Indifference.....

Indifference - Your First Competitor

Everybody is on overload...we are all too busy.  That is where most successful people end up.  Too much left to do at the end of the day.  Dozens of things on the To Do list crying out for attention.  Then you come along and want their attention so you can make a sale.  If you do not give them a powerful reason to listen they will not hear you.

“Your greatest competition is not your competition.  It is INDIFFERENCE.”

Many sales people, when talking to the prospect,  will talk about their company and their product.  They are trying to sell the value of their product, their company and themselves.  Instead the focus needs to be on the prospect and what you can do for the prospect.  Then you will be speaking the prospect’s language and not your own.

Prospects are thinking about themselves and what they need and sometimes we are thinking about ourselves and what we need...and the two do not connect.

If you don’t make your client and their needs your focus your message will become lost in their indifference.  Making them the focus will help you speak their language and they will hear you over the cries of others wanting their attention.

UBS going "upmarket". - Good move.

This week, Stifel Nicolaus announced it was buying 55 UBS wealth management branches spread across 24 states, which include $15 billion in assets under management, 320 reps and over $100 million in revenue. The St. Louis regional b/d will make an upfront cash payment of $27 million for the branches, which are said to consist of mostly lower level producers. UBS says the deal allows it to divest itself of producers that don’t fit into its high-net-worth strategy, and sell them to a firm that’s willing to take them on.

While it’s not the first time a firm has sold some of its branches to another b/d, Alois Pirker, senior analyst at the Aite Group, says the UBS/Stifel deal might spark a series of similar deals. “Ultimately there is over capacity at many firms right now. At Morgan Stanley, Smith Barney there must be people stepping on each other’s toes. There is plenty of opportunity to sell branches,” he says. In fact, D.A. Davidson says it bought two Smith Barney branches located in Washington and Oregon, which included 8 brokers, last November. Kerr says Smith Barney approached his firm about a possible sale. When asked about the deal, however, a Smith Barney spokesperson declined to comment. For more on this story, check out Registered Rep.’s Wealth Management e-newsletter.

In the headlines.....day after day after day after day.

Washington Has Always Demonized Wall Street

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By ZACHARY KARABELL

'Wall Street, as we knew it, is dead. The system that allowed the U.S. economy to be a dynamic innovator has been fundamentally broken and the implications of these structural changes have yet to be fully felt."

It's now commonly accepted that the economic meltdown has forever changed the nature of the financial industry. But the words above weren't written in the past weeks. They were penned by financial analyst Richard Wayman in 2003, after investigations by then New York Attorney General Eliot Spitzer led to a structural shift in the relationship between research and investment banking following the stock-market collapse of 2001-02.

Martin Kozlowski

Among the many remarkable aspects of our present crisis is the speed with which we have collectively forgotten past crises, even ones that happened recently. The current meltdown is substantial, dramatic, and systemically dangerous -- but it is hardly the first to merit that description. And each crisis, without fail, results in unequivocal pronouncements that such excesses will never again be allowed.

When President Barack Obama lambastes Wall Street bonuses as "shameful," he is keeping up with the American tradition of vilifying Wall Street. Almost since the founding of the country, the U.S. has oscillated between admiration and condemnation of money men. When the first Bank of the United States was established in Philadelphia in 1791, it was amid fears that it would allow merchants and speculators to subvert the new republic for their own gain. Decades later, Andrew Jackson's presidency was bolstered by his staunch opposition to the Second Bank of the United States. He positioned himself as the defender of the common man against supporters of the bank who used their money to obtain influence.

From the 19th century to the present day, denunciation of financiers has gone hand in hand with each recession, speculative bust and depression. Each time the economy falls, the chattering classes announce that the old ways have brought the country to the brink of ruin and that the riches of society will no longer remain in the hands of the greedy few.

Little recalled now is "The Long Depression" of the 1870s that began with the Panic of 1873. The Panic was triggered by the collapse of the Jay Cooke and Company Bank, which came on the heels of Jay Gould's infamous attempt to corner the national gold market in 1869 and the speculative boom in railroad building. During the 1870s, as much as 50% of the U.S. labor force was out of work at one time or another, making it by far the worst economic collapse in the country's history. In the agrarian heartland of the country, early stirrings of populism led to attacks on eastern barons for robbing Americans of their birthright.

