ADVISOR GUIDE TO HAVING THE 8 WEALTH MANAGEMENT ISSUES DISCUSSION WITH CLIENTS

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1 ADVISOR GUIDE TO HAVING THE 8 WEALTH MANAGEMENT ISSUES DISCUSSION WITH CLIENTS

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3 TAKING THE LEAD Personal finance is a topic that most clients simply don t feel comfortable discussing. So it s no wonder that questions like, How s your current financial state? may be met with some resistance or guarded answers, leaving you wanting to help, but reluctant to press the issue. As their Financial Advisor, you have a responsibility to assist your clients with their finances. In fact, your clients look to you for wisdom and guidance when it comes to planning for their financial futures, and they need your help even if fear or pride prevents them from asking for it. There s a natural way you can broach the topic that allows you to strengthen your valued relationships and clearly demonstrate your unique value proposition as you address their financial goals. THE BIG PICTURE Eight Common Wealth Management Issues Affecting Your Clients After more than 30 years of supporting Advisors in offering their clients comprehensive financial services, we recognized a pattern that still holds true today. Whether clients have a modest or considerable net worth, they are likely to face certain wealth management issues during their lifetimes. A common thread of each issue is tax planning, which allows you to further demonstrate your value as their trusted Advisor. Clients might not be experiencing all of them today, but the 8 Wealth Management Issues process is one that is ongoing and adjustable as their family dynamics and financial situations change. 1

4 INVESTMENT MANAGEMENT Clients today are overwhelmed with investment advice from every direction. It seems everyone is offering an opinion regarding your clients financial future. But the truth is, there is no one-size-fits-all approach. Investment advice should be tailored to each individual client, and you are in a position to know your clients unique financial situations and can offer recommendations that will truly benefit them. But take care not to always wait for clients to come to you this approach can leave clients under-serviced, or interested in seeking advice elsewhere. Most of your clients are expecting you to take the lead. In fact, being proactive is what distinguishes a top Advisor. When you focus the conversation and investment strategies on your clients unique needs, you position yourself as a trustworthy expert. Message points you ll want to cover include: Investment goals Comfort level Expectations Tax implications Risk analysis Income needs Family dynamics Time horizon CASH FLOW AND DEBT MANAGEMENT Providing a sound wealth management roadmap begins with understanding your clients cash flows, spending habits and debt. More often than not, clients have little knowledge of where their money goes each month. Taking the time to evaluate how clients spend their money enables you to identify opportunities for improving cash flow, while taking a pulse on how they manage debt. All this can help you devise plans for your clients that factor in their credit history and overall financial decision-making preferences. You can then suggest tax strategies and debt management solutions such as refinancing, debt consolidation, or changing tax withholdings to level the investment playing field. And every client wants to hear that there s more money to invest toward their financial goals than they originally thought. 2

5 FAMILY RISK MANAGEMENT One thing is for sure life is filled with a series of unexpected events. That s why it s important to help your clients consider potential risks when devising a financial plan. Even the most well-intended plans can crumble in a second when faced with a sudden death, disability or long-term-care need. Part of providing your clients with a comprehensive plan is knowing the possibilities that could threaten their financial futures. Learning more about your clients situations enables you to identify potential risks and establish plans that will meet their needs now, and into the future. While clients may claim to have an insurance policy in place, the coverage may be inadequate. Alternatively, they might have too much coverage for their current situation. A common issue we also see is old insurance policies that may be more expensive than newer policies. You can provide value by evaluating current policies to make sure their coverage is as efficient as possible, which may allow them to contribute additional dollars toward other goals and needs. This advice will be invaluable as you help your clients protect their most important assets their families. 3

6 RETIREMENT PLANNING With improvements in healthcare, life expectancy is on the rise. The ability to retire in financial dignity is becoming a top concern for many. Clients are asking: Will I run out of money in retirement? Will I be able to retire at my desired age? What will my lifestyle be like? Can I really expect to enjoy my golden years? Couple these client concerns with the growing threat of a dwindling Social Security funding and you re presented with a real opportunity to offer financial guidance to your clients. The first step in addressing this growing concern is obtaining a clear vision of how your clients define retirement. In other words, what does their retirement look like to them? Answering these questions gives you a starting point for determining the level of assets needed to fund that vision. Regardless of your clients ages, as an HD Vest Advisor, you have access to tailored tools you can leverage to bring your clients goals to fruition. VestVision TM is a comprehensive eight-step planning process that was designed from the point of view of the client and allows them to be involved in every aspect of their investment plan. Identify and prioritize your clients goals, Decide on an appropriate investment strategy, Monitor their progress, Make revisions as life changes occur. Essential to the VestVision planning process is the Stress Test, which simultaneously evaluates your clients goals, investment allocation and assets to provide them and you with the best indication as to whether or not they are on target to reach their goals. Ultimately, VestVision strengthens your clients confidence in you and the services you provide, and allows them to approach the future with optimism. EDUCATION PLANNING One of the most neglected areas of personal finance is education funding for children. With media headlines forecasting tuition hikes at exponential rates, the thought of funding college education can seem futile to many. Considering these facts, it may be surprising to learn that education funding is actually one of the easiest financial hurdles to overcome. 4

