One common sales tactic for financial advisors is to offer prospective clients a free (or low-cost) financial plan to demonstrate the advisor’s expertise and to let the prospect ‘test drive’ the advisor’s services. However, creating these pre-commitment strategies and plans can take up a significant amount of an advisor’s time and there is no guarantee that the prospect will actually decide to become a client (in which case the advisor’s work would have generated little or no revenue). Further, when combined with the work the advisor does for current clients, the ‘extra’ work of creating free plans for prospects can easily lead to advisor burnout. However, by asking prospects a series of screening questions to assess whether they might be a good fit for the firm, and by emphasizing the value of the process and implementation of financial planning, advisors can better determine whether preparing an up-front plan for them is likely to end up being a profitable tactic.
Advisors can start by determining whether a prospect might be a good candidate for an up-front financial plan with a series of questions that ask whether they can meet the firm’s asset and/or fee minimums (to screen out prospects who will clearly not be a fit), how ready the prospect feels to get started, and whether the prospect is willing to follow through with the advisor’s onboarding and data-gathering processes. These questions can help the advisor confirm that the prospect would be a suitable client and will be able to meet the advisor’s timelines (so that the creation of the up-front plan does not drag on for weeks or longer). Once an up-front plan is created, focusing on the value of plan implementation and the ongoing financial planning process can increase the likelihood that the prospect will decide to engage as a client. As while the free plan may demonstrate the advisor’s expertise and knowledge of the prospect’s situation, the course of action that the advisor takes with the prospect (after they sign on as a new client!) to implement the plan as part of an ongoing relationship is even more valuable than the plan itself.
Ultimately, the key point is that while the preparation of free or low-cost plans for prospective clients can be a useful sales tactic, advisors who don’t have a process in place to assess prospect suitability and to showcase the true value of the planning relationships can suffer from burnout, preparing plans for prospects who are unlikely to become full-time clients. But by implementing simple steps to formalize a screening process and have conversations to emphasize the value of the long-term financial planning process and plan implementation offered to clients who have a relationship with the firm, advisors can improve their rate of converting prospects into clients, spend less time preparing free plans for the wrong prospects, and even enjoy a potential boost to their own overall well-being!
The Psychology Behind Why Pre-Commitment Strategies Can Work So Well
When a person uses a pre-commitment strategy, they are making a commitment in the present to take some action (e.g., making a behavior change) in the future. For example, setting up automatic transfers today (the present commitment being made) for their bank to start transferring $100 from their checking account each month to their vacation fund (the future action). For financial advisors, an Investment Policy Statement (IPS) is a very common example of a pre-commitment strategy. By asking a client to sign the firm’s IPS, advisors are pre-committing clients to portfolio changes that the advisor feels necessary if/when certain market conditions are met. Because without the pre-commitment that the IPS facilitates, the advisor might be met with a lot of resistance. Clients may not really want their portfolio to be rebalanced, but they are more likely to go along with what they committed to and acquiesce to previously decided changes.
Pre-commitment strategies can also be powerful sales tactics – a very common example is test-driving a car. When people test drive a car they are much more likely to go ahead with the purchase than those who don’t test drive the car. And it is this same sales strategy that can be effective for financial advisors when they give away free plans. The advisor advertises a free plan as a way for prospects to ‘test drive’ the experience of working with a financial planner, with hopes that it motivates the prospect to commit to the work and the relationship… and along the way discovers that having a financial partner feels so great that they choose to continue the relationship even though they have their plan.
These strategies are extremely effective as they utilize the following 3 important biases that are extremely hard to resist:
- Status Quo Bias. We generally prefer to continue down a familiar path over making a change and implementing new behavior. If the prospect has previously committed to try out the relationship and work with the advisor to make a plan, they are less likely to change their mind once the advisor builds on the momentum of creating the plan to engage the client and implement the plan.
- Endowment Effect. We really value our belongings… so much that we tend to overestimate the value of the things we own. If a prospect feels that the plan they previously committed to is already theirs, it tends to be harder for them to refuse the ensuing work to execute the plan when advisors ask them to formally become a client.