From then on, busts followed almost like clockwork every 20 years, with the panics of 1873 and 1877 followed by the panic of 1893 and then the "Bankers' Panic" of 1907, when J.P. Morgan orchestrated the recapitalization of the financial system from his mansion in Manhattan. It was the TARP, the "bad bank," and the stimulus of its day, and it earned Morgan the gratitude of a nation and the applause of President Theodore Roosevelt.

Having lionized Morgan, a few years later the country turned on him and his ilk with a vengeance. In 1913, a populist congressman from Louisiana, Arsène Pujo, launched an investigation of the so-called "Money Trust" that he claimed was exerting undue and deleterious influence on the body politic. Exhibit No. 1 was none other than one-time savior Morgan, who was interrogated by the committee as if he had committed a heinous crime. One member of the committee said Morgan represented "a moneyed oligarchy more despotic and dangerous to industrial freedom than anything civilization has ever known." Strict regulations followed -- as they always have on the heels of such crises.

Yet 20 years later, the market imploded with the crash of 1929. The ranks of the unemployed swelled to at least 25%, and the country was plunged into the Great Depression. Franklin Delano Roosevelt famously indicted the "money changers" in his 1933 inaugural address, but he was even more caustic in private, vowing to end forever "speculation with other people's money." The raft of modern regulatory institutions, from the Securities and Exchange Commission to the Federal Deposit Insurance Corporation, was one result. Wall Street was tamed and quiet for a while.

Later on, the "Go-Go" years of Wall Street in the late 1960s quickly gave way to the bust of the so-called "Nifty-Fifty," the 50 largest blue-chip companies. Then came inflation, severe unemployment, and the stock market collapse of 1973-74. Between 1964 and 1982, the major stock indices went nowhere fast -- the Dow began that period at about 800 and ended at the same. Wall Street in those years was more of a cottage industry, one that few suspected would again return to its prominent and controversial position at the apex of American society.

The booming 1980s -- mergers and acquisitions and arbitrage -- were capped by the highly publicized trials of Ivan Boesky and Michael Milken, who were pursued by the Eliot Spitzer of his day, Rudy Giuliani. Combined with the market crash of 1987, the subsequent Savings and Loan debacle (which had little to do with Wall Street per se, but was wrapped up with the same crowd in public imagining), and the recession of 1991-92, Wall Street was once again pronounced immoral and in need of tight reins. Yet within a few years, the Nasdaq was soaring, animal spirits were in control, and the Internet bubble was in full bloom.

Wall Street's obituary has been written many times. Yet what is striking today is that cycles that used to take a few decades now take a few years. And our cultural amnesia has gotten worse. The rapid sequence of the dot-com bubble of the 1990s, the recession of 2001, and the 2002 collapse of Enron combined with major fines levied against investment banks, all became a distant echo in a surprisingly short amount of time. At the rate we've been going, we're due for a new boom with obscene profits for the financial industry -- albeit with different names and different companies -- before Mr. Obama runs for re-election.

The fact that we have been in similar places in the past doesn't make the specific problems we face any less pressing. New regulations may prevent an exact recurrence of yesterday's crises, but our relentless capacity for reinvention means that we will produce innovations that will in turn create new problems.

Recognizing that our present is not quite so breathlessly unprecedented doesn't make the challenges less critical, but it could lead to a more level approach. That can begin with steady leadership from President Obama. Wall Street has been humbled and will change, but capital will continue to flow. That much, at least, is certain.

Mr. Karabell is president of River Twice Research. His new book, "In the Red: How China and America Became One Superpower Economy," will be published by Simon & Schuster in October.

The Power of a Story....

The Power of Story

In case you have not noticed our culture is engrossed with stories.  People Magazine, USA Today, the first words you hear on any TV news show...everyone in communications know that if you want to grab peoples attention use a story.  It is not a new marketing technique.  It has been in use since Euripides and the Greeks used it almost 2500 years ago.  Even before that in every culture in the history of the world people sat around and shared stories.

When we are selling a product we can use adjectives or story.  Adjectives do not engage the listener, stories do.  Adjectives place a spotlight on a product but they are so overused in our communications they have become almost meaningless.  Stories have the power to immediately make a connection with the listener and engage their minds and emotions.

“Like clever journalists and great lawyers, marketers who tell true stories make their presentations more interesting, more personal, more credible and more felt - and more persuasive.”

Changing Affluent Expectations....

