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Communicating your investment philosophy can lead to prospecting success

by Jan 30, 2019UpClose

Communicating your investment philosophy can lead to prospecting success

by Jan 30, 2019UpClose

Communicating the benefits of active, risk-managed strategies during each stage of the sales cycle can enhance the chances that prospects will turn into clients.

There’s an old adage in the world of sales: If you’ve done all of the steps right, the close should be a piece of cake. In fact, some of the most critical parts of the sales cycle are at the very beginning.

These general principles are the same for financial advisors when cultivating new prospects.

It starts with how they meet the right people who are likely in need of financial-planning services—through referrals from clients, their network, or from centers of influence such as estate attorneys, accountants, loan officers, real estate agents, and tax attorneys.

Advisors also meet prospects by conducting public financial-education seminars, participating in networking events, and even partaking in creative endeavors such as social media blogs or a radio talk show on financial planning.

Successful planners then try to schedule time just to get to know the prospective client or client couple and build rapport, learn about their broad financial and life goals, and whether the parties are a good fit for each other. Subsequent meetings can then be devoted to explaining the advisor’s service model, discovery of key financial data, identifying specific objectives, presenting recommendations to help the client best achieve their goals, and articulating how they will maintain and nurture the relationship with the client.


  1. Build a personal connection and rapport.
  2. Listen closely to the prospect’s overall concerns and needs.
  3. Review your firm’s mission, practice model, and client-service principles.
  4. Explain your overall financial-planning and investment philosophy.
  5. Emphasize transparency and your advisory role.
  6. Provide specific direction on moving forward/schedule the next meeting.

For advisors who adhere to an investment philosophy that includes active management, communicating the benefits of active, risk-managed strategies during each stage of the sales cycle can enhance the chances that prospects will turn into clients.

Robert Pugh, an investment advisor representative with Transamerica Financial Advisors in Portland, Oregon, said in an interview with Proactive Advisor Magazine,

“I grow my client base in two essential ways: through referrals from current clients and by expanding the services that current clients and their families use. In both cases, my practice’s use of active investment strategies through third-party managers is an important part of my presentations and a differentiator for my practice. … The story of active investment strategies, and its emphasis on risk management, has therefore become a major part of how I position our firm’s services and investment philosophy.”

How do some other successful advisors incorporate their investment philosophy as a key piece of their client prospecting efforts?

Prospects want to understand the concept of active management

Andrew Paladino, founder and owner of Paladino Financial Group in Timonium, Maryland, says that one of the main ways he finds prospects is by doing a radio show, in which he talks on general topics, such as planning before you invest, the emotional aspects of investing, and explaining the realities of market volatility.

“I also talk about the benefits of active management and invite them to call or email me at my office,” Paladino says. “I think I get better prospects this way because they must be paying attention and have a general idea about what I talk about. They are also intrigued about active management, though I also take on clients that want their portfolio to be passively managed.”

People who meet with him typically like being educated on the different options, Paladino says. Many are just used to their employer’s 401(k) retirement plan and find his discussion on active management compelling because it’s different from anything they’ve ever heard.


“If you look at the history of many active money managers, you will see times where they may not always perform as well as the market indexes in positive market times,” he says. “However, it is when markets turn negative where you can see the past value of these managers, and by being able to historically minimize the losses, they end up overall outperforming the indexes.”

Paladino also talks to prospects about their planned retirement date, and what their investment strategy should be doing a year and six months before that date, and then six months and a year after that date.

“If we can structure something in a way that’s actively managed that helps them continue to make money but minimize the potential downside—even if they take some income—they’re very appreciative,” he says. “I think my conversations with prospects about active management increase the chances that they’ll become clients.”

Placing client education at the forefront

Bob Chitrathorn, vice president of wealth planning at Providence Wealth Planning in Corona, California, says most of his new business comes from referrals, including current clients and from centers of influence who are familiar with his active management philosophy. But before he takes on referrals as clients, Chitrathorn will typically set up a phone conversation to see if a prospect fits his most basic criteria.

“Usually, people come to me with a combination of many financial issues, and I take a holistic planning approach with my clients. Ideally, I want to work with clients who take their finances, their families, and their goals seriously. My clients are everyday people looking for organization, education, and a forward-moving plan. They are teachers, business owners, engineers, police officers, doctors, nurses, lawyers—basically from all walks of life.”

In his first meeting with potential clients, Chitrathorn makes sure he finds out what they want to get accomplished. “Sure, all people want a good rate of return, but the question is, ‘Why?’” he says. “What is the money for? Their kids’ college tuition? Retirement? Vacation? All of the above?”

As they discuss those things, Chitrathorn is also testing their knowledge.