- Loss Aversion. We generally want to avoid losing things that we value. If a prospect values the plan the advisor created for them and, more importantly, the relationship they’ve established through the process, then the feeling of losing the relationship can feel very bad.
These 3 biases can work together to create a highly effective sales strategy that few prospects can resist. They want to continue with what they have started, and since they already feel like the plan is theirs and both the plan and relationship are valuable, they don’t like the idea of losing those things. Not only does formally becoming a client to continue the process of implementing the plan feel like the path of least resistance (status quo), not receiving support to implement the plan and discontinuing the relationship can feel very painful (loss aversion) because of the high value they now associate with their plan – even though it was created for free – and the relationship with the advisor (endowment effect).
The Dangers Of Implementing Pre-Commitment Strategies For Advisors Who Tend To Help Too Much
Advisors may enjoy the sense of goodwill that can come with providing prospects with free or low-cost plans, and doing so can even result in new clients and new referrals. However, using free or low-cost services as incentives for prospects to sign up with the firm can backfire if too much work is done for potentially unprofitable clients too frequently. In particular, offering too many planning services for free not only can be less profitable despite being used to bring in new clients but it can also be less satisfying for the advisor who may end out doing a whole lot of work for a prospect who doesn’t choose to engage or who may not be a good fit for the firm.
Data from the 2022 Kitces Research study on “How Financial Planners Actually Do Financial Planning” suggest that these are adverse effects that can be especially relevant for advisors who are highly helper-focused. Consider the following findings from the Kitces Research study:
More work does not result in higher fees. According to the Kitces Research study, “there is no clear correlation between financial plans that are broader in coverage and productivity of advisors that prepare more extensive plans –in other words, to the extent that some advisors create more comprehensive financial plans, they have been unable to command higher fees commensurate with the extra work that it takes to produce such plans.”
Which suggests that, when making an initial plan, let alone a free initial financial plan, it does not pay to create an elaborate plan. Initial plans are most effective when they are simple and address the primary pain point that made the prospect call in the first place and no more than perhaps a couple of additional concerns. Doing more work on the initial plan is unlikely to result in higher fees and will probably have little, if any, positive impact on the prospect’s decision to formally sign on as a client.
More issues addressed in the plan can lengthen the process of moving the prospect through onboarding to implementation. The Kitces Research study asked advisors to indicate how many topics they covered in the financial plans they prepared for clients. The plans were categorized into 4 groups, as follows: Targeted plans covered fewer than 6 topics, Narrow plans covered 6–9 topics, Broad plans covered 10-12 topics, and Extensive plans covered 13+ topics.
The study found that Targeted, Narrow, and Broad plans took advisors between 30 to 35 days to move clients from the on-boarding stage to plan implementation, while Extensive plans (13+ topics) took significantly longer – 49 days on average. In other words, when plan breadth exceeded 12 topics, the length of time it took clients to progress from sign-on to implementation significantly increased.
While these data don’t account for free financial plans that are prepared for prospects in advance of their agreement to engage as a client, we can assume that a significant portion of the onboarding process for these prospects is completed prior to engagement when preparing their plan, which means lengthening the onboarding process can make a big difference – especially if this prospect never signs up to be a client!
Therefore, if advisors are going to prepare free plans as part of a pre-commitment strategy, the plans should not be longer than they need to be. Addressing no more than 12 topics (equivalent to a Broad plan) may be a good way to ensure that the advisor doesn’t spend more time creating the plan, which can delay the on-boarding process.
Additionally, plans that cover too much may be overwhelming and even off-putting for some new prospects. For example, some prospects who fear being judged by a new financial advisor might be overwhelmed by a large plan. The advisor believes they are marketing themselves by emphasizing all the things that they can help with, but the prospect simple sees a very long list of all the things they’ve done wrong.
