Extend Your Reach • Preparing Your Clients for the Future

Extend Your Reach Networking with other financial-services professionals can improve client services and increase your business. By Jeffrey H. Duncan, CLU, CFBS, AEP, CLTC

After 20 years of working too many hours and using traditional marketing techniques, I realized marketing is critical for a successful financial-services career.

So about five years ago, our firm decided to host a client-appreciation night at a local baseball game with a picnic for our clients and their families. It was a great success, with more than 125 people attending last year. An estate attorney with whom I had developed a referral relationship attended our first game and asked if I would help organize a local chapter of Business Networking International.

BNI is based on the concept of word-of-mouth marketing. By giving referrals to others, you gain. Members often market themselves and the services of other members to their clients, friends and other business professionals. Since joining BNI nine years ago, my practice has become almost 100 percent referral-based.

The next level

Spring-boarding off the early success of BNI, it was time to take client building to the next level. I realized that the aging population and retiring Baby Boomers could use a one-stop resource for seniors and their families. I approached several professionals who were working with seniors about forming a networking group that would encompass all aspects of the health, legal, accounting and financial disciplines. Educating each other about the benefits of our services has become one of the keys to our success.

This group has grown to 30 members who meet monthly, sharing referrals, educating each other and providing services and products to seniors and their families. Both networking groups have begun to cross-pollinate and share referrals.

Strategic alliances

I have met other professionals through these two networking groups and have developed solid relationships with them as well. For example, we have formed strategic alliances with a payroll company and a property and casualty agency in our area. We have positioned our firm as an extension of their services, and they refer their clients who need life, disability income and long-term care insurance, as well as employee benefits, to us.

Another strategy I have used successfully is to have a breakfast or lunch meeting with a CPA or an estate attorney. You can increase the number of appointments exponentially each year by implementing this easy marketing practice.

Here’s how it works. During fact-finding, ask your clients who their financial professionals are and if they are happy with them. If not, you can make a referral to a professional in your contact circle. If they are satisfied, ask their financial professionals to dine with you.

Most professionals agree that being a competent CPA or attorney is not enough if marketing is not one of their strong suits. I can help them with that. I simply make them an offer to meet for a bite to eat and discuss how we can help each other grow our respective businesses.

This idea really works. For example, I invited an attorney to breakfast, during which he mentioned he was working with a client who was looking for long-term care insurance. I met with the client and her family a few weeks later and closed a significant LTCI sale.

Hire a marketing pro

Two years ago, I made another investment in my practice by hiring a full-time marketing director.

With more than 600 clients, it was becoming increasingly difficult to maintain contact with all of them and to make sure their plans were kept current. The marketing director coordinates our client-appreciation events, maintains our email-marketing program, prepares annual-review materials, designs sales illustrations and sends our periodic theme mailings to clients. This has allowed me to spend my time doing what I do best—meeting with clients and referrals to generate new business.

Bio:
Jeffrey H. Duncan, CLU, CFBS, AEP, CLTC, is an MDRT Court of the Table member with 30 years’ experience in financial services. He is a registered representative of and offers securities and investment advisory services through MML Investors Services Inc., member SIPC. Contact him at jeffreyduncan@finsvcs.com or 973-237-0100.

 

Preparing Your Clients for the Future Help your younger clients understand the importance of developing a financial plan early. By Herb White, CFP, MBA

Your 20-something and 30-something prospects may not be as worried about future financial security as some of your older clients, but you should explain the importance of reducing debt and putting money aside for the long haul.

In this second installment of a two-part series, you will learn specific tips for guiding your young clients into a secure financial future.

Begin now

This age group needs to consider saving 10-15 percent of every paycheck in an employer or individual savings plan. Paying off debt, starting with loan consolidation and paying off high-interest credit cards, is also essential. One goal might be to reach age 40 with only a mortgage payment.

Since many 20- and 30-year-olds tend to job-hop, they need to be reminded they are still eligible to participate in their employer’s 401(k) or 403(b) plans and advised not to cash out their plan when they change jobs. When advisors quantify the money clients can lose by paying income tax and penalties for cashing-out versus the compounding effect of saving, they can motivate clients to protect future earnings with a rollover plan.

While discussing contributions to employer savings plans, it is a good time for advisors to bring up 2009 changes in 401(k) and 403(b) contribution limits. The new maximum contribution for a 401(k) or 403(b) plan is $16,500 for those less than 50 years old. This is more than a 6 percent increase over the 2008 contribution limit of $15,500.

Even if they have checked out individual retirement accounts in the past, this younger group may not know that, even though the 2009 maximum contribution limits for people under 50—$5,000—remain the same as the 2008 maximum contribution limits, the income phase-out ranges have increased for 2009. The phase-out ranges are the limits on the income an individual can make and still contribute to a Roth IRA or a tax-deductible IRA contribution.

If your client’s modified adjusted gross income is above $105,000 for single filers or above $166,000 for those who are married and are filing jointly, his maximum allowable Roth IRA contribution begins to reduce to zero. If his MAGI is above $120,000 (single) or $176,000 (married and filing jointly), he does not qualify for Roth IRA contributions.

When you pair increased limits with 30 or 40 years of saving and compounding interest, the numbers can be astonishing. For example, a 30-year-old saving $5,000 per year in an IRA can accumulate more than $500,000 by the time he is 60, assuming a 7 percent rate of return.

Roth IRAs are excellent hybrid saving plans for people in their 20s and 30s, because they allow participants to invest in an individual savings plan and support education savings. While the Roth IRA offers tax-deferred earnings and tax-free qualified distributions when needed, there have been restrictions that have excluded many people from participating. Starting in 2010, the existing $100,000 income criteria for converting a traditional IRA to a Roth IRA will not apply.

Special conversions next year

Advisors can assist clients in taking advantage of a special rule for conversions that will occur in 2010 and help them integrate their college savings and retirement goals. In that year only, income from a traditional IRA conversion will not be reported in 2010, but can instead be reported and divided equally between returns filed in 2011 and 2012, meaning tax payments will be due in 2013. Individuals who make nondeductible contributions to their traditional IRAs in 2009 can get a jump start on the new law and increase their savings more quickly. The entire amount built up prior to 2010 will be available for conversion in that year.

Other strategies

When putting together a financial plan, don’t forget to include property investment and life insurance. Individuals in their 20s and 30s should be reminded that waiting to buy a house in their 40s could mean mortgage repayments well into their 60s or even 70s.

People, regardless of age, want to protect their families from financial burdens if they die. Although some life insurance can be expensive, taking out life insurance when someone is in his 20s and 30s is far less expensive than waiting until he is in his 40s or 50s. Term life insurance is an excellent alternative for the younger client, because it is a less expensive way for him to purchase a substantial death benefit.

Bio:
Herb White, CFP, MBA, is president of Life Certain Wealth Strategies, www.lifecertain.com, in Greenwood Village, Colo.