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post-conference report

special advertising supplement Investmentnews Content Strategy Studio | deCember 15, 2014 S3

1Charles Schwab strategy estimates, 2013

©2014 Charles Schwab & Co., Inc. (“Schwab”). All rights reserved. Member SIPC. Schwab Advisor Services™ serves independent investment advisors and includes the custody, trading and support services of Schwab. Independent investment advisors are not owned by, affiliated with or supervised by Schwab. InvestmentNews is not affiliated with Schwab. (1214-7921)

Dear InvestmentNews Readers,

IMPACT® 2014, held in the Mile High City of Denver, brought together thousands of advisors and ® 2014, held in the Mile High City of Denver, brought together thousands of advisors and ®

record keepers from across the country to network with peers and industry influencers, keep

current on industry trends and gather new insights to help drive their businesses forward. This year’s

conference was one of our largest yet—with over 5,300 attendees, including 1,560 exhibitors/

sponsors, it was a strong testament to the momentum and significance of the independent

registered investment advisory (RIA) industry.

The theme for IMPACT was “Empowered,” and it is certainly a fitting description of everyone who

has contributed to the phenomenal success of the RIA industry. With over $4 trillion1 in assets under

management, RIAs continue to be one of the fastest-growing segments in financial services. When

I think back to Schwab’s first advisor conference, held in a small ballroom in San Francisco with just

300 advisors, it is inspiring to see just how far this industry has come.

“Empowered” is more than an event theme. It is also a call to action—for Schwab, for the industry

and for advisors. To ensure that the RIA industry succeeds not only today, but also well into the

future, we all need to be empowered to drive change—to look ahead and see opportunities and

be prepared to act on them. I believe that to succeed in the future, RIAs will need to be thinking

not only about serving their current clients, but also about evolving and adapting their firms to

meet the unique needs of a new generation.

I encourage all of us to pursue this future together. Advisors who are part of the younger generation

can share their unique perspective across their firms, helping to evolve the firm’s offering to attract

younger investors. And advisors who helped make the industry what it is today have experience

and expertise that will be invaluable as they guide their firms through change. For our part, we will

continue to provide advisors with the resources and highest standards of custodial support they

need to thrive. I know that together, we can ensure a vibrant future for advisors and the industry.

Please enjoy this special conference report, which showcases some of the key insights and

highlights from the industry’s leading event. Thank you to everyone who joined us at IMPACT 2014

and made the event such a success, and I look forward to seeing you next year in Boston.

Sincerely,

Bernie Clark

Executive Vice President

Schwab Advisor Services

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special advertising supplementInvestmentnews Content Strategy Studio | deCember 15, 2014S4

Special Projects AssociateLauren [email protected]

EditorialGaynor Communications, Inc.

Photographyjean lachat photography

DesignerAlison MainAlison Main Creative

VP/PublisherSuzanne [email protected]

Associate PublisherMark [email protected]

Senior Marketing ManagerDiana [email protected]

‘The Next Great Opportunity’ As baby boomers retire, advisers must engage ‘Generation Now’

Attracting Female Clients and Advisers Top industry figures discuss how firms can reach out to women.

Photo Gallery Learning, networking continue in General Sessions and on exhibit hall floor

The Youth Movement Having younger clients, staff can increase value of RIA firms

Helping Clients Cope with Grief Advisers must focus on client’s needs, avoid platitudes, stay in touch

Debunking Myths Washington insider says D.C. is not as troubled as the media would suggest

Running the Bulls Expert says various factors suggest continued good news for markets

Past and Future Ben Bernanke talks financial meltdown, legacy

Creating Community Deeper relationships can benefit advisers and their clients

In Search of Rationality Advisers can help clients understand, avoid emotions that can derail financial plan

Expanding Ownership Bringing in employee owners can be good for a firm, if it is handled carefully

Leading with the Right Stories that evoke memories are key to connecting with clients as they age

A ‘Must-Have’ Tool Effective public relations can differentiate advisers, foster growth

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www.investmentnews.com

Contents

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Registered investment advisers have had a great run in recent years, but to keep it going, they must engage with the next gen-eration of investors, diversify the talent within their firms, and ex-pand their use of new technologies, leaders of Schwab Advisor Services told advisers at IMPACT 2014.

“Your model has served (clients) so well that I know it’s going to become the model for the next generation, but it will need to evolve to serve the next generation – what we’re calling ‘Generation Now,’” said Bernie Clark, executive vice president of Schwab Advisor Services. “This is the next opportunity.”

With more than $4 trillion in assets under management, RIAs con-tinue to be the fastest-growing segment within the financial ser-vices industry, Mr. Clark said during the opening general session of IMPACT 2014.

But nearly 70% of RIA clients either are retired or within 10 years of retiring, “and they’re starting to draw down their portfolios,” Mr. Clark said. With 10,000 baby boomers expected to turn 65 every day for the next 15 years, advisers must engage with Generation Now, which includes people from 30 to 45, to continue the RIA success story, he said.

Few advisers are doing so today, said Neesha Hathi, senior vice president of Schwab Advisor Services. Speaking at an IMPACT 2014 session entitled, “Imagining the Future: Exploring Social and Technology Trends Reshaping the RIA Industry,” Ms. Hathi said Schwab’s research shows just 16% of RIAs are in touch with cli-ents’ Generation Now children. “We think that’s an opportunity missed,” she said. “Those folks are actually very much in need of financial advice.”

Generation Now already controls $3.5 trillion in investable assets, “and that’s only going to grow,” Mr. Clark said. The group also will benefit from the trillions of dollars in wealth expected to transfer between generations between now and 2050, he said. “Your op-portunity and quite honestly your risk is how many of those assets will you be able to continue to serve?” he said.

Mr. Clark and Ms. Hathi painted a portrait of Generation Now based on Schwab research, including interviews with members of the group in major markets. The research focused on indi-viduals with at least $150,000 in annual household income or $500,000 in investable assets or the expectation of inheriting that amount within the next five years.

The research shows members of Generation Now “don’t know who you are,” Mr. Clark told advisers. Asked to describe their im-age of a typical adviser, many shared unflattering impressions. “They confuse you with all the Wall Street movies that they’ve been watching,” he said.

To attract Generation Now clients, advisers must diversify the tal-

ent within their firms, clearly differentiate their firms and their val-ue propositions, and connect with Generation Now on its terms, using the technology that its members use, Mr. Clark and Ms. Hathi said. “We encourage you not to sit still,” Ms. Hathi said. “This is a time to take action.”

Diversifying the ethnicity, gender and age of advisory teams is “so critical,” Mr. Clark said. “People who will work with you will want to see people who look like themselves.” He said 40% of the Millennial generation, born between1981 and 2000, are “eth-nically diverse,” compared with 25% of baby boomers. Ms. Hathi noted one-third of today’s U.S. millionaires were born outside the United States or are first-generation immigrants.

Meanwhile, women will control 50% of the private wealth in the United States by 2020 and will receive 70% of the upcoming wealth transfer between generations, Ms. Hathi said. They rep-resent a “huge market opportunity” for advisers, she said, but as Mr. Clark noted, their under-representation in advisory firms is “profound.”

Advisers also must understand the mindset of Generation Now. With generational change already under way at many ad-visory firms, Mr. Clark urged advisers to glean knowledge and insights about Generation Now from younger members of their teams. Ms. Hathi pointed to the need to recruit and to develop next-generation talent.

Mr. Clark said members of Generation Now approach investing and advice “with great care” after experiencing challenging times as they came of age and entered the business world, in-cluding the dotcom crash of 2000 to 2002, 9/11 and its aftermath, and the recession and housing bust that began in 2007. “Fear and insecurity drive their approach to financial planning,” Mr. Clark said. They also prize traditional values more than flashy life-

Neesha Hathi, senior vice president, Schwab Advisor Services

‘tHe neXt GReAt oPPoRtUnItY’As baby boomers retire, advisers must engage ‘Generation Now’

Opening General Session and Imagining the Future: Exploring Social and Technology Trends Reshaping the RIA Industry

Imagining page S9

Women page S18

AttRACtInG FeMALe CLIents, ADVIseRsTop industry figures discuss how firms can reach out to women

Trillions in Investable Assets and Building a Diverse Workforce

The financial advisory industry is doing a serious disservice to women and to itself, according to presenters at IMPACT 2014. In separate sessions, two prominent industry women -- Andrea Turner Moffitt of the Center for Talent Innovation and Sallie Kraw-check of Ellevate – explained the opportunities that advisers are missing to expand their practices and to build more-diverse firms that would better serve not just women clients but the industry itself.