7 It s without question that many parents dream of sending their children to college. As a Financial Advisor, you can help pave the way for parents to accomplish this dream. With the many education savings plans available, you can offer solutions that don t interfere with your clients other investment planning goals. As you build an education plan, it s important to identify the following key components: How much money is needed? What is the monthly investment minimum? How does this investment fit into the overall plan? Education savings plans can be confusing for clients. For this reason, it s important to help clients understand how their savings will affect their children s ability to qualify for financial aid, as well as the implications for their income, gift and estate tax situations. LEGACY AND ESTATE PLANNING One aspect that is all too often overlooked until it s too late is legacy planning. Ultimately, a legacy plan is what ensures your clients wishes are upheld when they pass. While legacy planning is a complex and emotional subject, it s one the most critical discussions to have for a number of reasons. The last thing your clients want is to leave their families in the position of making important decisions during an emotionally fragile state. Helping your clients create a plan reduces the stress and red tape associated with the loss of a loved one, and more importantly, it keeps the government from collecting valuable assets never intended for its possession. Without having a plan in place, families left behind find the government assuming authority of assets and dividing them as it sees fit. To make matters worse, the government then is able to inherit a lofty tax portion of those assets, leaving family members to collect whatever may be left. By developing a legacy plan now, you can help your clients minimize potential estate taxes and maximize the funds left to their families. While broaching this topic may be uncomfortable at first, it s likely a conversation your clients will be forever grateful they had. 5

8 BUSINESS PLANNING Running a business is no small feat. With countless immediate business needs competing for your clients attention, it s no wonder long-term planning falls by the wayside. Unfortunately, this lack of preparation places your clients in a precarious position. It s important to help them establish a plan that not only protects their personal needs, but also the future of their business. No client wants to come to find that they lack protection when a financial loss occurs. Nor do they want to face the challenge of using their business as a sole means of retirement. As their Advisor, you can help alleviate these fears by implementing strategies to establish retirement plans, protect their businesses, and improve cash flow, taxes and more. At HD Vest we provide comprehensive worksheets and guidance to help you develop these strategies and ensure every detail of their business is handled. SPECIAL SITUATIONS Life is filled with a series of precious moments, as well as unexpected events. It s important to help your clients prepare for any special situations that may come their way. Whether it s planning a wedding, taking a dream vacation or encountering unexpected expenses, these special situations may require clients to take a hard look at areas of their investments they may be willing to sacrifice. As their trusted Advisor, you can help them make the best decisions around these new challenges or opportunities and help them implement a plan to ensure their financial futures remain secure. 6

9 NARROWING THE SCOPE A Focused Approach to Addressing Your Clients Pressing Issues Most clients will never be affected by all of these issues at once. Instead, they will likely find themselves vulnerable in just two or three areas at a time. Failing to address those areas or the common thread that runs between them taxes can lead to problems and unpreparedness down the road. The 8 Wealth Management Issues were developed to help clients actively participate as you uncover and address their concerns. Through a guided conversation centered on what s most important to them and their families and how they feel they are doing in those areas, you can effectively eliminate the issues not impacting them, prioritize those that are and offer effective counsel. It s important that you do not present the 8 Wealth Management Issues as a menu of services. Instead, conduct guided conversations about their financial situation, future needs, family dynamics and goals. Simply pushing the 8 Wealth Management Issues meeting guide tear out (located at the rear of this brochure) across your desk and asking if your clients need help will result in low client engagement and fewer opportunities to help them. Using the proven method outlined in the subsequent pages to introduce the concept to clients will result in more successful interactions. 7

