Facing down failure: The Madoff factor
By Michael Lovas
Quick, who is currently the most famous person in the financial industry?
The answer is one that no one would be proud of -- Bernie Madoff. That answer has tremendous repercussions for you. It means that everyone else in the financial industry is compared to Madoff. It's the Madoff factor.
Humans learn by association. I say Olympic athlete and you probably think of Michael Phelps, because he's currently the most famous one. All other Olympic athletes are then associated with him. They wear both good and bad associations. I say airline pilot and you think of Chesley Sullenberger III, the pilot who landed in the Hudson River. I say investor and you still think Madoff.
Now, what if I ask a consumer (your client) to name the most famous person in the financial industry? The answer is still Madoff. But the bigger question is, why isn't it you? At least in your own community, why are not you at top-of-mind and tip-of-tongue? It's because when your clients think about investing or managing money, the image of Madoff is more powerful than anything else.
Madoff has singlehandedly destroyed the credibility of the financial industry. This is not a rational determination, it's the determination made by the "old brain" -- the part of your brain charged with keeping you safe. One bad apple and the old brain suggests that you avoid all apples in the future.
All of this psychobabble means that Madoff has affected you personally. He has robbed you of your credibility. He has robbed all advisors of their credibility. He has also robbed the investing public of their faith in advisors.
What can you do about it?
There is plenty that you can do about it, but most advisors aren't doing anything to counter the Madoff factor. Many are operating as though it's still 2005. In spite of Madoff and the economy turning flips, many advisors go about their days as though the economy is hunky-dory. Now, they might be stunned, dazed, confused and unsure about know what to do. That's fair. It doesn't change anything, but it's a fair excuse.
In business we say, "The person with the greatest flexibility wins." In chaos theory, we say, "That which is not growing is dying." In the Marines, we said, "Adapt and overcome." We also said, "No excuses."
Let's look at how you can snap out of your daze and quickly adapt so you can begin to turn the Madoff factor and this economy into an opportunity.
Step 1. Do something. When the industry as a whole has a credibility problem, it becomes strangely easy to distinguish yourself, separate yourself and demonstrate yourself as different and better than all the advisors who have failed to take the appropriate steps. In a sense, every advisor who is doing nothing is actually moving backwards, like being a passenger in a car that's falling backwards off a cliff.
Step 2. Do something specific. If you take proactive, positive steps to build or bolster your own credibility, you'll be flying forward past everyone else. In a world of darkness, you'll stick out like a lighthouse. What's more, you'll be giving your own clients something to talk about. That is the secret to keeping your existing clients and getting referrals. Your clients will say, "If I didn't know Mike, I wouldn't trust any of them!" Their friends will ask, "What's the deal with him?" and they'll answer by talking about your credibility, your client-focus, your ethics, your transparency and your accountability. They'll say, "He's different -- a breath of fresh air when we really need one."
How can you distinguish yourself?
Knowing isn't the same as doing, and taking action isn't the same as taking the right action. If you're going to take this credibility-building idea seriously, you're going to need to understand a couple of concepts.
What is credibility?
It's a "cluster concept" -- a combination of integrity, competence, accountability and relevance. Those are abstract ideals; I mean, what exactly is integrity, for example? How would you improve it? How would you demonstrate it?
In practical terms, integrity is simply consistency in your behaviors and decisions so your clients can accurately predict what you're going to do in terms of right and wrong. Will you sell them a product they don't really need? No. Will you sell them the product you get the highest commission on? Not unless it really is the best one. Will you refer them to a different advisor when they need a different level of expertise? Let's hope you have the expertise, but if you don't have it, let's hope you have the integrity to make the referral.
How can you let people know about your credibility?
This is called "credibility marketing." It's an area of the financial industry I began researching in 1991. You can think of credibility marketing as a "cluster discipline" because it combines several different areas of specialization: journalism, marketing, publishing and personal connection, to name just a few. Here's how you approach it. I call this YTRCM (A Latvian word meaning "Where are all the vowels?"):
1. Determine what you are excellent at. Let's get real; no brain is big enough to be an expert in every aspect of the financial, insurance and banking industries. So, what are you actually best at?
2. Determine which target wants what you have. Who are the people most likely to be your future clients? Remember, they need to meet several tough criteria. They must want what you have, need what you have and they must have the ability and willingness to pay your fees.
3. Do it in a way that demonstrates your relevance. Let's say you're an expert who is good with an audience and are also a gifted writer. Now, you have to show specifically how your expertise fits a prospect's needs and wants. How do you relate to them? Everyone has products and provides some level of service, so what's so good about yours that would make them want it? It must be relevant to them.
4. Communicate your expertise. You will need to either give speeches or classes in your area of expertise, or you'll have to write it. If you're not superb at writing and speaking, get help.
5. Do it in multiple media. In the old days, all we had to do was send out a letter. Those days are long gone. Today you need a book, e-book series, white papers, magazine articles, Web pages and blogs.
The point of that story is that, no matter how credible you really are, you can't prove it to people unless you have the right equipment. The right equipment is contained in that five-point list above.
I fully understand that these things may fall outside of your area of expertise. For example, selecting a target market is a highly sophisticated psychological process. After all, you're going to connect with their decision-making behavior and values. Giving a speech is very different from delivering a sales seminar. Writing a book or white paper is very different from writing a letter. These steps are tough. But what else are you going to do? What options do you have?
In conclusion, credibility is all about psychology -- the psychology of perception. What does it take to convince someone that you really know what you're talking about? You just saw the answers. On the other hand, what will most of your competition do? Nothing. And what does that mean to you? It means that if you're proactive enough to actually take steps to improve your credibility, you'll shoot like a rocket past everyone else. This is how you keep your existing clients and attract lots of new clients.
I always give a reward to people who read my articles. It's my way of saying "thanks." Use the forum below to send me a note that includes your e-mail address and this paragraph. I will e-mail you back a list of the most powerful and persuasive words ever collected. I call it "Words that guide minds."
*For further information, or to contact this author, please leave a comment and your e-mail address in the forum below.