The advantage of serving women is obvious and significant. In a session called “Trillions in Investable Assets: Do You Understand How to Reach Out to Women Investors?” Ms. Moffitt noted that women control $11.2 trillion as primary and joint decision makers.

In addition, according to Ms. Krawcheck in a session called “Building a Diverse Workforce: Women as Your Most Significant Business Opportunity,” women will control 70% of the multi-tril-lion-dollar wealth transfer that is on the horizon.

Some of that wealth will be inherited by women when their hus-bands die, and some will be inherited by women from their par-ents and grandparents.

But many women do not currently have an adviser -- 44% of U.S. women, including 75% of those under 40, according to Ms. Moffitt. Perhaps even more concerning is that the vast majority of widows – and younger people of both genders – will fire the adviser who handles their wealth transfer shortly after that trans-fer occurs.

The biggest reason is that many women do not think that their advisers – most of whom are male – understand them. For ex-ample, Ms. Moffitt said, advisers often assume that a woman’s wealth is the result of inheritance, even though many women

generate their own wealth. She noted a shocking result from Center for Talent Innovation research: Many women who had created their own wealth reported that their adviser never asked them about their job.

Women say that many advisers simply don’t listen to what they have to say and that advisers often do not address issues that are important to women. In fact, advisers often don’t realize that issues women care about might not be the same issues that are important to men.

The situation can be even more pronounced when male ad-visers are meeting with women as part of a couple. Women in these meetings often feel that the adviser talks mainly to their husband rather than to them.

To test whether these perceptions were true, Ellevate, a wom-en’s networking organization run by Ms. Krawcheck, videotaped male advisers talking with couples. Afterward, each adviser was asked whether he thought he spent more time talking to the man or the woman. Most of the advisers said that, aside from a little sports chatter at the beginning, they thought they had talked to both people pretty equally.

Then, Ms. Krawcheck said, they looked at the tape. What they saw was “talk to the man, talk to the man, talk to the man, nod to the lady,” she said, “It was very 1957.”

Both Ms. Krawcheck and Ms. Moffitt agreed that women do not look at investing the same way men do. For example, Ms. Kraw-check said, women take longer to make up their mind to sign on with an adviser. Advisers might have to work harder to bring them on board, but once they do, women are more loyal and give better referrals, she said.

In addition, Ms. Moffitt said, women want different things from their money. Like men, they want financial security and inde-pendence. But they see that as only the bare minimum. They want their money to allow them to do other things: fund their aspirations, support their values and give them career latitude,

Andrea Turner Moffitt, Center for Talent Innovation

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Learning, networking continuein General Sessionsand on exhibit hall floor

IN008993p8.indd 1 12/11/14 8:33 AM


Investmentnews Content Strategy Studio | deCember 15, 2014 S9special advertising supplement

styles and are “a very altruistic group,” Mr. Clark said. “They want to give back.”

Generation Now needs a “trusted guide” to help them “feel better about their financial futures,” and RIAs are ideally suited for this role, Mr. Clark said. Research shows that Generation Now members are more willing to pay for financial advice and are more interest-ed in the holistic financial advice that many RIAs offer, Ms. Hathi said. But to win the trust of Generation Now, advisers must demonstrate shared values and offer transparency “in everything that you do with them,” Mr. Clark said.

Generation Now will be more involved in their investment decisions, will have a great need to validate those deci-sions with trusted family members and friends, and will use social media and other technology to obtain validation, Mr. Clark said.

“They will have very high expectations around technology,” he said. “They’re married to their technology. Electron-ic signatures? E-authorization? Mobile 24/7 access? Not special. Table stakes. They expect it.”

He urged advisers to adopt best-in-class technology, including mobile apps for business. “Clients now and even more so in the future are going to want to do things on their terms, and technology is a big part of that,” he said.

Ms. Hathi noted that smartphones and other mobile devices already are ubiq-uitous in people’s financial lives, with 93% of ultra-high-net-worth investors us-ing mobile devices to check account balances and information and 65% of these investors using mobile devices to research investments.

RIAs must prepare for a future in which technology, coupled with Generation Now’s needs and expectations, will re-shape the way advisers connect with prospective clients, win their business and provide ongoing service, Ms. Hathi said.

She showed advisers three animated video vignettes depicting how advis-ers and clients might interact five to 10 years from now. The vignettes showed people selecting advisers by using a combination of online matching ser-vices and social media, and then col-laborating with advisers through video chats. Technology already is making virtual relationships more common, breaking down traditional notions of advisers serving only local investors, Ms. Hathi said.

Referrals still will play “a huge part in how you capture clients in the future, but you might get those referrals in different ways,” such as online match-ing services, Ms. Hathi said. Noting that online match sites account for 30% of today’s marriages, she said: “If peo-ple feel comfortable enough to find their spouse on an online dating site, don’t we think they’d be comfortable enough to find their financial adviser?”

Websites seeking to match investors with advisers already have appeared, although “there are complications

there because of testimonials and oth-er things,” Ms. Hathi said. “No one’s real-ly cracked the code.... But it does feel like someone’s going to.”

Reviews of financial advisers, she add-ed, already can be found at yelp.com. “That online brand, that reputation, is really important,” she said. “And people are trusting websites to make important decisions.”

To cultivate Generation Now clients, advisers will need to maximize the ef-

fectiveness of their websites and to

embrace social media, Mr. Clark said.

“Generation Now does their homework,

and they do most of it online,” he said.

Research shows that nearly half of all

financial advisers -- including RIAs and

those with wirehouses and indepen-

dent broker-dealers -- use social media

daily, Ms. Hathi said. More than 70% of

those advisers report that social media

has helped them aggregate assets.

Yet Schwab has found that only about

30% of RIAs use social media. “You all

are using it less than your peers in those

captive channels – (that’s) probably

something for all of us to think about,”

Ms. Hathi said.

As RIAs pursue Generation Now, they

also might need to consider adopting

flexible service models, including man-

aging only a smaller part of a client’s

assets at first and offering multiple fee

schedules, Ms. Hathi said. Members

of Generation Now often want “to do

business a little bit differently,” she said. “They might not want to give you all their business to start. They might want to test you out.”

Generation Now, she added, “might come to you with a lot of misconcep-tions, having read a lot of that informa-tion that’s out there. You have to build that relationship and become the trust-ed guide.... That might require you to broaden your value proposition in order to build that trust and that holistic rela-tionship that they are looking for.” Z

imagining Continued from S6

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IN008993p09.indd 1 12/11/14 8:42 AM



Gen Y were shaped by their experiences.

Among the most significant of those experiences has been technology. Gen X and Gen Y are very tech-savvy. They are comfortable online and with social media, and they will work only with advisers who are comfortable there too.

“Technology is a major factor in attracting them,” Ms Mullen said, adding, “If you don’t have a website, they won’t work with you.”

They want that website to be full of information and interaction. Gen Y in particular is interested in lots of videos and podcasts. They want to be able to find out from an adviser’s online pres-ence what the firm can do for them.

Then, Ms. Mullen warned, “You better deliver on what you say.” If an adviser does not deliver, “Gen Y will tell their entire social media circle about it.” However, she said, they also will tell their social media circle about firms that do what they say they will.

While there are some differences between the two generations – Gen X is more skeptical, while Gen Y is more collaborative – they both want to focus on values and goals rather than invest-ment performance.

To reach these younger investors, Ms. Mullen said, advisers should follow the 5-E Model for Effective Communication: Explore, En-gage, Envision, Enlighten and Empower.

Explore. This step begins with learning more about what moti-vates these generations, and it also involves preliminary discus-sion with potential or new clients to define the client-planner relationship.

In moving from background information to interacting with spe-cific potential clients, advisers should focus on understanding the

At the same time, many advisers are considering how to disen-gage from their firms. Some 60% have no clear succession plan, she said. For many of those, their general plan is to sell their firm to a younger adviser. However, the pool of younger advisers who are interested in and capable of running a firm is relatively small. And they do not want to buy the kind of firm that many advisers are selling, Ms. Mullen said.

In particular, younger advisers are looking for firms that are sus-tainable, meaning that they have both younger clients and younger staff. Ms. Mullen quoted an industry insider as saying, “If I were buying a financial advisory firm, I would discount the firm’s value based on the number of clients and staff over the age of 55.”

Gen X and Gen Y can help advisers grow a sustainable firm, she said. As clients, they have more to offer than many advisers may think. For example, she said, the wealth of Gen X and Gen Y will increase from $2 trillion in 2011 to $28 trillion by 2018. It likely will increase even further as they inherit from parents and grandpar-ents. But 86% of Gen X and Gen Y will fire their adviser when they get their inheritance – most often because they don’t feel that adviser understands them.

