9. Money markets and CDs gathered assets. Money market funds returned double digits. Bank CDs ran for six months or longer, had early withdrawal fees and required a $10,000 minimum. Firms repackaged CDs in $1,000 units, finding banks across the country paying attractive rates. These brought people who were traditionally non-investors into the firm.
Good because: Clients hadn’t developed a love affair with the stock market. Money funds and CDs were familiar and brought them through the door. As you got to know your clients, you could introduce new products.
Bad because: It was difficult to sell a fixed-income product when money funds were yielding the same and people thought interest rates would keep going higher.
Today: Although interest rates are still very low, it’s expected they will move up. Interest in fixed income may increase.
10. You were on the phone constantly. My manager explained during market hours you should be on the phone all the time. Lunchtime was the exception. You were making outgoing calls or answering your incoming calls all day. Surface mail and personal appointments were the only other communication channels.
Good because: Clients got lots of attention.
Bad because: Your choice of communication channels was very limited. Lots of people cold called using lists. The people on those lists got called a lot.
Today: Advisors have multiple channels including social media. Compliance departments have gotten more comfortable with them.
11. Advisors had many, many clients. There were no account minimums. Opening IRA accounts with $2,000 was normal. Many clients might start the relationship buying a municipal bond, which came in $5,000 increments. They usually had many CDs at various banks. As their CDs came due, you would talk to them about buying more muni bonds.
Good because: New clients usually had plenty of money in bank CDs with different maturity dates. If they bought muni bonds and liked them, more money usually followed. They referred their friends.
Bad because: Some clients got lots of attention, others got little or none. A client could buy a stock at $10, it would go up to $20 and then fall to $2. If it was a small account and they didn’t read their statements, they might not know until it was too late.
Today: Many advisors have adopted a strategy of having far fewer clients with higher asset minimums. CRM software prompts you to call clients.
12. Advisors were resistant to change. Firms gradually introduced cash management accounts. Advisors complained they weren’t bankers. Firms added insurance to their offerings, requiring advisors to get additional licenses. Advisors complained they weren’t insurance agents. Firms even got involved in real estate brokerage. Advisors complained.
Good because: Firms were competing to gain a greater share of wallet, offering more services clients wanted to buy.
Bad because: Many people got comfortable doing business a certain way. They didn’t show clients new products. Clients bought them elsewhere.
Today: The business is much more dynamic. A firm’s clients are segmented. Those clients working with an advisor can access almost any financial product they can imagine.
13. Financial planning was in its infancy. People came to the firm to invest. There wasn’t a program in place to help them plan for retirement and educating their children. It wasn’t until the mid 1980s financial planning and developing comprehensive relationships arrived.
Good because: The arrival of financial planning got clients thinking long term. The advisor could be positioned as the quarterback or gatekeeper.
Bad because: Completing a certain number of financial plans was a requirement for recognition levels at some firms. It was said some advisors did financial plans for their pets.
Today: Financial planning is the first step in the process of building a relationship. Advisors know their clients.
14. Performance reporting didn’t exist. The client statement was “the official document.” I would do primitive performance reporting on a spiral notebook, showing clients where they started the year and where they ended. I would show how much they added and removed. The closest to a weighted annual return was: “You made somewhere between X% and Y%.”
Good because: Some advisors anticipated a need and found ways to address it.
Bad because: An advisor’s “back of the envelope” calculations could be very rough. Compliance wouldn’t let you hand them to clients. “The statement is the official document.”
Today: Performance reporting has been perfected. Advisors can produce professional reports from their desktop.
There might have been some good in “the good old days,” but life in a fee-based environment with a wider range of products is easier than life as a broker doing transactions.
Bryce Sanders is president of Perceptive Business Solutions Inc. He provides HNW client acquisition training for the financial services industry. His book Captivating the Wealthy Investor is available on Amazon.