t understand what you mean by buying risk.” That gives me an opportunity to say, “What we do, then, is we help you figure out how much risk is in your portfolio and whether you have the right amount of risk and whether that risk is being allocated properly. If you’re interested, I would love to sit down with you and show you what we do and how we do it. Give me your card, and I’ll call you in a couple of weeks or a week or whatever, and we’ll get together.”

That one works out pretty well for me. I’ve had great success with that one. How you get into that when they say, “Mark, what is it that you do?” You say, “Well, I keep the name on the door.”

Audience: I’m consistent.

Baker: Yeah, you’re consistent, right.

Audience: The gentleman’s comment about serious money — I always thought I was raised on John Savage’s three circles, so you’ve got your serious money and your mad money. Your mad money might be your individual stock that you own or even speculated position, and can I get your serious money? I said, “I hope someday that your mad money becomes greater than your serious money, but I just want to make sure your serious money takes care of what you need down the road if the mad money doesn’t.”

Baker: Yeah, I studied under John too. I just never could get mad at my money. I always liked his three buckets.

This is one way, and of course the cocktail party is always good the same way. It’s the law of reciprocation. If you talk to them enough about what it is that they do, eventually they’re going to reciprocate and ask you, “Well, I really don’t want to know this, but what do you do?” and then you have to go from there.

I always like to ask a question back as it relates to “How much risk are you buying?” Say, “But before I answer that for you, let me ask you a question. Would you mind?” They’ll say, “What?” I say, “Do you have money in the stock market?” What I’m I doing? I’m doing a fact finder. If they don’t have money in the stock market, I’m going to tell them I’m a guy in a call register. I’m sorry, bad joke. I’m kidding; I would never do that.

The point being, I may not want to pursue that avenue with them, but if they say they have money in the stock market, I’m going to say, “Well, that’s interesting because what we do is we help people assess how much risk they’re buying. Have you ever had a risk assessment? Do you know how much risk you’re buying in your portfolio?”

Then, right there, that’s where the rubber hits the road. Right there, you are going to know whether or not this person is somebody whom you can connect with and come into your rear or not. That isn’t really what networking is all about, it is more like speed dating.

Why is that important? Well, here is portfolio A, which has 10 percent every year, and it grew to 161. [visual] Here’s portfolio B, which jumped around a little bit, and it got 10 percent a year, but a huge difference because this one got 161, this one got 153 and the internal rate of return was 1 percent less.

“You can have the same average return,” I’ll tell a client, “but you may not be getting the same results. It’s important for you to understand how much risk you’re buying in your portfolio in order to be able to figure out how to be more effective and efficient with your investments.” I’d like to talk about the power of 1 percent. A $1 million, yeah.

Audience: Going back to the previous slide, one of the presenters, I think yesterday, covered that even though you may have a lower average return. A lower return portfolio could be more tax-efficient.

Baker: That’s true too.

Audience: Therefore, it could provide a better net after-tax return than have maybe a higher average return.

Baker: Well, and you could also have a lower return but a lower standard deviation of risk and actually end up with a better return than somebody who had a higher return with a higher standard deviation of risk. Both of those are true.

Here is $1 million invested, 10 percent over 25 years, with a 1 percent fee, which grew to $8.6 million. [visual] If the fee was 2 percent, it grew to $6.8 million, so that was a 21 percent reduction. I’m talking IRR. I mean, this is a 10 percent IRR. If the fee was 3 percent, it would be a 37 percent reduction, so that’s another thing from a critical angle perspective. You could ask them not only “Do you know how much risk you’re buying?” but “Do you know how much risk your risk is costing you? You’re buying risk; how much is your risk costing you?” These are good numbers to have on the tip of your tongue.

There’s a second critical angle that I like, which Caleb mentioned yesterday. The guy is walking around with the numbers, right? The Transamerica Institute for Retirement has done a lot of studies on this; that’s a great website to go to if you want to get some good factual information about retirement. They’ve said 86 percent of Americans can’t tell you how much money they need to have in retirement.

I don’t know how many of you like darts, but if I have a dartboard where 86 percent of the time I’m going to hit the target, that becomes a pretty good use of my time and mental energy.

“Do you know your number?” And of course what are they going to say unless they’ve been watching that ad frequently? “What do you mean by ‘number’?” It opens up the door for that conversation. There are three questions that we ask. “What is your number?” “Do you know how much you have to save to get to your number?” And, again, here’s where Wade Pfau could come in handy for you. He’s done a lot of mathematical models on how much you have to save, at what risk levels you’re willing to save at, in order to make your number. Then, finally, and then this is the key; this is the one that I like to camp on: “Do you have an investment process that has the highest probability of achieving an optimum return for the lowest amount of risk?” You could see “risk” is really an important thing in my vocabulary. We really camp on risk because what’s the No. 1 thing the DFA survey said? They said the vast majority of people wanted peace of mind.

If the No. 1 fear and concern of 20,000 investors who are satisfied with their DFA advisors and what they’re getting say that they are there because they want peace of mind, what’s our call to action? Our call to action is to create peace of mind for our clients, and what’s the opposite of peace of mind? It’s fear, right. If we’re dealing with an investment strategy that has the highest probably of delivering an optimum return for the lowest amount of risk, and that gives them peace of mind, we’re hitting the sweet spot of our clients’ concerns. Does that make sense?

AUM is like selling life insurance; you’ve got to discuss the problem not the solution; understand the magnitude of the problem, the concerns, the fears they have; and let them internalize it and wait for them to ask for help. These may not close the sale, but it will certainly open up a good discussion. I found that the longer you can keep people talking and discussing with you, the higher the probability is that they are going to do business with you.