And as advisers or other staff within a firm, members of Gen X and Gen Y often make it easier to attract and serve younger clients – which can make the firm more valuable for a potential buyer.

So what can advisers do to reach Generations X and Y?

The first thing is to acknowledge a few basic truths, Ms. Mullen said. First, Gen X and Gen Y are very different in some significant ways from their parents and grandparents, who may make up the bulk of an adviser’s clients. Like every generation, Gen X and

Reaching Gen X and Gen Y can help advisers build their prac-tice now and increase their firm’s value when they are ready to sell it, according to Amy Mullen of Money Quotient in a session called “Close the Generation Gap and Build a Sustainable Fi-nancial Planning Practice.”

Ms. Mullen noted that the average age of financial advisers is 56. Clients are even older, averaging from the mid-50s to the 60s. That means that clients are reaching the stage of their lives when they will begin drawing down their assets rather than add-ing to them.

tHe YoUtH MoVeMentHaving younger clients, staff can increase value of RIA firms

Close the Generation Gap and Build a Sustainable Financial Planning Practice

Amy Mullen, Money Quotient

Youth Movement page S14

Grief page S11

HeLPInG CLIents CoPe WItH GRIeF Advisers must focus on client’s needs, avoid platitudes, stay in touch

What to Say When There Are No Words

Amy Florian, chief executive officer, Corgenius, Inc.

Advisers can strengthen client relationships and can build mul-tigenerational loyalty by preparing themselves to become “the go-to person” when clients have a death in their family, accord-ing to a grief expert who spoke at IMPACT 2014.

“If you can genuinely offer support and comfort to a client in the toughest times of their lives, they’re going to stay with you, and you’ll get their family, friends and associates, too,” said Amy Florian, chief executive officer of Corgenius, Inc., and author of “No Longer Awkward: Communicating With Clients Through the Toughest Times of Life.”

Speaking at a session entitled “What To Say When There Are No Words,” Ms. Florian said it’s especially important that advisers un-derstand how to communicate with grieving widows, who “look for the adviser they’re going to work with during times of tran-sition” and who seek “someone...who understands them, who can be there for them.”

Ms. Florian offered guidance on dos and don’ts after a death in a client’s family, including how to communicate with the client at services and in the months and years that follow. She recommended that advisers take 15 minutes a week to role-play through different scenarios, including what they will say at services, so they can feel comfortable interacting with grieving

clients. “We live in a death-denying society, and you’ve never

been taught,” she said. “Get it down so you are comfortable

and not awkward.”

When attending services, advisers must focus on their grieving

client and must be aware of the threefold purpose of services:

to celebrate the life of the deceased, to recognize his or her

death, and to begin the formal goodbye. Advisers must help

grieving clients achieve these goals, Ms. Florian said.

Advisers should introduce themselves briefly to their grieving cli-

ent, unless the adviser is certain the client will recognize him or

her instantly. Advisers also should establish as much of a physi-

cal connection with the client as their relationship allows. “If you

have a hugging relationship, certainly, give them a hug,” Ms.

Florian said. “When you let go of the hug, don’t totally let go

of them. Keep a hand on their shoulder, on their elbow. Keep

holding their hand.” If an adviser does not have a hugging re-

lationship with a client, a two-handed handshake or a regular

handshake with the other hand on the client’s elbow or shoul-

der are good alternatives. “You’ve got to do what you’re com-

fortable with; otherwise it’s going to come across as awkward or

disingenuous,” Ms. Florian said.

When speaking with the grieving client, advisers should avoid

platitudes such as “I’m so sorry,” “You have my sympathy,” “At

least he (or she) is no longer suffering,” “Time heals all wounds”

and “He (or she) is with the Lord now,” Ms. Florian said.

The adviser instead should share a story or memory about the

deceased, ask the grieving client about his or her memories,

and listen, Ms. Florian said. If the adviser didn’t know the de-

ceased, the adviser should read his or her obituary or should

do some other research to find something to comment on, and

then invite the client to talk about the deceased. “You get the

dialogue going, you ask questions based on what she (the cli-

ent) says, you keep the stories going, as long as she’s engaged,” Ms. Florian said.

Advisers should not worry about slowing down the line at ser-vices. “Your job is not line management; your job is to be there for your grieving client,” Ms. Florian said. When it’s time to end the dialogue, conclude with a statement of support, such as, “I’m going to call you next week just to check in and see how you’re doing, and I’m going to be with you here for the long haul.”

“Acknowledge the reality. Touch them. Let them know you’re there.” - Amy Florian

IN008993p10.indd 1 12/11/14 8:33 AM

Never discuss business at services or fu-nerals, Ms. Florian said. If the client or a family member brings up business, de-flect the inquiry with a response such as, “You have enough on your plate right now. Nothing needs to happen in the next couple of days....I’ll be in touch with you. I have your back.”

Ms. Florian recommended that instead of sending flowers to services or a funer-al, advisers make a donation in memo-ry of the deceased to a cause or char-ity supported by the deceased or his or her family. Advisers should make such contributions after sending a sympa-thy card to their grieving client about a week after the services. The card should include a personal note that refers to some aspect of the services, mentions the charitable contribution, and reiter-ates the adviser’s intention to remain in touch and to provide support.

When meeting with a grieving client to discuss financial matters after a death, do not start the meeting with business, Ms. Florian said. Start with open-ended questions, such as “What kind of a day is it today?” or “If you could tell people one thing about what you’re going through...what would it be? What do you wish people knew?”

Advisers, she added, should not be afraid to mention the name of the de-ceased. “Every grieving person wants to know their loved one made a dif-ference -- that somebody remembers besides them,” said Ms. Florian, who was widowed at 25 when her husband, John, died in a car accident.

“We need to say the name....and invite the story and keep it alive,” she said.

Advisers should expect a roller coaster of emotions from grieving clients, and should encourage them to postpone any major and/or irrevocable finan-cial decisions while managing routine, time-sensitive financial matters for them. Grieving can take a long time, and “grief is more volatile than the stock market,” Ms. Florian said.

Advisers should assure grieving clients that they will stay in touch, and then fol-low through, Ms. Florian said. At the end of a meeting, instead of saying “Call me anytime,” advisers should announce when they plan to call the client. “You set that interval depending on where you are and what needs to be done,” she said. “But you always call them. Take the burden off their shoulders.”

Ms. Florian recommended that advisers send a card with a personal note to grieving clients a few days after their first post-funeral meeting. The card should thank the client for the meeting and should express a commitment to working together to maintain the lega-cy of the deceased and to protect the client’s financial future.

After a client loses a loved one, advis-ers should note significant dates, such as the birthdays and wedding anniver-saries of the deceased and the client. These dates can be intensely painful for survivors, and advisers can provide solace and support by sending a card

or a small remembrance, such as a box

of chocolates, along with a personal

note, Ms. Florian said. “They need those

touches,” she said. “Be there for them.”

Similarly, advisers should note the date

of the death and should send to their

grieving client a card with a personal

note or small gift on some of the month-

ly anniversaries of the death (from three

months to 14 months) and each yearly

anniversary (for 10 years), Ms. Florian said.

grief Continued from S10

Although most people appreciate such gestures, advisers occasionally might en-counter a client who does not want such support, Ms. Florian said. In these cases, the adviser should ask the client how the adviser can best serve him or her, and then should adjust accordingly, she said.

Don’t assume that a client’s grief and pain disappear after a year, she said. “Many people in support groups say that the second year after being wid-

owed is actually harder than the first,” she said. “You get to the second year, and all the support has disappeared.... People really appreciate getting those touches, those reminders that someone else remembers.”

Advisers should be especially sensitive to grieving clients during the holidays, which can remain painful for years, Ms. Florian said. Don’t send grieving clients the same holiday card that other clients

receive, she said. Instead, get a card that wishes the grieving client peace, hope and healing. Include a personal note and a gift card. “Acknowledge the reality,” Ms. Florian said. “Touch them. Let them know you’re there.”

Grieving people often talk with other grieving people, Ms. Florian said. “You do a good job for a grieving person, and you’re going to have more griev-ing people come into your office.” Z



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IN008993p11.indd 1 12/11/14 8:43 AM



Another good sign is that bank lending

is starting to catch up with deposits.

Usually these rates are pretty even; the

banks lend out most of what comes in.

Currently, banks are lending much less

than they are taking in. However, in the

last 18 months there has been an in-

crease in lending across all categories,

Ms. Sonders said.

There are some negative forces that

concern her. For example, public debt

is still too high and is a drag on the

economy. “Public debt is still at 100%

of GDP,” she said. The recent dramatic

reductions in the deficit are helpful, she

said. However, the deficit reductions

are not bringing down the debt.

