Following are some practical tips we have gathered from advisors who have done an admirable job of networking within their commu- nity. The win-win arrangements you make with other professionals begin with some simple steps where you show the other party that you are willing to help their business as a part of the referral arrangement.
In any referral relationship, you have to give something to get something. A relationship is a two-way street and if you are going to ask a professional to enter into a strategic alliance with you, you want to make sure that you give something back. The simplest way is to refer clients to them. However, if you aren’t in a position to do that 17 / Building a Resource and Referral Network 171
immediately, here are some immediate shows of good faith that can help get the relationship off to a good start.
• Ask for a supply of business cards or brochures that you can use in your office and give to clients.
• Invite the professional to write a brief article to post on your Web site or include in your newsletter. Make sure that it is an information piece and not a selling piece.
• Offer to write an article for the professional’s Web site or newsletter.
• Create a joint education seminar or workshop—inviting both your clients and your client’s client—and focus on a topic that combines everyone’s expertise.
• Create a breakfast club or strategic alliance group with other professionals and work on joint marketing opportunities.
The professional referral market represents far more than a group of professionals to whom you can refer customers. It also represents exposure for your service through those professionals who get to know and understand the approach that you take.
Everyone in business is interested in developing new customers.
The key to building successful referral networks is to remember that you have to give before you can expect to receive. If you can find ways to direct business to your strategic alliances, you will find them much more willing to assist you in the same way.
Relationships work if both parties continue to receive benefit.
When you have a strategic alliance with other professionals, you re- ceive the benefit of their knowledge and reputation, access to their clients, and enhancement of the services that you provide. What do they receive in return? Chances are that they are looking for the same kind of payback in dealing with you. Keep in mind that you will have to continually make your side of the relationship work for your referral partners if the alliance will have any longevity.
A referral is an extension of your own reputation that is out of your control once it is made. For this reason, be doubly sure of the people to whom you refer your clients. A well-developed referral net- work is a wise method for introducing your services and branding yourself as a different kind of advisor.
C h a p t e r
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Can clients improve their prospects for wealth by becoming more educated on financial issues? We think it depends on the type of education they receive. There are an awful lot of very smart peo- ple who make very stupid choices with their money—so stupid that many have never told anyone what they did and how much they lost.
In examining financial education today, we have seen a need to pre- sent consumers with the basics of financial literacy and teach them to recognize how their behavior, attitudes, beliefs, and patterns are either accelerating or sabotaging their wealth-building prospects.
Most financial advisors are keenly aware of the fact that their clients’
financial knowledge can be quickly offset by a lack of emotional awareness regarding their financial behavior.
According to Mark Riepe, CFA, and senior vice president for In- vestment Products and Research at Charles Schwab & Company,
“Psychology and behavioral finance show us that there are some very strong decision-making patterns that influence people. Advisors can do a better job to ensure a successful plan if they take these into ac- count.” (Shelley A. Lee, “Why Do Financial Plans Fail?” Journal of Financial Planning, June 2001, p. 66–67.) Most financial education approaches have failed to adequately address this pivotal aspect of financial literacy; i.e., how your emotions, attitudes, and behavioral patterns will affect your wealth-building process and ability to reach your goals. Riepe goes on to say, “The education of clients must be 173
Addressing
Financial Intelligence
nonstop. It’s not just the client’s financial capital that will be expanded, it’s their intellectual capital that will go way up.” We are learning that smarter investors become better clients and are less likely to fail in their plans.
This idea of amalgamating logical and emotional financial edu- cation has led to the development of a new, more holistic approach to financial education that we call “raising your Money Quotient™”
(MQ). Money Quotient is the crossroads where financial knowledge meets emotional intelligence. It is a balanced approach of learning helpful facts and personal insights and examining our behaviors in light of that information. In order to help people assess on which areas of financial intelligence they should focus, we have developed the Money Quotient Self-Assessment. This profile is a subjective tool designed to help clients grade their personal grasp of the knowledge and habits that contribute to wealth and living a “rich” life.
Here are the principles of emotional intelligence, as they affect an individual’s financial well-being.
• Emotional intelligence (EQ) will have more bearing on a client’s financial success than the intelligence quotient (IQ).
• A person makes poor financial decisions when the logical part of his or her brain is hijacked by the emotional part of the brain.
