Trust is an elusive thing. We know it when we see it. Trust is also a difficult thing to define. Building trust takes time. The goal in building a trusting relationship is to continue moving forward. Paying attention to the following four things will help move towards a trusting relationship with others.
Trust is the key for all successful relationships. Without trust you are fighting an uphill battle that you likely aren’t going to win. Courtney Poulin has some wonderful thoughts on where trust comes from. I regularly review his ideas to make sure I stay authentic when I interact with others.
Transparency – If you’re not transparent with what you do and say you will not build and maintain trust. Transparency means you must be open and honest with others about your expectations as well as your goals.
In the wealth management and financial planning business there is often a disconnect between what clients value and how planners get paid. I’ve noticed that in my own business this has caused trust issues to occur and have re-thought the importance of congruency in what we do and how we get paid.
I found that in my practice making the pivot from advice to products could be a problem. Most people who engage with me do so because I can help them achieve an outcome in an efficient and effective way. Rarely do they start working with me because of products we provide.
I was recently at a conference where the presenter was talking about the length it takes for a financial plan to be delivered to a client. He said that among the best firms he found that the average financial plan takes 35 days to be completed.
If you are an advisor and work with business owners and have Clients who are over fifty years old, they are thinking about how they will leave their business. When asked about their time frame for an exit, they will usually say they want to leave their business in five years. If you come back and ask them three years later, they will still say five years.
I call this phenomena “perma-five”. Business owners live in perma-five because they know there are things they need to deal with in their business but haven’t come up with a strategy or an understanding of what those things are.
I find there are five areas that business owners need to focus on if they ever want to change their relationship to their business and leave perma-five. These areas are:
Understanding what they need financially.
Business owners can’t often sell their business and ride off into the sunset. Once a business is sold, the ending capital will provide less than 20% of the income the owner had before they sold their business. A financial plan showing this change in income is crucial in the planning process.
Knowing what the business is worth
In many instances the owner of the business will think the business is worth three to five times it’s real value. If we help our owner Clients understand how buyers value businesses we can help them understand the importance of owning the real estate they operate their business in and why maximizing their qualified plan contributions is important.
Understanding the value drivers of their business
Most business owners are stuck in the tactical details of their company. Helping them more to operational irrelevance in their business will allow them to start acting strategically in their business. Certain strategic actions can add a tremendous amount of value and cash flow to the business. Helping owners understand what those strategic actions are is very important.
Know who the business will be transferred to
In most instances an internal buyout or a move to a passive ownership strategy is the most advantageous for our private business Clients. Understanding how both of these strategies works can provide real value for our Clients.
Keeping their key people
The concept of working with a “stay bonus” is important for having key people stay with our Client’s company. Whether there is a third party sale or a passive ownership strategy pursued, having key people in place is crucial if one is to have a successful transfer strategy.
Helping our Clients move from “perma-five” to a real strategy for building value that allows them to change their relationship to their business is a key in working with private business owners in a wealth management relationship. Having an understanding of the five topics above can go a long ways towards becoming the most trusted advisor for our business owner Clients.
When I had my vending business one of the pillars we had in our company was the following statement:
I’ve been in several peer-to-peer groups over the years. These groups have ranged from ad hoc groups that were put together, industry specific groups, and formal groups in YPO (Young Presidents Organization).
All of them have one thing in common: They never work well until someone decides to take a risk. The risk that has to be taken is when one of the members of the group spills something to the rest of the group that is both embarrassing and confidential.