Minimums are a must: Preparing plans for clients who don’t meet minimum AUM levels or who can’t afford full-priced plans and ongoing fees can result in unprofitable clients – if they even end out signing on as clients! For advisors who use an AUM model, establishing a minimum net worth that prospects must have to qualify for a free plan can be one way to ensure that the prospects they target will be worthwhile clients. Otherwise, signing on lower-net-worth clients who don’t meet the firm’s minimum may essentially result in higher-net-worth clients subsidizing them… and clients who do meet the minimums might not like it if they found out.
Non-AUM advisors can have a similar screening process, perhaps assessing a prospect’s cash flow by asking for their monthly income and expenses prior to offering a free plan to them. By doing so, advisors can establish a minimum free cash flow level as a metric to gauge the likelihood that a prospect would be able to afford their ongoing fees should they sign on as a client.
Finally, when deciding how to implement free financial plans as part of a pre-commitment strategy, the comprehensiveness of the work to be done, breadth of the free financial plan being offered, and potential profitability of the prospect are not the only factors that should be considered. The reality is that the advisor’s own health and well-being are crucial and should not be overlooked. Data presented in the 2021 Kitces Research on Advisor Wellbeing has shown Advisors are happiest (thriving) when they are spending more time with a manageable case load. If advisors are churning through so many financial plans that it keeps them from doing what they love most (e.g., spending time with individual clients), then they are not going to be as happy.
3 Steps To Help Advisors Implement Pre-Commitment Sales Strategies With The Right Prospects
Financial advisors are natural helpers at heart, but helping too much can cause some advisors to struggle with overcommitting themselves and burning out. And even though pre-commitment strategies that rely on free or low-cost planning services can be a very effective marketing tactic, advisors who are too helpful and who try to be overly productive may find it challenging to manage their time and energy, ultimately burning themselves out. Being too helpful, it turns out, does not help anyone.
Furthermore, while preparing free plans for new prospects can be a powerfully effective pre-commitment sales strategy, navigating the dangers of preparing free plans can be challenging for advisors, especially for those who have an inherent desire to help everyone they can. But asking screening questions can help ensure that free plans are offered only to the prospects who will make good clients. And once the right prospects have been identified, having a strategy to frame the firm’s process (which is showcased through the free plan) as a valuable selling point can also help advisors make sure that prospects who do get free plans decide to sign on as clients!
Step 1: Identify The Right Prospects By Asking About Minimums And Readiness
To identify prospects who will be a good fit for the firm, advisors can implement a process to screen prospects before committing themselves to do the work of creating a plan… so that when they do create the free plan for the prospect, the effort to produce the plan will be invested on prospects who are more likely to become productive clients.
3 Questions To Help Advisors Target The Right Prospects For Their Pre-Commitment Sales Strategy
The following 3 screening questions can help advisors assess whether it would make sense to move forward with a pre-commitment strategy to entice a promising prospect with a free plan, and to ultimately sign on as a profitable client:
- Can you meet our firm’s minimum? Given the time costs of creating plans, successful advisors simply cannot afford to spend time creating free plans for prospects who are not a good fit for the firm and who turn out to be unprofitable clients. For advisors who love to help their clients and have trouble turning down a person in need of help, this question can be a good way to assess when it makes sense to spend the time and energy enticing a new prospect to sign on as a client, and when to refer the person to another advisor or resource that is more suitable for their needs.
- On a scale of 1 to 10, 10 being “totally ready” – how ready are you to get started? As effective as pre-commitment strategies can be, using free plans as a marketing strategy can take a lot of time and are not a silver bullet to onboarding new clients. It takes up to an average of 30–35 days to onboard a client (when preparing Targeted, Narrow, and Broad plans, which address no more than 12 topics). As such, when using plans as a pre-commitment strategy, it is important that the prospect be ready to get started with the process (which can include a substantial amount of data gathering) in order to keep onboarding short.
- Will the practice’s onboarding and data-gathering process work efficiently for you? Related to prospect readiness, advisors will want to ensure that the prospect’s self-assessed readiness score lines up with the reality of what the process actually involves. By explaining the requirements of and process involved in preparing the financial plan, advisors can have a more insightful discussion around how committed the prospect will be to the data gathering process.