And, she said, “The higher the level

of debt, the weaker the economic

growth.” That is in large part because of

the cost of paying interest on that debt.

On the other hand, private debt and corporate debt are in

much better shape, since many consumers and companies

were forced into deleveraging by the recession.

Speaking on the evening of the midterm elections, Greg Valliere told attendees at IMPACT 2014: “This is the day we’ve all been waiting for – the end of po-litical ads.”

His remark was met with laughter, but then Mr. Val-liere, chief po-litical strategist for the Poto-mac Research Group, took a

more serious tack at his pre-conference General Session. Ac-knowledging that much of the country seems to have lost faith in the likelihood that anything meaningful will get done in the nation’s capital, Mr. Valliere said the media was responsible for much of that negative perspective.

“The media has created a lot of myths about Washington,” he said. In particular, he noted six “myths.”

Myth 1: Washington is hopelessly broken. He agreed that “a year ago, we made fools of ourselves,” referring to the gridlock in Congress. But in 2014, he said, Congress has accomplished several things, including:

• Atwo-yearbipartisanbudgetdealhammeredoutbyRe-publican Rep. Paul Ryan of Wisconsin and Democratic Sen. Patty Murray of Washington.

• Abipartisanfarmbill.

• AbilltoaddressissuesattheVeteran’sAdministration.

DeBUnKInG MYtHsWashington insider says D.C. is not as troubled as the media would suggest

Pre-Conference General Session: Greg Valliere

Greg Valliere, chief political strategist, Potomac Research Group

• Funding the government for the fiscal year.

• AgreeingtoastrategytocombattheterroristgroupISIS.

While he noted that there is still a lot of political bickering, he

said, “On big stories, the center does hold, and we do things.”

Myth 2: The Federal Reserve is divided. On the contrary, Mr. Val-

liere said, “This is the most unified and dovish Fed in our lifetime.”

He said the members of the Fed agree on the importance of

keeping rates low. In fact, he said, many people think the Fed is

keeping rates a little too low for a little too long. But regardless,

the Fed is not divided.

Myth 3: The dramatic progress in bringing down the deficit means it is no longer a big deal. It is true that the deficit is com-

ing down significantly, as government spending declines and re-

ceipts increase. However, Mr. Valliere said, “I would say we have

yet to deal with the elephant in the room – entitlements.”

The rising cost of entitlements such as Medicare and Social Se-

curity will put an increasing strain on the federal budget. And,

he added, “I don’t see anybody really willing to go after enti-

tlements.”

He said that the GOP is the party most likely to take on the en-

titlement programs, but so far only Ryan has proposed mean-

ingful changes. The rest of the Republicans seem content to do

nothing, at least until after the 2016 election.

Myth 4: The GOP will be resurgent after the midterms. Although

the midterm elections did, as expected, bring big gains to

the Republicans, Mr. Valliere noted that now the party “has to

choose between two very different narratives.”

On the one hand are the backers of the Tea Party; this group is

led by Sen. Ted Cruz. On the other hand are the pragmatists, led

by House Majority Leader John Boehner and Senate Majority

Leader-elect Mitch McConnell. The Tea Party tends toward an

uncompromising adherence to its core beliefs, while the prag-

matists want to demonstrate that they can govern so as to en-

hance the party’s chances in the 2016 presidential race.

Mr. Valliere said he believes that Republicans, led by Ryan, could

pass corporate tax reform by the summer of 2015; lowering the corporate tax rate would be good for investors, he said. On the other hand, he thinks reform of the tax structure for individuals will be much more difficult to accomplish.

He also added that Hillary Clinton, if she decides to run, will be a formidable opponent for a Republican nominee because of the demographics of presidential elections.

Myth 5: A Hillary Clinton presidency would be bad for the mar-kets. He thinks that would not be the case because:

• SheprobablywouldhavetodealwithaRepublicanHouseof Representatives, and traditionally markets have thrived under that divided-power scenario.

• SheismoremoderatethanPresidentObama.

• Liberalscomplainthatsheisa“cronycapitalist”–whichMr.Valliere thinks is actually an asset.

Myth 6: Geopolitical threats don’t matter to the markets. There are several current threats that could have serious effects on markets, he said. They are:

• ISIS.ThefightagainstISISislikelytobelengthyanddifficult,he said. One main danger is the possibility that ISIS will start exporting terrorism to the west, including the United States.

• RussianPresidentVladimirPutin.Mr.VallieresaidthatthePentagon is worried that Mr. Putin will begin to stir up unrest in other eastern European nations with large Russian popu-lations. In addition, sanctions against Mr. Putin are a drag on the European economy.

• China,especiallyitshandlingofpoliticaldissidents.

• Iran’splansforanuclearweaponsprogram.Iftheseareallowed to continue, that could have a negative impact on the markets, he said.

Overall, though, Mr. Valliere is much more optimistic about what is going on in Washington than most of the media is.

“When I add it all up, I think that most things in my city are just fine,” he said, adding that the one exception to his positive out-look is the possibility for geopolitical unrest. Z

RUnnInG tHe BULLsExpert says various factors suggest continued good news for markets

Pre-Conference General Session: Liz Ann Sonders

Liz Ann Sonders said she believes the United States has been in a

secular bull market since 2009, and she does not expect that to

change any time soon.

Speaking in a pre-conference General Session at IMPACT 2014,

Ms. Sonders, who is the chief investment strategist for Charles

Schwab & Co., Inc., explained the reasons she believes this bull

market is likely to continue.

First, she said, consumer spending is stable and government

spending is improving. Traditionally, consumer spending is the

main driver of the U.S. economy, and although it is slightly down,

it remains the major driver. Government spending, which has

been down because of austerity measures such as the seques-

ter, is starting to pick up.

And companies also are starting to

spend some of the money they have

been holding onto for several years.

“We’re finally getting to business capital

spending,” Ms. Sonders said.

Also the Federal Reserve is not likely to

raise interest rates in the short term. She

noted that the Fed has two mandates:

to control inflation and to stimulate job

growth. Currently, the Fed is working to

accomplish both of these goals by keep-

ing rates low.

There are some positive signs on the

jobs front, Ms. Sonders said. Job growth

has been accelerating, especially since

2010. And long-term unemployment –

more than 27 weeks – remains high but

is starting to come down.

Ms. Sonders said the Fed is unlikely to act

to counteract inflation until the inflation rate reaches 2%. Since

it remains well under that threshold, interest rates probably will

remain low until at least the middle of 2015.

She added that the markets tend to respond positively to this level

of inflation, when there is neither deflation nor hyperinflation.

“The higher the level of debt, the weaker the economic growth.” - Liz Ann Sonders

Sonders page S13

Liz Ann Sonders, chief investment strategist, Charles Schwab & Co., Inc.

IN008993p12.indd 1 12/11/14 8:34 AM



Declining oil prices also could have a

negative impact on economic growth,

she said, though she said it is not yet

clear what, if any, effect oil prices will

have.

And Ms. Sonders said she expects mar-

ket volatility to continue, “but it’s in the

context of a secular bull market.”

Ms. Sonders said the last factor to con-

sider is investor emotion. Despite the

recent positive stock market perfor-

In General Session remarks and a Q&A session with Liz Ann Sonders, chief investment strategist for Charles Schwab & Co., Inc., former Federal Reserve Chairman Ben Bernanke talk-ed about his experiences during the financial meltdown in 2008 and the legacy he hopes to have left when his time as head of the Fed ended.

He said that the “critical turning point” of the crisis was the mid-September weekend when Lehman Brothers filed for bankruptcy and AIG tottered on the brink.

“When Lehman happened, the fear just multiplied and the panic got much, much worse,” he said.

He noted that although he, Treasury Secretary Hank Paulson and others tried desperately to find a buyer for Lehman, in the end there was no choice but to let it fail. “At that time, the Congress finally realized we need-ed a response,” he said.

Mr. Bernanke was tasked with con-vincing Congress of the necessity of TARP and other measures to combat the crisis. It was a difficult job, he said, adding that, “The thing you have to understand about Congress is that most congressmen are lawyers, and lawyers never ask a question that they really want to know the answer to.”

However, he said, he was able to draw on his experience as a teacher and as a student of the Great Depression. “It was my comparative advantage,” he said. And, although Congress balked at first, “In the end, we were able to bring the country back.”

When he was asked what his emo-tions were during the heart of the crisis, Mr. Bernanke said, “It was very scary.” Things were happening in quick succession. But, he said, “What you try to do in a situation like that is just focus on the task.”

He said that from September 2008 to the following spring, “A lot of the focus was on stabilizing the financial system. ... The economy was dropping like a rock.”

The Fed’s decision to buy assets was an attempt to stimulate the economy, and though some argue that it had no effect, Mr. Bernanke said he be-lieves it worked.

