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The Legacy of Bernie Madoff

How it impacts you
and what you must do to re-establish safety and trust.

I know that the vast majority of financial practitioners are decent, well-meaning and ethical people. Unfortunately, you’ve recently become the victim of collateral damage. The legacy of Bernie Madoff is that – by association – you are as guilty as he is. The damage done by Madoff (and the many others like him) impacts every one of us in the industry.

How can I say that with authority? Simple psychology - humans learn by association. All jobs dealing with money are associated with each other. All people working with money are associated with each other. And, logically, the crooks create an atmosphere of distrust, doubt and skepticism that is extended to you – by association.

Unsafe anywhere. Consumers are inundated with evidence – even in their local newspapers – stories of financial advisors, portfolio managers, insurance agents, regulators, bankers, and CFOs. In my quick search, I found hundreds of references for just the past three months. Here are a few of them:

“Seniors Cheated Of $284K, Insurance Agent Charged With Bilking Investors - Some Of Whom He Knew From Church.” Lancaster New Era Lancaster, PA;
Dec 8, 2008

“Insurance firm fined over sales to seniors.” The Register-Guard, Eugene, OR;
Oct 31, 2008

“Advisor accused of stealing $500,000 from elderly woman.” Glenview Announcements (IL),
Dec 3, 2008

“Brentwood financial advisor charged for 'Ponzi' scheme.” Nashville Business Journal,
Dec 19, 2008

Right now, investors are skeptical. They do not believe what you say and doubt your intentions. And, as illogical as it seems, their doubt is justified in their minds. If dozens of aircraft were crashing every month, how safe would you feel flying? If dozens of advisors are committing crimes every month, how safe can the consumer feel?

Considering the facts above, you have a huge hurdle to overcome. In order to step forward and work through that mess: 1) You absolutely MUST learn what the consumer attitude is and let that be your guide. 2) You must take a proactive position and work to prove that you are, honest, ethical and responsive. You simply cannot assume that your target market will take your credibility at face value.

In other words, you need to take a different (smarter) approach to making your clients and prospects feel safe with you. They no longer take safety for granted and neither can you.

The Credibility Process. We have devoted decades to identifying the process that leads to credibility. This was not an easy discovery. It required hundreds of hours of research, and we engaged in many heated discussions about the specific steps. While we use different charts to explain the process, the following is the essential 5-step process.

Take the First Step ASAP. The first step in the process is Safety. That’s what Madoff and his ilk took from you. Your objective is to make your clients and prospects feel safe. If you don’t know their fears, you can’t create a safe environment for them. And, if you can’t make them feel safe, you will NEVER get any farther.

What can you do now? How can you start reassuring the people you meet with? The strategy is to provide proof of contrast and distance yourself from the disreputable people in the news. Here are three of the most important steps you can take right now:

Step 1. Provide Transparency. Investors have become skittish, skeptical and untrusting. Can you blame them? They’ve been fooled too many times to take any more leaps of faith. So, you need to combat that attitude by becoming proactively transparent. Specifically, transparent about:

How you make money. Fees, commissions or what? Be specific about when and how you get paid.
All fees and charges they’ll incur. This even includes the little ones and the obscure ones.
Oversight. Let clients and prospects know about the checks, balances and oversight in place to protect them (for example, your broker/dealer, custodians, accounting firm, etc.)
Client commitment. Outline your commitments in writing. This way you can graphically show your clients what they can expect from you.

Step 2. Prove Your Credibility. It is no longer enough to merely BE credible. Now, you must be able to prove and demonstrate your credibility. The most effective way to do that is to prove it before anyone questions it, and you do that in these ways:

Publishing. Publish books, articles, and white papers. In them, you would tell stories about specific situations in which you made appropriate and successful decisions. (Warning – If you can’t write at a professional level, get help.)
Speaking. Book yourself to speak at every luncheon meeting for every organization you can find. (Warning - These are very different from sales seminars, so if you’re not trained in how to deliver a speech, get help.)
Introductions. We call these “credibility introductions” It’s what other people say when they introduce you to their friends and colleagues. Write it out for them so they will have a good idea of what to say on your behalf.
Explanations. Develop a simple spreadsheet explaining professional designations and licenses. Show your target market what they really mean. Expose the less credible ones, and highlight the highly credible ones. Hopefully, you have the credible ones.

Step 3. Demystify the Account-Transfer Process. Face it, the process of transferring an account can seem daunting to someone who doesn’t understand it. If your prospects think it’s confusing or time-consuming, they are far less apt to do it. So, you have two options:

Explain how it works – use a simple step-by-step visual to assure them it’s easy and pain-free. You could even do the analysis and be upfront about any penalties or costs.
Advise your clients not to transfer their accounts. Advise them to merely open a new account with you. This has the added advantage of allowing them to maintain their existing relationships. Many existing relationships have been forged over several years. It is psychologically very difficult to reject someone you’ve known for a long time. Again, just help them avoid that stress.

In Conclusion. During the Vietnam War, Lt. William Calley led a massacre on a village. After that, every person in uniform had to deal with the sour attitude toward them. They had not done anything to deserve it, but they were guilty by association and had to deal with it.

Today, the consumer world is holding its nose because there is a stink on the financial industry. You did not cause this stink, but you are (potentially) guilty by association. And, you need to deal with it right away. But how? By putting as much distance as possible between you and the cause of the smell.

This article shares with you some of the insights we have developed to help you do that. If you want more than just these few guidelines, please let us know. Contact us.

Your Reward
Our normal fee for consulting is $250 per hour. But these are unusual times, and you need a kind of help you can’t find elsewhere. So, we are making you an offer. Send us an email right away and let us know that you want to book a consulting session. We’ll give you a half-hour session for $59. In the session, we will give you specific and personal advice on how you can overcome the industry’s loss of credibility, how you can distance yourself from that mess and show yourself as the best option to your target market. Just send me an email at: michael@aboutpeople.com .

-- Michael Lovas

Find AboutPeople resources at:
https://www.aboutpeople.com/Catalog

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