What is your risk allocation and how much risk are you buying? So ask them questions. We get a lot of further with our clients asking them questions than we do speaking all the time, repositioning their assets, showing them how you can make a more risk-adverse portfolio to get the same results.

I have what I call my “expected return analysis.” What we do is create, take and deconstruct their portfolio, and once we’ve deconstructed the portfolio, we figure out what their asset allocation is based on the Morningstar nine asset classes; how much they have in the large cap, small cap, mid cap. We create proxies for each of them, so we can take any investment portfolio and take it back to 1970. Let’s say that’s almost 50 years, 48 years, and we can show them how that portfolio would have performed over a long period of time.

Now, one of the objections to that is 48 years is a long time. I’m 68 years old; I mean, I’ve lived that long, you know what I mean? You are going to have to deal with some of those issues relative to time frame, but, as we’ll talk about tomorrow, the most important thing you can understand about portfolio construction is what’s called “expected return,” and we’ll talk about that. That’s why I call it the “expected return analysis.”

By taking their portfolio, deconstructing it, finding out what their return is and what their risk is, I can then compare that to an efficient portfolio. So complete the analysis, and show them why their portfolio does what it does. An efficient portfolio looks like that. [visual] If you’re aware of the efficient frontier, the yellow dot is where their portfolio is.

If you could be on the efficient frontier, but you’re where the yellow dot is, do you think your portfolio would be more consistent and stable and return a better output to you and your family over the long run than if you’re not paying attention to that?

Remember my client profile: engineers, probability, they’re logical. This doesn’t go anyplace with emotions. Emotional, relational people don’t care about this stuff, but the logical, probability people care about it a lot.

We created this tool so that we could put in the information over here. [visual] We’re looking at a $9,000 a month income at retirement starting at age 70; Social Security when it’s going to start; how much capital they have; what’s their current age and so on. We create a chart like this, which shows their money is going to last till 1986. I have this on my screen, I can change all those number over on the side, sit with them, and I can do this type of a projection in order to do what? What am I doing with this? I’m fixing the problem.

How do we sell life insurance? We fix the problem, so they need to see they’re going to run out of money, if their portfolio is only going to last to age 86. If we drop the earnings rate from nine to seven, now it only lasts to 79. Do you have an investment process that has the highest probability of returning an optimum return for a minimum amount of risk?

I haven’t talked to them at all at this point about their portfolio, the deconstruction, the things that we’ve learned about it. What I’m showing them here is the depth of the issues that they’re dealing with and some of the things that they need to be concerned about. At 7 percent, to reach age 90, they’ve got to increase their monthly savings to $3,000 a month.

It’s amazing the reaction people give me to the information that we’re able to give them here in real time. If you’ve got a software program like this, it’s not hard to create this, by the way, on Excel; I mean that’s what we did. You must demonstrate their current investment plans is not going to get them there.

Define the problem, show a solution, so their number, whatever their number is plus a good strategy, is going to get them to their end result. Show them the analysis, deconstruct their portfolio, determine the amount of risk they’re buying, match the risk tolerance.

Then four important keys for developing AUM. I love Simon Sinek’s “Why.” If you haven’t ever watched his video, you should. If you haven’t watched his video two or three or four times, you should. It is a very powerful delivery of how to think. If you’ve never tried it, try it. Try talking about why you’re in this business with people before you start telling them what you do and how you do it.

Do you have a vision? Can you articulate that vision? The guy I was telling you about who put me through the litigation meeting the other day; he wanted to know my vision. He looked at me, and he said, “You’re probably not going to be here when I need you.” Let’s face facts — when you’ve got a few gray hairs, you’ve got different issues to deal with.

He wanted to know my succession team; he wanted to know what was behind our strategy. Could we deliver on our promises if I’m not there? And I’m getting that question a lot more now than I like. Everyone needs written goals; they’re the guardrails for success.

Audience: Do you wait till you get that question, or do you address it in advance?

Baker: I have always believed that whoever owns the objection controls it. If that’s an objection, I want to control it, so I bring it up in advance.

Good goals are broken into daily activity; we heard that from Joy this morning, right? Master these three skills; communicate your philosophy. You wrote that down: What is your philosophy? If you need to rearticulate it, change it, modify it, do it. Make sure your philosophy is something that resonates with your clients. Develop an effective elevator talk, a critical angle. If you had a hard time writing down what your critical angle was, and I have to think maybe some of you did since you didn’t share it, work on it. Work on your critical angle.

When somebody says to you, “What is it that you do?” have a good answer. If you don’t have a good answer, get somebody to help coach you on getting an answer because you’ve got to have a good answer to that. What are you? Are you a financial coach, an advisor, a wealth manager, a facilitator, a risk manager? What do you call yourself? I’ve struggled with that for years, just don’t call me late for dinner. You’ve got to have a good name for who you are.

I finally, ultimately decided we’re wealth coaches; that’s what we do. We help people; we coach them through the various phases of their wealth, so that’s where I’ve camped.

How are you different? Learn to ask the right questions. What’s your number? Are you saving enough? You have an investment process; how much risk are you buying? Make sure you choose the correct business model. We got this from Caleb yesterday — independent affiliated fees, commissions or both; give clients excellent service, multiple touches.

I really believe in these dinners. I think the dinners are a great way to reward clients and stay in touch with them; give them an opportunity to bring people to meet you. The three-legged stool of success is sound philosophy, consistent process and a high level of service.

A successful wealth coach is a person who can master both sides of the financial statement. They need to protect clients against the liabilities of life, and they need to help them capture and grow their wealth. Those are the things that we do; that’s our mission statement, more or less.