• A person who lacks emotional intelligence will choose the wrong reasons and motivations for financial decisions and, therefore, sabotage financial goals.
When an archer misses the mark, he turns and looks for the fault within himself. Failure to hit the bull’s-eye is never the fault of the target. To improve your aim, improve yourself.
—Gilbert Arland
Current research shows that IQ influences at best 25 percent of people’s success in their careers. A careful analysis suggests a more accurate figure may be no higher than 10 percent and perhaps as low as 4 percent. (Successful Intelligence, by R. Sternberg, Plume: 1996.) Recent studies in emotional intelligence demonstrate that EQ is a far greater predictor of success (80 to 85 percent) in the workplace and life in general. The following story tells of the genesis of the study of emotional intelligence.
In 1960, psychologist Walter Mishel conducted a psychological test involving marshmallows and four-year-olds. At a Stanford preschool,
the children were given a marshmallow and told that the teacher had to run an errand. If they waited until the teacher got back, they could have two marshmallows. If they couldn’t wait, they would only receive one marshmallow. Some of the four-year-olds were able to wait what must have seemed an endless 15 to 20 minutes for the teacher to re- turn. Those who waited used various techniques to survive the wait- ing period. They covered their eyes so they wouldn’t have to view the temptation, rested their heads in their arms, sang songs, talked to themselves, counted their toes and fingers, and even tried to go to sleep. Others swallowed their marshmallows as soon as the teacher left the room and some even taunted those who restrained.
As a part of this study, all these four-year-olds were subsequently tracked down as adolescents and later as they graduated from high school. The emotional and social differences between the eat-it-now crowd and the gratification delayers were quite dramatic. Those who had resisted the temptation at four years of age were more socially com- petent, personally effective, self-assertive, self-reliant, composed under stress and frustration, likely to embrace challenges, confident, trust- worthy, dependable, and self-initiating as adolescents—and they were still able to delay gratification in pursuit of their goals. Even the SAT test scores of these waiters surpassed the grabbers by over 20 percent.
Systems based on IQ have many positives; however, they cannot predict unerringly who will succeed in life. This fact is one of psy- chology’s long-held secrets and industry’s frustrations. Students with high intelligence are not necessarily going to become the most suc- cessful in their personal or professional lives. Put another way, can you think of someone who is really smart but really stupid? I often ask this question to my audiences and, of course, everyone knows some- one who fits this description. When I inquire further into how they define “really smart but really stupid,” I hear answers like “They lack common sense” or “They don’t see the big picture” or “They lack people smarts” or “They just don’t get it.” Although their answers may seem a bit vague, when you distill them to their most basic level, you are left with a picture of someone who is intellectually astute and emotionally backward, out of touch, or even dangerous.
People who fit this description seem to alienate others and have trouble controlling their emotional impulses. As a result, they cause offense to others and sabotage their plans for success because of their lack of emotional smarts. (The Financial Professional’s Guide to Per- suading 1 or 1,000, by Mitch Anthony and Gary DeMoss, Dearborn Trade Publishing, 2001, pp. 137–138.)
18 / Addressing Financial Intelligence 175
These same principles hold true in the realm of financial intelli- gence. In the arena of financial literacy, the average approach has been to focus on the intellectual aspects of money management to the unwitting neglect of the emotional facts that can influence one’s financial success to a disproportionate degree.
These individuals are likely to be successful in other endeavors while their financial lives are out of kilter. Here are a few examples.
• Joan has a great job and earns a six-figure salary. Even though she gets a generous raise each year, she can’t seem to save and invest for her future.
• Three years ago, John received a large inheritance from his grandmother. If well managed, her generous gift could pro- vide John financial security for the rest of his life. However, he feels anything but secure. The responsibility of financial stew- ardship has challenged his self-confidence and has triggered anxiety attacks and depression.
• Tina recently graduated from law school and landed a posi- tion in a top firm in San Francisco. Though she was offered a generous starting salary, she finds that it is inadequate to meet her living expenses, car payments, and student loan payments.
After all the sacrifices she has made to reach this career goal, she is angry and frightened about her financial problems.
• Tim wants to micromanage the family budget and it is driving Karen crazy. They have been married five years, and Tim’s at- tention to their money matters is becoming increasingly ob- sessive. To assert her independence in this relationship, Karen frequently goes on shopping sprees.