Surveying Prospects Before The Initial Meeting
The biggest issue that many advisors have with discussing minimums and readiness to proceed is not wanting to come across as too pushy or salesy. Thankfully, this can be solved with tech tools like the online scheduling website, like Calendlyv or another scheduling tool, along with some realistic expectation setting.
Calendly and other tools can be set up to include the first 2 questions discussed in the previous section above to survey prospects about their assets or the their cash flow (to see if they meet the firm’s AUM minimums or are capable to pay for the plan) and their stage of readiness as part of the process when scheduling the initial get-to-know-you meeting. Using the survey function in Calendly, but also in other programs, establishes the importance of these issues and, because it’s the survey system asking and not the advisor, the advisor doesn’t come across as pushy or salesy.
This nuanced difference in presenting the information might seem slight, but it can have an impact, as people are less likely to judge (or feel judged by) the advisor for asking about minimums and income or readiness; the survey normalizes the process.
Exploring The Prospect’s Readiness And Reviewing Firm Expectations During The Initial Meeting
The initial meeting or call offers a good opportunity to explore the prospect’s readiness more deeply, to determine whether it makes sense to continue with the free plan for the prospect. Some prospects who indicate a readiness score of 7 or below may not be very motivated about getting started and may drag their feet as they go through the process. Ultimately, there may be occasions when the prospect is not ready, and, in some situations, it may be best not to proceed any further. Advisors can decide how much time they want to commit to supporting prospects who may not be enthusiastic about or capable of getting started right away.
When meetings are scheduled, advisors can thank the prospect for answering the questions and engage them in a discussion to explore their answers (and readiness to engage) in more depth. At this stage, the advisor can bring up the last question discussed above, which addresses whether the firm’s onboarding and data gathering process will work for the prospect. The advisor can also ask if the client has any questions and offer a more detailed explanation about the fee structure.
Karen Miller-Kovach, the Chief Scientific Officer for Weight Watchers, offers a 4-question framework to assess how ready Weight Watchers members are to commit to a weight loss plan. These same questions can be an effective way to explore a financial planning prospect’s readiness to commit to the financial planning process, as there are salient parallels between health goals and financial goals: “Sure I want to lose weight (save money), but right now I want to sip hot chocolate and eat churros (splurge on airline tickets to take a vacation), so I will start my diet (work on a budget) next month!” The 4 Weight Watchers questions are as follows:
- What would you like to have happen?
- What needs to happen?
- Can you?
- Will you?
Consider the exchange below between Andy, a financial advisor, meeting with Carl, a new prospect for the first time. Carl scheduled his meeting with Andy through Calendly, where he reviewed the firm’s asset minimum and confirmed he met the minimum.
Andy: Thank you for completing the pre-meeting survey when you scheduled our time together today. This quick call is basically just to have a chance to review your survey responses and to go over any of your questions you have about our fees. As you know by now, we charge based on your assets. For you, our advisory fee would be 1%, since that’s the level we charge for managing assets between $1 million and $3 million. As part of our discovery call, which will be our next meeting, we’ll review your specific assets in greater detail and we’ll provide you with a more formal quote and an overview of our investment strategy. Any questions so far?
Carl: I don’t have any questions. So far everything makes sense.
Andy: Great. So for your response to our survey about your readiness level, you indicated that you’re at an “8”, which is great that you’re so ready to start! I have a couple of follow-up questions I’d like to go over with you.
Carl: Lay them on me!
Andy: OK, this is an open question – in your mind what would you like to have happen?
Carl: You mean today?
Andy: Today or in the near future. What would you like to have happen to get started?
Carl: Well, I want to get my current tax situation cleaned up. I had a huge tax bill this year, and I don’t want that again next year. And I do want an ongoing relationship with an advisor.
Andy: In your mind, what do you think needs to happen between us to get that done?
Carl: Well. I know I’ll need to go through the onboarding process that was described on your website to become a new client. I know that means we’ll be having a few meetings and that I’ll need to give you a few documents.