“At a minimum, it’s going to help them become comfortable, and then later, become confident when I help them better understand what they thought they knew,” he says. “I also want to make sure we like each other and that we get along well.”


He says that he believes all prospects are open to active management. “People just need to understand what it is, and some people don’t. … That is why we need to explain.”

He also believes that risk management is paramount in investment planning, and he says he usually recommends to clients that “some portion of their portfolio be allocated to tactical or actively managed strategies.”

“I tend to be very conservative in my investment approach, perhaps more conservative than many of my clients. I want to place an emphasis on risk management. The hard lessons of the two market crashes of this century must always be kept in mind. I also always ask myself, ‘Can a client’s objectives be met with an investment plan that is even more efficient or sensitive to risk than what we now have in place?’ In other words, can the client achieve returns that will meet their needs while taking on less risk or less tax exposure?”

But Chitrathorn also talks about how passive investments work and their pros and cons, which he believes makes a better case for active management.

“If I take the extra time to explain more to clients, they come to understand that I really care about their learning and understanding and being able to make a smart financial decision,” he says. “They appreciate that, and I think that helps me turn more prospects into clients. … The most important point is that I constantly seek to add value for clients. This means developing an investment approach that is not cookie-cutter and works hard to meet the specific investment goals within their overall financial plan.”

How networking sets the stage for client development

Mary Lyons, a financial advisor and founder of Wealth Woman Inc. in Dallas, says, “My entire practice has been built through networking, and I devote a lot of time to networking efforts.”

She says that she often sets up mutual information-gathering sessions with people she meets. “Fifty percent of the time, even if the purpose of the meeting was only to gather information, people ask me if I will look at their investment portfolio or their current financial plan to see if they should tweak something,” says Lyons.

When the time is right for discussing her investment philosophy with prospects, she starts with the familiar idea of diversification.

“Asset management is often tied across indexes and asset classes, and I find that most people buy into that definition of diversification right off the bat,” Lyons says. “Then I have a conversation about styles of management. Different styles might make more or less sense depending on their tax classification, because if somebody is in a taxable account, I don’t want an investment that is trading every other day because of the inefficiencies on the back end.”

Lyons also has a conversation about diversifying across costs.

“If there’s value in something, let’s pay for it, but if there’s not clear value, we shouldn’t be paying for it,” she says. “If I am using a buy-and-hold strategy, I want to do it as cheaply as possible. If the account is actively managed, I would expect to pay a little bit more in fees.”

Talking about active management does help her sales ratio—it’s a different conversation than most people have with advisors, she says.

“I find that most people are concerned that we’re going to have a major correction in the market, and they become more engaged when we talk about active management,” Lyons says. “They realize that they can be more responsive as opposed to just letting their investments sit there, and even if we don’t choose investments for them that are actively managed, just having that conversation increases the chances that they’ll become my client.”


Most of her clients are business owners or have some responsibility for the bottom line at their company, such as an attorney. Often, they don’t have the same amount of income coming in every month—rather, they tend to get a big commission, fee check, or bonus, and they need to figure out what to do with it.

“In these cases, because they aren’t making contributions over time, dollar-cost averaging isn’t an option,” Lyons says. “Often, actively managed investments seem more appealing to them.”

She particularly enjoys networking occasions where she can become engaged with someone personally, such as sitting with a partner at a law firm at a charity event.

“At some point, they’ll ask me what’s happening in the market, and we start a conversation—just casually at this point,” Lyons says.

She then invites them for coffee, and even then, she doesn’t necessarily talk about having them as her client. They may discuss the prospect’s financial goals, what’s happening in their business, and how Lyons might be able to help them. For example, she recently sat down with someone who needed a co-working space, and she was able to suggest one of her contacts who she knew had some space available.

“This is a very important step in increasing the chances that a person will become a client. When you spend a lot of time getting to know people, and find out how you can help them create more income, they are happy to continue talking to you about how to grow it once they have it,” Lyons says. “If we help them grow their business, then they’ll trust that we’ll help them grow their assets on the back end as well.”


Following all of the steps of the sales cycle—starting with getting in front of the people most likely in need of financial-planning and investment advice—can greatly enhance the closing process. Communicating why active investment management is a smart philosophy throughout the sales process can demonstrate how an advisor might deliver superior value over other advisors—further boosting the chance that a prospect will become a client for years to come.

The opinions expressed in this article are those of the author and do not necessarily represent the views of Proactive Advisor Magazine. These opinions are presented for educational purposes only.

Katie Kuehner-Hebert is an award-winning journalist with more than three decades of experience writing about the financial-services industry. She has expertise in banking, insurance, financial planning, economic development, and employee benefits, and her work has appeared in many leading publications.

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