• Single and 50 years old, Linda finds financial matters to be bor- ing and confusing. Her dad, retired and with time on his hands, is all too eager to relieve Linda of any task she finds onerous.
He oversees all of her accounts and makes all her investment decisions for her.
You can probably relate to one of these descriptions because nearly everyone has or has had a complex and difficult relationship with money. As these examples illustrate, financial wellness is not ex- clusively dependent on how much money people have, but on how well they integrate money into all areas of their lives. Clearly, money can’t buy happiness, but it is important for clients to understand how
their money beliefs and attitudes can affect the quality of their lives and relationships.
Learning the basics of money management and financial plan- ning will increase your clients’ confidence and equip them with the tools they need to make good financial decisions. In addition, un- derstanding the underlying emotional motivators of their financial attitudes and behaviors will give clients the extra edge they need to achieve life goals. When clients earn, spend, and invest their money in ways that are compatible with their values and priorities, they will experience a sense of purpose and satisfaction.
For everyone, self-knowledge is an essential ingredient to under- standing and improving their relationship with money. The Money Quotient Self-Assessment is designed to focus your clients’ thinking on both the fact and feeling aspects of their financial lives. This tool will guide advisors in evaluating five key areas that contribute to a cli- ent’s successful and satisfying financial life: recognition, resilience, resourcefulness, relationships, and wisdom. Figure 18.1 provides an outline of the logical and emotional building blocks that constitute financial intelligence.
All of the building blocks listed in Figure 18.1 are evaluated in the MQ Self-Assessment. The sections of the assessment in which clients rate themselves low can be addressed by focusing on the educational building blocks associated with it. Figure 18.2 is a copy of Part One of the MQ Self-Assessment, a tool that is available for use with your cli- ents. This instrument will help you facilitate the conversation regard- ing both the rational and emotional facets of financial well-being.
18 / Addressing Financial Intelligence 177
FIGURE 18.1 Five Key Factors to Financial Success
1. Recognition: understanding the roles of practical knowledge and emotional awareness in achieving financial well-being. (Sec- tion 1, Statements 1–8 of the Money Quotient Self-Assessment) Building Blocks:
• Reflect on money history, beliefs, and patterns.
• Clarify financial goals and priorities.
• Assess risk tolerance.
• Evaluate satisfaction with financial life.
(continued)
FIGURE 18.1 Continued
2. Resilience: ability to navigate transitions and to bounce back from financial setbacks (Section 2, Statements 9–16)
Building Blocks:
• Build a foundation of financial protection.
• Expand income earning options.
• Gain a sense of control of financial destiny.
• Increase financial skills and knowledge.
3. Resourcefulness: motivation and ability to maximize resources for achieving financial well-being and life satisfaction
(Section 3, Statements 17–24) Building Blocks:
• Organize financial records and activities.
• Set financial goals based on life goals and values.
• Develop a money management strategy that includes debt reduction and a spending plan.
• Take a proactive approach to reaching financial goals and building financial independence.
4. Relationships: connections with others that affect financial well-being and life satisfaction (Section 4, Statements 25–32) Building Blocks:
• Improve communication skills and relationship dynamics regarding money issues.
• Evaluate financial responsibilities across generations.
• Build good working relationships with financial professionals.
• Participate in giving and philanthropy.
5. Wisdom: linking financial goals to values and to life as a whole (Section 5, Statements 33–40)
Building Blocks:
• Engage in meaningful “work.”
• Seek to understand and achieve true “wealth.”
• Pursue a balanced and meaningful life.
• Make a lifelong commitment to raising your MQ.
18 / Addressing Financial Intelligence 179
FIGURE 18.2 Money Quotient Self-Assessment (Part One) Directions: For each of the 40 statements, quickly choose the response that best reflects your feelings or behavior (your first reaction is what you should record). Write the number of your selection in the right-hand column. When you have completed all 40 statements, add together the numbers in each section and record the subtotal in the space provided. At the end, add the subtotal figures together for your MQ score.