Andy: And how ready do you feel to get those things done? Are you in a place where you have the time and energy to have some meetings and gather all of the paperwork we’ll need?
Carl: Yes, I am ready.
Andy: Wonderful. Last question: You scored your readiness at an 8 out of 10. What would we need to do to get you to a 9?
Carl: Hmm. Well. I think I just need a list of things I need to do. I’ve never worked with an advisor before. I’m pretty organized, but I don’t know what you need from me for the discovery process. So, to get to a 9, I think I just need you to tell me what you need.
Andy: Great! That’s no problem. As part of today’s follow-up I’ll send you a list.
In the above exchange Andy used the 4 Weight Watchers questions to ask Carl about his readiness. In answering these questions, Carl tells Andy exactly what he thinks is important and discusses his motivations and needs for getting started, which also serves to build up his desire to actually get started.
The 4 Weight Watchers questions are highly scripted and give advisors who are just starting to ask these types of readiness questions a more formal framework to structure their conversations. However, if these questions feel too scripted, another approach is to simply ask the prospect about their readiness score (which the prospect answered prior to the actual meeting), “What needs to be done in this meeting go to from an 8 to a 9?” Asking this question (and encouraging the prospect to elaborate on their answer by asking good follow-up questions) can encourage the prospect to share many of the same things as the 4 questions. However, unless the advisor feels confident about asking unscripted follow-up questions effectively, the single-question approach may not result in as much information as the full set of 4 questions.
Step 2: Sell The Process – Clarify Responsibilities And Expectations Using Agendas
Advisors who give away free plans as part of a pre-commitment strategy can provide impactful insight to prospects about the value of the firm’s process. Having the opportunity to experience the firm’s meeting cadence and data-gathering process can be very powerful – it is through understanding the roles and responsibilities of both the firm and the client that prospects get to intimately test drive the financial planning relationship.
Which means that it’s important for advisors to clarify the process to prospects. For example, during the prospecting call (and during other meetings such as the ensuing discovery call and plan presentation), advisors can tell prospects that onboarding is a three-meeting process and describe the ongoing data-gathering efforts required during the process and throughout the ongoing relationship.
Advisors can also outline the required documentation needed between meetings and frame it as an example of what prospects can expect as clients – as the relationship grows and the focus of the client’s plan addresses more nuanced details, advisors will be asking clients to provide more data. And by clarifying expectations early in the relationship, prospects will understand what they are getting into and have the right expectations for how the firm works to move efficiently through its processes (including initial onboarding steps), and advisors can worry less about appearing too pushy when asking for data in the future as clients will understand the process simply as an efficient way of working together!
How Agendas Can Manage Expectations And Normalize Potentially Awkward Conversations
While it may be useful to review responsibilities and expectations during preliminary conversations and even through surveys conducted through online scheduling tools, providing agendas to prospects in advance of each meeting can be an especially powerful strategy to manage expectations, communicate the specific roles and outcomes that prospects need to understand, and to showcase the value that the firm provides for its clients. For example, an agenda for the plan presentation meeting can indicate that joining the firm as a client will be the last discussion point during the meeting, as shown below:
Plan Presentation Meeting Agenda:
- Pertinent Updates – Has anything happened since the last meeting that impacts the plan?
- Plan Presentation – Review of the plan and your priorities.
- Plan Implementation – How to make this plan a reality.
- Joining the firm – Final onboarding steps to join the firm as an ongoing client.
By including the last discussion point on the agenda, prospects will not be awkwardly surprised by the conversation. Just like bringing up minimums and readiness through a scheduling tool, using an agenda to inform clients that they will be asked to join as a client normalizes the conversation as a routine part of the process, and takes pressure off from advisors who may feel pushy broaching the topic.
Overall, the agenda should be kept simple and to the point. The agenda is meant to set expectations for the meeting, but it should still provide ample opportunity for feedback and discussion. The steps are broad enough that, although they give direction, they are also not overly prescriptive.