As evidence, he noted that both the United States and the United King-dom used quantitative easing, and they have recovered from the crisis. The European Central Bank, on the other hand, chose not to use it, and Europe still is struggling.

Mr. Bernanke said he was proud of the way his team pulled together and managed to right the country’s finan-cial ship.

He noted that the solutions they de-vised worked, although many remain unpopular. With TARP, for example, taxpayers ended up making money,

“but congresspeople are still losing their seats” because they voted for it.

And, he said, that ability to help find solutions in the midst of crisis is his ma-jor legacy. “We did a lot of unorthodox things that are now part of the tool kit” that the Fed can use if a similar crisis happens.

In addition, he said, during his Fed ten-ure he wanted to increase the Fed’s

transparency, “and I think we’ve made progress there.”

Still, he knows that he will be most remem-bered for the calm and resolve he dis-played in the midst of financial panic and disbelief. When he was asked if he had seen the movie “Too Big to Fail,” based on the book of the same name, Mr. Ber-nanke laughed and said, “I didn’t see the movie, because I saw the original.” Z

PAst AnD FUtUReBen Bernanke talks financial meltdown, legacy

General Session: Ben Bernanke

SonderS Continued from S12

mance, she said, equity exposure is low

among consumers. Consumers do not

seem to be rushing into the market,

which indicates that they are still some-

what skittish.

She noted that bull markets tend to

end when investors reach a high lev-

el of euphoria. And, she said, “We

have not brought back that level of

euphoria that we often see right at

major market tops.” Z


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Advisers are missing many opportunities to expand their practic-es and serve their clients, but they could capture these by creat-ing deeper relationships with their clients, according to Anthony DiLeonardi, managing partner, Third Quarter Advisers.

In a session called “Face to Face: Building Lifelong and Multi-generational Clients,” Mr. DiLeonardi noted that, in general, new relationships tend to generate a lot of excitement in the peo-ple involved, and usually those relationships are very productive. However, over time, relationships can become less exciting and less productive.

He encouraged advisers to examine their client list to determine what relationships need to be renewed, and then to begin the renewal process by reconnecting with clients and spending time to determine what is really important to them. This helps advisers build a community with their clients.

“Community is important to all of us,” Mr. DiLeonardi said. “It sup-ports and protects us.”

By connecting on a deeper level, advisers move from simply selling their services to clients, to actually caring about clients and helping them meet their life goals as well as their financial goals. And that in turn can help them to create a practice that includes several important groups, including:

The aging population. Mr. DiLeonardi noted that the average American who retires at 65 will live 18 or more years after re-tirement. Yet many are not financially prepared: They have not saved enough, their pension might be reduced, and Social Se-curity could be in trouble. Advisers can help them prepare fi-nancially before they retire and manage their money once they have quit working.

But advisers also can strengthen their relationship with these cli-ents by providing other kinds of service. For example, advisers should be sensitive to the health problems that can come with aging. They should ask clients about their health or the health of their parents.

If there is a concern, advisers should be proactive about helping find solu-tions. If a client thinks a parent might need a new living situation but is not sure what to do, the adviser can provide information about assisted-living choic-es in the area or put the client in touch with an expert who can help determine what care is need-ed.

In addition, advisers should talk to their

aging clients about legacy – but not only their financial legacy. They should talk about how the client sees legacy. Then they can provide relevant information or introductions to people who could help.

The next generations. That deeper approach not only helps cli-

CReAtInG CoMMUnItYDeeper relationships can benefit advisers and their clients

Face to Face: Building Lifelong and Multigenerational Clients

ents, but it also can help advisers to build a multigenerational business. It can provide a way for advisers to meet the children and grandchildren of their older clients and to begin to build relationships with the next generation.

The benefit is obvious: The wealth transfer over the next 40 years will be the biggest in history, and most of it will go to the next gen-erations. Yet the overwhelming number of those people will fire their parents’ financial adviser when they get their inheritance.

Mr. DiLeonardi said that by engaging and working with clients across generations, advisers can increase their chances of keeping that business – and those assets.

Affluent women. Women will inherit 70% of the coming wealth transfer, and 80% to 90% of women will be solely responsible for their own finances at some point in their life. Yet advisers overall do a very poor job of connecting with women.

Advisers need to understand that wealth often means different things to women than to men. Women see wealth primarily as a means to security, freedom and peace of mind. They want their adviser to help them create a holistic plan, including a legacy plan, Mr. DiLeonardi said.

He said advisers can strengthen their firms by expanding what they can offer clients. They should be able to recommend a CPA or an estate attorney, but they should think beyond that and tap their network for other experts their clients might need, such as an information technology expert, a social media expert, life coaches, therapists and other healthcare professionals.

By being able to help clients with whatever they need, advis-ers strengthen their relationship with clients and build a stronger community. And that, Mr. DiLeonardi said, serves everyone. Z

IMPACT hosts annual student program Born during the dark days of the financial crisis in 2008, the annual Financial Planning Student Program at

IMPACT has grown into an important way to expose young people to the best the industry has to offer.

Since its start in Atlanta six years ago, the program has grown from two schools to 10 and now includes more

than 60 students. The only requirement for participation is that a student must be pursuing an education in one

of the more than 300 CFP Board-registered programs.

The program also has grown from a reception honoring the partnership between Schwab and Texas Tech

University, which has one of the nation’s oldest and most respected financial planning programs, to an extensive

schedule of speakers, a luncheon and a special women’s reception. In addition, students at IMPACT 2014

attended general and educational sessions and visited the exhibit hall.

And the program is starting to bear fruit. One of the students in the inaugural class in 2008, who is now a CFP,

said, “Attending Schwab IMPACT ... allowed me to gain insight and exposure from leading RIA firms ... and was

how I obtained my internship with an RIA firm, which ultimately cemented my desire to travel down the path of

a financial planner.”

youth movement Continued from S10

person’s main concerns and aspirations, estimating the scope of the likely engagement between the person and the adviser, relat-ing the services the adviser can provide to what the person needs and wants, and verifying that the relationship would be a good fit for both the adviser and the potential client.

Engage: This step involves gathering client data and establishing goals. Ms. Mullen stressed that when advisers are trying to engage with Gen X and Gen Y, they should talk less about things like rates of return and more about the client’s vision.

It also is important to understand that young investors do not want their adviser to do everything for them. They want to be involved in the process.

“One of the biggest things you can do to create a supportive environment and engage more with your clients is to do less for them.” Ms. Mullen said. She suggested that advisers can do this by:

Anthony DiLeonardi, managing partner, Third Quarter Advisers

• Workingwithclientstoco-createtheagendaformeetings.

• Lettingtheclientdoresearchaspartoftheprocess.

• Workingcollaborativelytoestablishanactionplanwithclearly defined steps.

Envision: In this step, advisers help their clients to understand and explain their goals. Ms. Mullen said this is the most important part of financial planning, “and most people don’t do it.”

Tools advisers can use to help Gen X and Gen Y clients visualize their goals include:

• Questionnairestohelpwalkthemthroughthegoal-settingprocess.

• Acollageorvisionboardshowingthegoalstowardwhichthey want to work. They can create their own images or use technology tools such as Pinterest and Instagram.

Enlighten: In this step, the adviser analyzes and evaluates the cli-

ent’s financial status and helps to develop and present a finan-

cial plan involving specific and concrete recommendations. To

help with this step, Ms. Mullen suggested that advisers:

• Uselanguagethatissupportiveratherthancontrolling.

• Activelyinvolvetheclientintheprocess.

• Behonestanddirect.

Empower: This involves implementing and monitoring the plan.

Ms. Mullen suggested that advisers:

• Breakbigchangeintosmallsteps.

• Celebratetheirclients’successes

• Continuetonurtureclients’understandingof

what’s important. Z

IN008993p14.indd 1 12/11/14 8:34 AM

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seem to be conflicting.

But Mr. Schwartz said that

among companies that

had made the move suc-

cessfully, “Again, fairness,

affordability and trans-

parency predominated.”

He also urged all the par-

ties to focus on the long-

term plan and benefits as

they work through these

issues.

For example, he said, “Ar-

rive at what you feel is a

fair valuation, and don’t

lose sight of what each

other is getting from the

deal.”

Finally comes formalizing the transition. Hard work in the earlier

steps can make this step much easier. But still, Mr. Schwartz urged

owners to involve third parties “because this is the most emotion-

al thing you will do short of getting married and having children.”

He acknowledged that there will be disagreements and difficult

discussions. But, he told advisers considering employee owner-

ship, “It’s about trust. These people are your future partners. Do

you trust them, or do you not trust them?”