10 BREAKING THE ICE Introducing the 8 Wealth Management Issues to Your Clients At the core of the 8 Wealth Management Issues is the belief that getting your clients to open up about their finances requires you to tap into their emotions. Instead of immediately jumping into the 8 Wealth Management Issues discussion, we recommend that you carefully mention it during a client meeting centered on a topic they re more comfortable discussing, like their 1040 Analyst TM results, taxes or quarterly performance. Here are some best practices to help you break the ice. 1. Greet your clients genuinely and graciously thank them for meeting with you. Nothing lowers your clients guards like a warm, sincere smile. Engage in small talk to help set them at ease. Whatever mood you establish at the beginning of your meeting will likely be carried throughout the entire meeting, so exude positivity right from the start. What to say: Hi [CLIENT], I m so happy you were able to join me today, despite this rainy weather. I always look forward to seeing you. How was your summer? 2. Acknowledge why you ve asked them there, whether it s to review their 1040 Analyst results, taxes or quarterly performance. What to say: The reason I ve asked you here today is that by using a unique tool called the 1040 Analyst, I was able to identify some potential financial planning opportunities you may be unaware of. This shows them that you value their time, are organized and can conduct an effective meeting. 3. An important part of your role is being a good listener. Ask your clients what s on their minds and really listen to what they have to say without interrupting. Clients are more likely to open up when they believe their thoughts or opinions are valued and supported. This also allows you to gauge their interest or better understand how they think, which presents a way to frame the rest of the conversation around what s important to them. What to say: Use supportive statements like, I agree. Investing can seem complicated. And congratulate them on their progress thus far, You should be very proud of yourself for taking the step to invest in your 401(k). So many people neglect that and you haven t. Congratulations. 4. Transition the conversation to the 8 Wealth Management Issues. What to say: Because of what I see on your 1040 Analyst report, I think it s time that we take a more comprehensive and holistic look at your financial situation. I have found that there are eight common wealth management issues that typically affect every client at some point in their lives. Some may not apply today, so we will eliminate the ones that don t and prioritize those that do. Through a proven process, we can go beyond what s outlined in your 1040 Analyst output and uncover additional financial concerns you may be facing unknowingly. 8

11 5. Ask for permission to move forward. What to say: These eight issues are like a balancing scale; if we address one but not the others, it could cause your financial situation to be out of balance. Because you just (had a job change/had a baby/bought a new house, etc.), for me to do the best job I can for you and your family, I think we should discuss this now. A comprehensive review would reveal any pressing concerns and be the first step to getting your financial affairs in order. Would it be OK for us to go through each of the issues together? 6. Once their permission has been obtained, offer clients the 8 Wealth Management Issues Client Brochure to review after the meeting. Many clients prefer to read or research on their own before making a decision. The brochure offers them a comprehensive overview of the process that they can refer to at any time. Seeing it in black in white will lend additional credibility to what you re telling them. Encourage your clients to take notes on the meeting guide tear out and let them know that you will do the same. What to say: You ll notice a meeting guide at the end of the brochure. Please tear it out and take notes on our discussion. Be sure to write down any follow up questions or concerns you may have. I ll take notes too. That way, we can easily recall everything later. Sound good? 7. Differentiate yourself from the competition. What makes you unique is your ability to address your clients wealth management issues and the tax implications that accompany them, but don t assume they ll make that connection on their own. What to say: As we go through this list, you may notice that tax planning is not listed, and there is good reason for this. Taxes are a common thread that run through each of the eight issues. A financial advisor without a tax background may not understand the tax implications of certain investment decisions. But my dual expertise allows me to offer you comprehensive services that address the full scope of your needs. 8. Explain the next steps. What to say: Together we will go through each individual issue, eliminate issues that aren t important to you right now, prioritize the remaining ones and move forward to create a concise plan that makes you feel comfortable and aligns with your needs and goals. Are you ready to get started? 9

12 DEFINING AND PRIORITIZING Conducting the 8 Wealth Management Issues Conversation Once you ve introduced the 8 Wealth Management Issues to your clients, the next step is to conduct an effective conversation where they feel comfortable speaking freely. It s important to use layman s terms that your clients can understand. Then ask open-ended questions that allow you to gauge where they stand on each issue. The key to this conversation is to ask clients, How do you feel you are doing in this area? Money and finances are very emotional, and this question will help you identify more than just data. You will repeat this conversation eight times for each of the issues, but don t force it. Here is an example of how to structure the Investment Management conversation. Please note that this method can be applied to the remaining seven issues. 1. Briefly define the issue. Note that defining the issue is not as important as the steps that follow. You don t want to spend a lot of time here, so give a high-level explanation and move on. What to say: Investment Management is basically your stocks, bonds, mutual funds, CDs, and any other investment that is not part of your retirement plan. 2. Connect to the emotion behind the issue. This is the most important step, so ask an open-ended question. What to say: How do you feel you re doing in this area? Listen intently to grasp a clear understanding. You will need to eliminate the issue or prioritize it based on the client s response. a. If the client decides to eliminate the issue at that time, skip the next steps and move on to defining the next issue. What to say: Based on what I heard, this issue doesn t appear to be an immediate concern. Am I correct in assuming that? If the client says yes, then say, Let s move on to the next issue and revisit when necessary. Sound good? If the client says no, then go back and seek to understand more about their concerns on that issue. b. If you sense that this is an important issue for the client, continue to step 3. Prioritizing issues reassures your clients that their most pressing financial concerns will be given the utmost importance and addressed in the order they deem significant. Don t bombard them with too many questions here; you will have the opportunity to do more fact-finding later. What to say: Based on what I heard, this issue is very important to you and your family. Since this is a priority, we should get a handle on where you currently stand in relation to your goals right away. 3. Ask for what you need. What to say: To get a deeper understanding of your situation, I will need your current investment statements and more information on the CD you have at the bank. 10