- The reality is that advisors have done a lot of work leading up to the plan presentation meeting – not just in ensuring the person is a suitable prospect for a free plan, but also in investing the time to create a valuable plan for them. A clear agenda can help prospects see how much they are getting out of their ‘test drive’ with the firm, and at the same time, helps mitigate the advisor’s frustration of not having the right conversations with the prospect and letting potentially great clients walk away.
Step 3: Emphasize Implementation In the Plan Presentation Meeting
The value for most clients, unless they are staunch and capable do-it-yourselfers, will mainly be in the ongoing process and guidance that comes with a long-term financial planning relationship – not just from having the plan itself prepared. However, prospects may not recognize this when they sign up for a plan. As such, focusing on the process and the relationship during the plan presentation meeting, not just the ins and outs and lists of to-dos in the plan, will help prospects to understand and appreciate all the ways the advisor can benefit them beyond preparing their plan – from the ongoing support and guidance to implement their plan to the continued assessment of their changing financial situation over the years – and encourage them to choose an ongoing relationship with the firm.
Some questions that help communicate the value that the advisor places on the client’s concerns and on a relationship that focuses on the client’s needs are listed below.
- What solution is resonating most with you today? Share with me how you see us working together to knock out those tasks in the next two months.
This question encourages the prospect to discuss what they would value most from an ongoing relationship. By asking this, advisors help prospects identify the benefits of an ongoing relationship on their own!
- We have discussed a number of solutions today. If you were to choose to implement them on your own, how might you make those changes and future updates?
This question helps prospects consider the amount of work their financial plan truly involves, and how the advisor can help them manage and implement all of the tasks involved. While tackling a short list of 10 tasks might seem like a notable achievement, managing the priorities of a full financial plan and routinely managing all the new to-do lists that arise from finishing the first 10 tasks takes a whole new level of responsibility.
- What is your highest priority leaving the meeting today? Tell me what is left to discuss for you in terms of next steps. If you were to address that priority over the next 2 months, how would you want my help?
This is another question that encourages the prospect to consider the benefits of having the support from an advisor. Shifting the focus from the plan itself to how the relationship with an advisor can help implement the plan can help prospects realize the value of an ongoing relationship with an advisor.
Notably, even ‘do-it-yourselfers’ may want a relationship with an advisor. Humans generally enjoy and benefit from having relationships, and even though some may like to do things on their own, they may still value guidance from a professional and recognize the ease, peace of mind, helpfulness of working together with an advisor. Helping these prospects recognize the time and expertise required to implement their plan can show them the true value of the ongoing support that is only available to clients of the firm. Asking questions that get prospects talking about ongoing value can encourage even the staunchest of do-it-yourselfers to join the firm as a client.
Financial advisors who prepare free plans as a pre-commitment sales strategy run the risk of overworking themselves when they don’t have a process to identify the right prospects and showcase the value of the advisor’s guidance, support, and expertise in implementing the plan that comes with an ongoing relationship. But by having a process in place to facilitate conversations about the prospect's readiness, their ability to meet the firm’s asset minimums, and their willingness to comply with the onboarding requirements, advisors can minimize investing time and resources into the ‘wrong’ prospects and increase the chances that the ‘right’ prospects will sign up as new clients.
Importantly, this does not mean that advisors need to be super salesy or pushy. Simple changes, like surveying the client’s ability to meet the firm’s minimum asset requirement and assessing their readiness to engage in the financial planning process before the advisor spends any time with them (e.g., through an online scheduling program like Calendly), and then discussing these responses (with only the prospects who meet the minimum and are ready to engage in the process) will help a lot. And by using an agenda to communicate that the advisor will be discussing next steps of onboarding as a new client with the firm at the end of the plan presentation meeting, the advisor can more comfortably focus on highlighting the value of process and implementation of the plan without an awkward segue into broaching the next steps of new client onboarding.
These steps can help advisors improve their chances of securing profitable clients, but perhaps more importantly, they will also help advisors prevent burnout by developing more efficient sales processes that ultimately enable them to do more of the work they enjoy most – helping their clients realize their financial goals!