Section 1 Number
1. My financial life is a source of frustration and inner conflict.
1. Always agree 2. 3. Halfway agree 4. 5. Never agree
2. Financial matters are of no interest to me.
1. Always agree 2. 3. Halfway agree 4. 5. Never agree
3. I have identified specific financial goals.
1. Not at all like me 2. 3. Halfway like me 4. 5. Exactly like me
4. I have a good understanding of the important financial issues that need to be addressed at this stage of my life.
1. Not at all like me 2. 3. Halfway like me 4. 5. Exactly like me
5. I will consider an investment only when I’m guaranteed not to lose any money.
1. Exactly like me 2. 3. Halfway like me 4. 5. Not at all like me
6. I am attracted to “get rich quick” tips and ideas.
1. Exactly like me 2. 3. Halfway like me 4. 5. Not at all like me
7. I feel that at this point in my life,
1. I am way behind where I expected to be financially 2. I am somewhat behind where I expected to be financially 3. I am about where I expected to be financially
4. I am ahead of where I expected to be financially 5. I am way ahead where I expected to be financially
8. I worry about not having enough money in later life.
1. Exactly like me 2. 3. Halfway like me 4. 5. Not at all like me
Section 1 Subtotal _______
(continued)
FIGURE 18.2 Continued
Section 2 Number
9. I am well-protected against major financial loss caused by extended illness, disability, long-term care, or downturn in the stock market.
1. Not at all like me 2. 3. Halfway like me 4. 5. Exactly like me
10. If I were to miss a month’s pay, I would experience serious financial problems.
1. Exactly like me 2. 3. Halfway like me 4. 5. Not at all like me
11. I have skills, knowledge, and/or talents that are transferable and in demand in the job market.
1. Not at all like me 2. 3. Halfway like me 4. 5. Exactly like me
12. In the past, I have been creative in finding ways to earn extra income when I have needed or wanted it.
1. Not at all like me 2. 3. Halfway like me 4. 5. Exactly like me
13. I feel defeated when I think about my financial future.
1. Always agree 2. 3. Halfway agree 4. 5. Never agree
14. If I were to lose half of my income, I could successfully navigate the transition.
1. Not at all like me 2. 3. Halfway like me 4. 5. Exactly like me
15. I feel I have the skills and knowledge needed to build financial security.
1. Not at all like me 2. 3. Halfway like me 4. 5. Exactly like me
16. I’m easily confused or intimidated by financial terminology or jargon.
1. Always agree 2. 3. Halfway agree 4. 5. Never agree
Section 2 Subtotal _______
Section 3 Number
17. My financial records are well organized.
1. Not at all like me 2. 3. Halfway like me 4. 5. Exactly like me
18. I have gotten the help I need to assess my financial picture.
1. Not at all like me 2. 3. Halfway like me 4. 5. Exactly like me
19. The way I manage money is in agreement with my priorities in life.
1. Never agree 2. 3. Halfway agree 4. 5. Always agree
18 / Addressing Financial Intelligence 181
FIGURE 18.2 Continued
Section 3 continued Number
20. This is how long I estimate it will take before I will be able to live the life I want:
1. I have no idea 2. Over 10 years 3. 6–10 years 4. 1–5 years 5. I’m there now
21. In regard to my saving habits,
1. I overspend and have too much debt to save 2. I spend what I earn and there is none left over to save 3. I save when I can
4. I save regularly, but not enough
5. I save regularly and adequately to meet my goals
22. I frequently make purchases spontaneously.
1. Exactly like me 2. 3. Halfway like me 4. 5. Not at all like me
23. I am taking full advantage of my tax-advantaged retirement plan opportunities such as IRAs, 401(k)s, deferred compensation, etc.
1. Not at all like me 2. 3. Halfway like me 4. 5. Exactly like me
24. I check my progress toward meeting my financial goals on a regular basis.
1. Not at all like me 2. 3. Halfway like me 4. 5. Exactly like me
Section 3 Subtotal _______
Section 4 Number
25. Financial issues cause a lot of tension in a relationship that is important to me.
1. Always agree 2. 3. Halfway agree 4. 5. Never agree
26. I experience a lot of tension and frustration when dis- cussing financial matters with certain family members.
1. Always agree 2. 3. Halfway agree 4. 5. Never agree
27. I am concerned about the impact of meeting the costs of higher education.
1. Exactly like me 2. 3. Halfway like me 4. 5. Not at all like me
28. I often feel squeezed between the competing financial needs and wants of family members (spouse/partner, children, parents, etc.).
1. Always agree 2. 3. Halfway agree 4. 5. Never agree
(continued)