He urged both original owners and future owners to be patient

as the process unfolds. They should keep talking to each other

-- and keep listening.

“It’s a dance,” he said. “And the firms who did it as a slow dance

were much more successful.” Z

Emotions such as fear can get in the way of

clients making sound investing decisions. But

there are psychological and physiological

reasons for that emotion – and things advis-

ers can do to combat it.

In an IMPACT 2014 session called “The Emo-

tional Investor: How to Prevent Behavioral

Biases from Sabotaging Long-Term Objec-

tives,” Jay Mooreland, MS, CFP, a behavioral

economist with The Emotional Investor, ex-

plained that many investors believe they are

making investment decisions rationally. How-

ever, often their irrational brain is driving their

actions.

In making investment decisions, as in much of

the rest of their lives, people are influenced

by two conflicting parts of the brain. The first,

called the amygdala, is the brain’s fear cen-

ter. “When people are experiencing a finan-

cial loss, the amygdala is firing,” Mr. Moore-

land said.

On the other hand, he said, “When people are experiencing or

even just imagining financial gain, they get a hit of dopamine,”

which is a neurotransmitter that makes the brain feel pleasure.

The media often feeds these two reactions by focusing – some-

times with near hysteria -- on the short-term performance of the

market. This has two negative effects. The first is to draw attention

to short-term market volatility. On days when the market is up

significantly, investors want to be part of the boom. But on days

when it drops, they often want to pull back. Of course, that puts

Adding employee owners to a firm can result in significant growth – so much so that often the original owner ends up with more than he or she had as the sole owner, according to Rich-ard Schwartz, managing director of Charles Schwab & Co., Inc.’s Business Consulting Services.

Citing information from Schwab’s 2014 RIA Benchmarking Sur-vey, Mr. Schwartz noted that 92% of advisers said they were con-sidering internal succession plans. Such an employee ownership model can be a tremendous driver of value for a firm and can have several advantages, he said, including:

• Reducingstressonoriginalownersbyallowingthemtohand off tasks they are not interested in and to focus on what they do best.

• Helpingfirmstoattractandretaintop-qualitytalent.

• Helpingfirmstoexpandbeyondwhereoriginalownerscould take the firms on their own.

Yet many owners have trouble actually creating this kind of ownership model, Mr. Schwartz said. There are several reasons for this disconnect between intent and execution, including that the owners felt unprepared for the transition, didn’t start early enough, had not identified a strong internal successor or did not have a way to prepare new leaders.

In studying firms that successfully made the transition to an em-ployee ownership model, “There was always some kind of trigger event,” such as missing an opportunity or losing a key employee, Mr. Schwartz said. Once these advisers decided to pull the trig-ger, they followed some common steps:

Get clear on what’s important. “This is the time to get a little self-ish,” Mr. Schwartz said. He urged owners to think about what they want to get out of the new arrangement and to talk to trusted advisers such as their friends, attorney and CPA.

them in a position of buying high and selling low.

The media also suggests that market movement can be forecast with rea-sonable accuracy. But that is not actu-ally the case. Mr. Mooreland said that in an analysis of 6,000 predictions by stock market experts, the experts were right only 47% of the time.

“The market goes up because there are more buyers than sellers,” Mr. Mooreland said. “That’s the only thing that is true.” Advisers need to help clients under-stand that so that clients stop chasing forecasts.

So what can advisers do to help their clients act more rationally and less emo-tionally? The Emotional Investor and Charles Schwab & Co., Inc. worked to-gether to develop a guide for advisers and investors called “Rational investing

in an irrational world.”(TM) It suggests that advisers should help their clients to:

Embrace volatility. The unpredictable nature of a volatile stock market can make investors fearful. However, investors who fo-cus on the long term see the drops in a volatile market as an opportunity to buy stocks for less and then hold them until they increase in value.

Mr. Mooreland showed attendees two separate charts, one of which showed extreme market ups and downs and one of

Create a shared vision. Mr. Schwartz urged owners to choose potential employee owners who share their basic values and vision, and then work to solidify those shared values.

Formalize the transition. Many owners fear that this could be the most difficult step. However, Mr. Schwartz said, “If they spent enough time in the first two steps, the third step went relatively easily.”

Critical to making a smooth transition to employee ownership is for the original owners to be clear about their goals. Owners should ask themselves why they want to make this change. Do they want to leave a legacy, create a sustainable business, maintain client trust, retain key employees, keep their control and independence, grow the firm?

The successful firms either identified potential owners who al-ready were at the firm, or if there were no potential owners there, they committed to looking outside the firm. They also shared a commitment to fairness, affordability and transparency in deal-ing with potential owners.

Mr. Schwartz emphasized that in looking for potential owners, owners should recognize that, “The one thing you are not look-ing for is you.” Instead, they should be looking for someone who complements them.

Once potential owners are identified, the next step is to concep-tualize roles and responsibilities; this is an especially important step if there are several owners, he said. Similarly, owners and potential owners need to assess their options, risks and rewards. Everyone affected by the ownership change should participate in the discussion.

One of the last steps is to explore valuation, funding and tim-ing. There are several possible options for each of these topics, and the ideas of the owner and the potential owners might

In seARCH oF RAtIonALItYAdvisers can help clients understand, avoid emotions that can derail financial plan

The Emotional Investor

eXPAnDInG oWneRsHIP Bringing in employee owners can be good for a firm, if it is handled carefully

When You Share Equity, the Pie Gets Bigger

which showed a market that, while it had some dips, moved

significantly upward. Then he noted that the chart showing vol-

atility simply covered a short time period within the larger chart.

“Even great investments can look bad in the short-term,” he said,

adding that advisers can use tools such as the two charts to

encourage their clients to think long-term.

Ignore the noise, especially the media. Mr. Mooreland said that

the brain hates uncertainty, and media noise makes people

think that there is less uncertainty – that someone knows what

is really going on.

Advisers should suggest that clients don’t act on an investment

decision for an agreed-upon time, from days to months. If they

are nervous about a market downturn, have them look at the

market recovery after major events such as Black Monday in

1987 or the recent financial crisis. Remind them that down mar-

kets can provide buying opportunities.

Focus on what you can control. Advisers should remind their cli-

ents that individuals have no control over many factors affecting

market performance, so worrying about those factors is futile.

Instead, advisers should help to change their clients’ focus.

For example, instead of worrying about market volatility, they

should focus on their investment process. Instead of focusing on

economic policies or the media, they should try to understand

and control their reaction to market volatility.

Set a course. Once clients have refocused on the things they

can control, advisers should work with them to set a long-term

investing course that takes into account the client’s investment

allocation and risk exposure, rebalancing strategy and tactical

adjustments. Z

Jay Mooreland, behavioral economist, The Emotional Investor

Richard Schwartz, managing director, Charles Schwab & Co. Inc. Business Consulting Services

IN008993p16.indd 1 12/11/14 8:35 AM


special advertising supplement Investmentnews Content Strategy Studio | deCember 15, 2014 S17

With the communications renaissance, public relations now en-compasses earned media and owned media, she said.

Earned media is the traditional purview of public relations, and media relations remains the core of public relations today.

“Earned media is that ability to build relationships, engage re-porters, bloggers, influencers, get them to know your firm, your value proposition, your point of view, and feature that in stories

People have an insatiable appetite for stories, and advisers who

master the art of telling stories and eliciting them from prospects

and clients can forge deeper relationships, simplify complex in-

vestment decisions for clients, and grow their businesses, a con-

sultant and author told advisers at IMPACT 2014.

Scott West, head of Invesco Consulting, calls this art “story sell-

ing,” and during an IMPACT 2014 session entitled “The Power of

Public relations is a “must-have” growth tool for advisers today, no matter the size of their firm, according to Susan Forman, vice president of corporate public relations for Charles Schwab & Co., Inc.

“It’s a tool to build your brand; it’s also a tool to build the RIA industry overall,” Ms. Forman told advisers at IMPACT 2014.

Public relations “is probably one of the more scalable means of communications,” she said. “It doesn’t necessarily require a team of people, a big budget. It’s important to understand what you’re trying to achieve with your public relations effort and then scale to meet the resources that you have available to you.”

Ms. Forman said that successful public relations programs not only can differentiate advisory firms and the RIA industry, but also can drive referrals; support client, asset and talent acquisi-tion; and position advisers as thought leaders. “That third-party

Story Selling,” he said advisers who are effective story sellers rare-

ly face objections to their recommendations.

“Story selling is nothing more than making the unknown known

by using the familiar,” said Mr. West, co-author of “Storyselling for

Financial Advisors.” Using stories, analogies, metaphors and in-

tentional questions allows advisers “to provide a cognitive short-

cut for people” to make decisions, he said.