13 4. Tell them what you plan to do for them. This should reflect the goals the client shared with you. What to say: I know you re currently working with a financial advisor, but if you would like a second opinion, especially one that considers your tax implications, I would be glad to assist. Once I have your statements, I will review your current investment plan to determine whether you are positioned to 5. Eliminate and prioritize issues. You may have already eliminated a few of the issues during the conversation above. However, if issues still remain, it s time to make sure you eliminate the non-priority items before moving on to make the client feel less overwhelmed. It doesn t mean you will never cover these items, as situations may change for the client. It simply means that we are trying first to identify what is most important to the client to deal with at this time and then as they become comfortable with progress in those areas, you can start to address other issues. What to say: Now that we ve spoken about each of the issues, I d like you to take a look at the list. Are there any remaining issues that you would like to eliminate as a priority right now and address at a later time? Let your clients choose which to eliminate don t argue with them about their choices. You are trying to understand their priorities, not your priorities for them. Then say, Now that we have eliminated Special Situations and Education Planning, let s look at those that remain. How would you rate the remaining issues in order of priority? Let the client review and prioritize. 6. Recap next steps. First, remind your clients of what you need from them: So to wrap up, what I will need from you is current statements for your investments, information about your current insurance policy and I ll need you to sign a policy review form. Next, remind the client what you will do for them: Once I receive your current statements and insurance policy, we will review these to see how they complement your current goals and needs. I may need some additional information from you as we go along. So expect to hear from me if that is the case. How do you feel about the direction we are going in? 11

14 GO FORWARD WITH CONFIDENCE Be Authentic You re in the business of building and managing personal relationships. The most important factor of the 8 Wealth Management Issues is you and the level of service you provide. This process is designed to inform your financial services conversations, not limit them. As you follow the blueprint above, be sure to tailor it to your unique personality and client base. Doing what feels natural to you will boost your confidence and help you appear authentic to your clients. Practice Before trying this out on your top clients, practice on your assistant, spouse, family members, or clients who are good friends. This can really help you perfect your presentation and build confidence when presenting it. Keep Your Clients and Business Top of Mind The 8 Wealth Management Issues encompasses every single financial challenge your clients may be facing and allows you to provide holistic counsel with a sound plan tailored to their unique needs and tax situations. Clients want a plan they know has been customized exclusively for them. The result is a value-added service that can t easily be duplicated by your competitors. Employ a Repeatable Process The 8 Wealth Management Issues process isn t a one and done practice. You ll repeat it year after year as your clients priorities change and their goals evolve. As this happens, your clients will become more and more comfortable discussing their finances with you and less likely to stray. Likewise, you ll get more comfortable having this conversation with them. That s why at HD Vest we feel so strongly about the 8 Wealth Management Issues. Time after time, it s proven effective in converting new clients and retaining existing ones. It s worked for so many HD Vest Advisors, and if you use the method outlined in this guide, there s no reason it won t do the same for you. For additional pointers on how to maximize your client conversations and relationships using the 8 Wealth Management Issues, speak to a Wealth Management Support Consultant at (866) , option 3. Not all HD Vest Advisors are licensed to offer all products or services, including investment advisory or financial planning services. HD Vest Financial Services and its affiliates (collectively, HD Vest, Inc. ) do not provide legal, tax or accounting services. You should consult your tax and legal professional regarding the tax and estate planning implications of any investments. VestVision is based upon the software, patents, copyrights and some of the trademarks owned, developed by or exclusively licensed to Wealthcare Capital Management LLC. ( Wealthcare ). All Wealthcare content within VestVision supports the use of Wealthcare s method and system for financial advising, its method, system and computer program for auditing financial plans, the system and method for incorporating mortality risk in an investment planning model, and the related terminology specific to its patents are used under license from Wealthcare. (U.S. Patents numbers 6,947,904/7,562,040/7,650,303/7,865,138/7,991,675). HD Vest Advisors are responsible for developing individualized investment recommendations or financial and investment plans for their clients. 12

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16 For Internal Use Only HD Vest Financial Services is the holding company for the group of companies providing financial services under the H.D. Vest name. Securities offered through HD Vest Investment Services SM, Member SIPC, Advisory services offered through HD Vest Advisory Services SM 6333 N. State Highway 161, Fourth Floor, Irving, TX (972) /14