“I’m not suggesting that this is a replacement for the facts,

but....this business is about an emotional connection as much

as it is about logic,” he said. “Emotion is the engine of the deci-

sion-making process.”

He called advisers’ attention to the distinction between “left-

brain people,” who are analytical, well-organized and inclined

toward number-crunching and fact-finding, and “right-brain

people,” who tend to be big-picture, conceptual thinkers.

As people age, the left side of their brain deteriorates, and the

right side of their brain becomes more dominant, he said. “It’s

an inexorable march,” he said. “Even with some of the most left-

brain people...you can’t fight it. It will happen.”

Memories and experiences are stored on the right side of the

brain, giving people as they get older “an incredible ability to

remain coherent and...to make actual decisions sometimes

quicker,” Mr. West said.

Advisers probably have experienced this phenomenon with

older relatives and clients, he said. “They couldn’t tell you what

after-tax return was or yields, but ask them a question about their

past, and with HD clarity they bring back memories, images and

experiences from three, four, five decades ago,” he said.

credibility that you get when you’re in the media is really import-ant,” she said.

Speaking at an IMPACT 2014 session entitled, “Using Public Re-lations to Boost Awareness of the RIA Model and Your Brand,” Ms. Forman and Kerstin Österberg, a principal with The Neibart Group, a Brooklyn, N.Y., communications consulting firm, shared a variety of tips for building a successful public relations program.

Advisers must remember that public relations is strategic, Ms. For-man and Ms. Österberg said. Before launching a public relations program, advisers should discuss their firm’s business goals and how public relations can help achieve those goals. “Your public relations program will be more successful if it’s absolutely in lock-step with your business goals,” Ms. Forman said.

Advisers should identify the audiences they want to target with key messages, identify and train spokespeople for delivering those messages, and determine which channels – traditional media, social media, website or events -- to use, Ms. Forman and Ms. Österberg said.

The communications landscape is undergoing a renaissance, with an explosion of communications concepts and tools caus-ing significant changes during the last 10 years, Ms. Österberg said. “It’s important to use the right tools for the right story,” she said.

Advisers must understand the pros and cons of the three major types of modern media – paid, earned and owned, Ms. Öster-berg said.

The upside of paid media, which includes advertising and spon-sorships, is control over the message and content. But the cost of paid communications can be a challenge, especially because they require a time commitment to reach your target audience successfully, Ms. Österberg said.

LeADInG WItH tHe RIGHtStories that evoke memories are key to connecting with clients as they age

The Power of Story Selling

A ‘MUst-HAVe’ tooL Effective public relations can differentiate advisers, foster growth

Using Public Relations to Boost Awareness of the RIA Model and Your Brand

For this reason, advisers should “lead with the right, and fol-low with the left,” particularly when talking with older clients or with women, who research shows are generally more right-brain-dominant than men, Mr. West said.

“Think of your 70-year-old clients coming to see you, walking in with a vast warehouse of neatly filed experiences waiting for you to draw upon,” Mr. West said. “Memories are the way to connect.”

This approach runs counter to traditional thinking in the financial services industry, which focuses on the use of left-brain-oriented literature and tools with clients, Mr. West said. “Therein lies the dis-connect,” he said. “In our industry, we are told to throw the left all the time.”

Advisers do not have to be eloquent storytellers to become ef-fective story sellers, Mr. West said. “Just a few words can turn a conversation,” he said. Advisers, he added, should be intentional in their client conversations, using simple words, phrases, ques-tions and statements, such as: “It reminds me of...”, “Do you re-

Scott West, Invesco Consulting

Kerstin Österberg, left, principal, The Neibart Group, and Susan Forman, vice president of corporate public relations, Charles Schwab & Co., Inc.

Story Selling page S19

PR page S18

“(Public relations) is a tool to build your brand; it’s also a tool to build the RIA industry overall.” - Susan Forman

“This business is about an emotional connection as much as it is about logic.” - Scott West

IN008993p17.indd 1 12/11/14 8:35 AM



including the ability to move in and out of the workforce to care for children or parents.

And, she said, “Overwhelmingly, around the world, women are driven by altruism.” They want to invest in organizations that pro-mote social well-being, especially in the areas of the environ-ment, education, fighting poverty and promoting diversity.

Ms. Krawcheck agreed that women are very interested in invest-ments that align with their values. Unlike men, who often choose to delay their major philanthropy until they have amassed signif-icant assets, women want to do both at the same time.

“For them this matters,” she said. “They want meaning and pur-pose wherever they can find it in their lives.”

Women want to be able to talk with their adviser about what really matters to them, and to be taken seriously in that conver-sation. Many men -- both advisers and clients -- are extremely concerned about financial performance; women, on the other hand, usually look at investing more as a means to an end and less as a competitive thing.

And, Ms. Krawcheck said, most women have very little interest in how the markets work and what drives them. “We are not inter-ested in how the sausage is made,” she said.

Ms. Moffitt said it is important to note that women do not nec-essarily want to work with a woman adviser. But they do want to deal with someone who has “gender smarts” – who can com-municate well, who can create a safe space where they can talk about aligning their investment and life goals, and who is interested in them.

So how do advisers create this safe space and demonstrate that they “get it”? Ms. Moffitt suggested that advisers:

• Usethe3:1rule,inwhichtheadvisertalksfor1minuteforevery 3 minutes the client talks.

• Bevulnerable.Theadvisercanshareabriefpersonalstorythat shows he or she has had an experience similar to the

client’s or an experience that made him or her empathetic

with the client.

• Usephrasessuchas“WhatIhearyousaying”and“HaveI

missed anything?”

• Use“whatif”questionstohelptheclientunderstandallthe

possibilities.

• Becollaborativeandrecaptheconversationtoclarifythat

the adviser and the client are on the same page.

• Focusrecommendationsonoutcomes;giveexamplesof

the potential effect on the client.

Both women said that, regardless of whether a woman’s individ-

ual adviser is male or female, women value diversity of leader-

ship and want to work with firms in which women hold significant

positions. That is another reason the industry needs to work hard

to attract more women, Ms. Krawcheck said.

To appeal to women colleagues, advisers should focus on the

way that their industry helps people holistically – not just to grow

their money, but to be able to live fully. Advisers hoping to recruit

women to their firm should focus on the message that “We help

families live the lives they want to live. It’s a very noble industry,”

Ms. Krawcheck said.

Increasing the diversity of a firm not only helps attract women,

she added; it can actually help the firm make better business

decisions.

She said that as she thought about possible reasons for the fi-

nancial collapse in 2008, she considered the usual explanations:

greed, regulations, etc. But as she thought more about it, she

said, “It occurred to me that the one we never talked about was

group-think.”

She explained that most of the people on Wall Street knew each

other, went to the same schools, looked the same. Because they

were so similar, they held many of the same views and had

Sallie Krawcheck, Ellevate

Women Continued from S6

Pr Continued from S17

and content,” Ms. Österberg said.

Earned media has enormous upside: “You usually get a lot of reach,” Ms. Österberg said. The downside is lack of control. “Nine times out of 10, you won’t get to see what’s published before it actually gets in print,” she said.

Advisers should map out a game plan for winning earned-me-dia placement, Ms. Forman and Ms. Österberg said. Advisers should identify publications in which they would like to build a presence, check the publications’ editorial calendars in the marketing or advertising sections of the publications’ websites, and contact reporters to offer ideas on specific topics and to volunteer as a source.

When working with reporters, advisers should be prepared, re-member everything they say is on the record, be quotable, stay within their area of expertise, deliver and repeat their key mes-sages, and demonstrate their value as a source by providing strong points of view, data and other materials, Ms. Forman and Ms. Österberg said.

Owned media, such as websites, brochures, social media and company events, “can be a real strength” in an adviser’s public relations tool kit because “you have control,” Ms. Österberg said. “You’re producing that content.”

The downside of owned media is that it doesn’t provide as much reach as earned media and owned media, she said.

Ms. Forman and Ms. Österberg emphasized the importance of advisers expanding their digital footprint by investing in their website and increasing their use of social media.

“A number of years ago, a website wouldn’t necessarily be part of a traditional PR tool kit, but today it really is your electronic business card, and it’s a great way to tell your story,” Ms. Forman said. “It’s probably one of the first places a prospect is going to look to understand who you are, what kind of capabilities you have and the kind of firm you are.”

Ms. Österberg encouraged advisers to think about how they are using social media. They should pay attention to their LinkedIn

profile and should consider using Twitter to convey their points

of view, she said.

“The more you invest in getting your word out on...social chan-

nels, the better you will be....because this is really how clients to-

day are doing their research,” Ms. Forman said. “They’re looking

to see who comes up in their community when they’re search-

ing for financial advisers.”

As the communications environment has changed, more news

is surfacing through social media and other online channels, Ms.

Österberg said. “These are places where you can have an influ-

ence,” she said. Research shows 76% of traditional media articles

are shared via social media, and social media posts with visuals

receive 94% more page visits and engagement than those with-

out visuals, she noted.

But advisers also must keep in mind the potential pitfalls of to-

day’s highly interconnected world, where spoken words, imag-

es, articles and other messages can be shared quickly in real

time.

“You’re ‘on’ all the time,” Ms. Forman said. “You always have

to be putting your best foot forward because you don’t know

where that content will end up.”

Providing solid content, including good stories, can help advisers

differentiate themselves from the competition. Ms. Österberg of-

fered the following tips for creating good stories:

• Make stories timely. Think about seasonal topics such as tax

planning and charitable donations, and contact reporters

to offer insights on those topics.

• Tap into emotions. Good stories require color, anecdotes

and real-life examples.

• Include a story arc. Build stories around an issue, the tension

it causes, and the resolution.

• Pass the “So what?” test. The story must be bigger than the

adviser. “PR is not about you per se,” Ms. Österberg said.

“It has to be about your audience.... What are the bigger

issues? What is something unexpected that people perhaps don’t know? That is what will engage people.”

• Use “proof points.” Incorporate research findings and other data to support your case. Avoid jargon.

• Make stories shareable. “Five-page white paper? Inherently unshareable,” Ms. Österberg said. “Start with the big idea. Break it down. Turn it into graphics. Turn it into tweets. Do a short blog post that pulls out the top five things you need to know about `x’ topic. If you can make your content bite-sized, you have much more chance that it will go out there into your networks and be shareable.”

Developing strong points of view on topics of importance to clients, prospects and centers of influence also is an important component of solid content. To help develop points of view, ad-visers should actively follow the news and key conversations on social media, Ms. Österberg and Ms. Forman said.

Getting involved in RIA advocacy also can create opportunities for advisers to develop and share points of view. Advisers should extend their points of view across multiple earned and owned channels, Ms. Österberg said. A strong point of view, she added, helps “underscore your differentiation points.”

Strong messaging is another element of solid content. Advisers should develop at the most three to five key messages about what differentiates their firm, Ms. Österberg said. Get people across the firm involved in developing these messages, and re-peat them across all communications channels.

“Your audiences are hearing your messages amidst an absolute plethora of other information that’s coming at them,” Ms. Öster-berg said. “The more you can repeat those core messages, the more successful you’ll be.” She and Ms. Forman recommended a tool called a “message map” that condenses a firm’s core messages to one page for spokespeople.

When developing a public relations program, advisers should start small, identifying one or two achievable activities per quar-ter, and then build from there, Ms. Forman said. “Don’t boil the ocean,” she said. Z

many of the same experiences. As a result, they often did not challenge each other; they all just agreed.

She then began to review research on the role of diversity in business management, to see whether it has any impact on the effectiveness of management. What she found, she said, is sig-nificant for business as a whole and especially for the advisory industry: When it comes to the kinds of decisions made by a business team, she said, “The power of diversity is so great that diversity outperforms smartness.” Z

IN008993p18.indd 1 12/11/14 8:35 AM



Story Selling Continued from S17

member when?”, “It’s a little like...”, and -- the most powerful of all -- “Let me tell you a story.”

Advisers should get into the habit of asking clients questions aimed at devel-oping a better understanding of who their clients are, their needs, likes and dislikes, he said. “We’ve lost the art of being fanatically curious,” he said. “My challenge to you is to get out of your comfort zone and ask great questions.... Great questions reveal land mines or gold mines...and you want both.”

Mr. West provided several examples of intentional questions that can help ad-visers achieve this objective, including:

• Whereareyoufrom,andwhatdidyou like about living there?

• Outsideofwork,whatconsumesmost of your time?

• Whatwasyourfirstexperiencewhen you learned the value of money?

• Couldyoutellmeaboutyour life’s work?

• Whatisthebestfinancialdecisionyou’ve ever made?

Combining a question with a simple il-lustration can be a very effective way of prompting a client to share valuable information, Mr. West said. He cited the example of an adviser who starts each client meeting by drawing a simple dia-gram showing zero and 10 connected by a line. The adviser then asks, “On a scale of zero to 10, how confident are you that you will have what you need when you need it financially in the fu-ture?”

“There’s no fear based in that,” Mr. West said. “But what is in there is the fact that she’s putting a finger on the potential discomfort of our clients.”

The adviser, he added, reminds clients that she will show them the diagram and will ask the same question each time they meet because she wants them “to visually feel” their progress.

She also reminds them that “we’ll never get to 10 because I’m not perfect and the markets are uncertain,” Mr. West said.

Another adviser explains diversifica-tion by drawing two squares, Mr. West said. One square hangs from a single vertical line. The other hangs from three vertical lines. The adviser tells the client that the pictures represent elevators and asks which one the client would prefer to be in during an earthquake. The adviser then explains, “My job with you over the next year is really quite sim-ply to provide you with more cables on your elevator.”

Mr. West has found that intuitive story sellers also decorate client-meeting space in a way that fosters and facili-tates story selling. He said they make sure the space does two things well:

1) Communicates the story the adviser wants to tell to clients. If the adviser likes to use certain analogies or metaphors, he or she decorates the space “in such a way to lead that,” Mr. West said.

2) Provides an opportunity to gather stories from clients. Examples of deco-rations that can serve as conversation starters include ones that spotlight fami-ly, hobbies, education and awards.

“Family is absolutely the most import-ant,” Mr. West said. Advisers should make sure clients can see family pictures eas-ily because they can foster conversa-tions about clients’ families.

“You want to understand the land mines and the gold mines of why peo-

ple do what they do to save, invest and

spend their money? Talk about the fam-

ily,” Mr. West said.

He also encouraged advisers to think

about hobbies they could spotlight in

client meeting areas and could use

as springboards for story selling. He

recommended that advisers display

education and award items in client

waiting areas and not in their office, “to

build credibility for you as they wait to

see you.”

Mementos from meaningful experienc-

es in an adviser’s life also can serve as

useful reference points during conver-

sations with clients, Mr. West said. He

cited an adviser who is an Iraq War vet-

eran and displays in his client-meeting

area his tattered flight manual from the

war. When clients resist the idea of fi-

nancial planning and ask him why they

should do it, the adviser tells them that

without financial planning, they never

will get to their destination, just as he

never would have reached his destina-

tion without his flight manual.

“We have an insatiable appetite as hu-

man beings to be told stories,” Mr. West

said. “My point to you is they have a tre-

mendous place in our industry. In a thor-

oughly left-brain-dominated business,

you can set yourself apart by leading

with the right and following with the left,

becoming fanatically curious....and be-

ing intentional in your conversations.” Z


IN008993p19.indd 1 12/11/14 8:40 AM

Spectacular.For nearly a decade, Schwab IMPACT Awards®

have recognized select firms who champion and

empower the independent model.

Join us in celebrating these 2014 high achievers

for their vision and leadership. Each exemplifies

the excellence, independent spirit, and drive of

the RIA and retirement plan provider industries.

Outstanding Business Management Bingham, Osborn & Scarborough, LLC Best-in-Business IMPACT Award™

Exemplary Service in Retirement Alliance Benefit Group of Minnesota & Kansas Best-in-Retirement Business IMPACT Award™

Industry Advancement & Advocacy Beacon Pointe Advisors Trailblazer IMPACT Award™

Innovation & Accelerated Growth United Capital Financial Advisers, LLC Pacesetter IMPACT Award™

Learn more about the IMPACT Awards—and the 2014 winners. www.impact.schwab.com/about/winners.html

(“Advisor”) is not owned by or affiliated with Charles Schwab & Co., Inc. (“Schwab”), and its personnel are not employees or agents of Schwab. To be eligible for an IMPACT Award, an advisor firm must use Schwab or an affiliate to custody client assets. Advisor recommends/requires that its clients custody their accounts managed by Advisor with Schwab. The IMPACT Award and this announcement are not a referral to, endorsement or recommendation of, or testimonial for Advisor with respect to its investment advisory or other services. Each investor must decide whether to hire any investment advisor and what authority to give it. Schwab does not supervise investment advisors and takes no responsibility to monitor the services they provide. Schwab Advisor Services includes the custody, trading, and support services of Schwab.

©2014 Charles Schwab & Co., Inc. (“Schwab”) All rights reserved. Member SIPC. TWI (1114-7841) ADP34417IN-08 (11/14)

IN008986.indd 1 12/5/14 4:46 PM

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