Phoenix: Following a presentation I delivered on "affluent expectations in tough times," Mike said, "My clients are continually calling—it's as if they expect me to know when the markets are going to stabilize ... it's gotten to the point that I'm convinced my clients have unrealistic expectations."

Obviously it is impossible for me to determine whether or not Mike's clients have unrealistic expectations from our brief conversation. But what is quite clear—and our research continues to reinforce this point—is that most affluent clients have unrealistic expectations of their financial advisors. Why? Because not long ago the markets appeared strong, clients were making money, and both clients and advisors were getting greedy. So why bring up something that might interfere with landing a new client? Bearing this is mind, many advisors opted for the path of least resistance and avoided establishing realistic expectations at the beginning of the professional relationship. And it is virtually implausible to manage expectations that have never been clearly established.

Couple this with the fact that most advisors still have too many clients, don't have a clearly defined service model and service tends to be reactive rather than proactive. If, like Mike, you are getting too many incoming calls from your clients during these challenging times, it is a warning signal that your service model needs either a tune-up or a major overhaul.

The fact is that being on the receiving end of poor service is what's causing the greatest amount of dissatisfaction amongst affluent clients. In tough times, shoddy service leads clients to believe you are an unprofessional and shoddy advisor.

The level of affluent dissatisfaction has prompted many media outlets to publish questions that investors should ask their current or prospective advisors. Take a deep breath as you read through these questions and PLEASE take this as a signal of what, in some shape or form, clients will expect from the affluent client-advisor relationship. The following is a partial list of questions that affluent consumers are being prompted to ask by the media and consumer groups. If your clients and prospects are not yet asking these questions, it is likely they have been exposed to them, which means they probably will be in the future.

34 Questions:

• What services do you provide?

• How do you provide these services?

• How do you get paid relative to each of these services?

• How long have you been in the business?

• How long have you been with your current firm?

• How many firms have you worked with?

• Why did you change firms?

• Did you get paid to change firms?

• Did you get paid to stay at your current firm?

• What is your educational background?

• What licenses and certifications do you have?

• Have you ever been disciplined by the NASD or other regulatory agencies?

• Can I have a copy of your NASD form?

• Do you prepare comprehensive financial plans?

• How long does it take to complete a comprehensive financial plan?

• What do you charge for this comprehensive financial plan?

• How many clients do you have?

• How much money do you manage?

• What type of clients do you have?

• How often will you contact me and how?

• How will you determine my risk tolerance?

• What type of due-diligence do you conduct to ensure my money is "Madoff proof"?

• How is my money going to be protected?

• How often will you meet with me to review my portfolio?

• Will you be handling my account personally ?

• Will you be executing my financial plan personally?

• Will you keep me informed with every investment decision you make on my behalf?

• Will you be organizing, coordinating, and keeping all financial documents up-to-date?

• How many full-time associates do you have assisting in providing the services you described?

• How long have these associates been working with you?

• What is the role of each of your associates?

• Can you outline your service model?

• What are your office hours?

• Do you have names of clients, CPAs, and attorneys you have worked with who I can call?

Granted, few clients and prospects are currently asking all of these questions. But as I mentioned earlier, you can expect them in the future. Which is why you—and every member of your team— should be able to answer these questions with ease and confidence. TARP money, the Madoff scandal and the general economic meltdown have created a media field day. As these entertainers disguised as journalists continue to report scandalous behavior and fuel the fires of fear, affluent expectations are being framed accordingly. 

The emphasis is now on the advisor—not the firm. The trust factor with national firms is at an all-time low, and now clients are focused on the professionalism of the individual advisor. Our research on both the affluent and the rainmakers continues to tell us that there is tremendous opportunity for advisors who are able to stay ahead of these challenging times. That said, it is important to realize that affluent expectations regarding financial professionals will never be the same. 

Raise your game. Be able to handle serious due-diligence and background checks. You will not only survive this financial tsunami, your future will be bright. 

Moving Forward from Failure....

Vincent Van Gogh failed as an art dealer, flunked his entrance exam to theology school, and was fired by the church after an ill-fated attempt at missionary work. In fact, during his life, he seldom experienced anything other than failure as an artist. Although a single painting by Van Gogh would fetch in excess of $100 million today, in his lifetime Van Gogh sold only one painting, four months prior to his death.

Before developing his theory of relativity, Albert Einstein encountered academic failure. One headmaster expelled Einstein from school and another teacher predicted that he would never amount to anything. Einstein even failed his entrance exam into college.

Prior to dazzling the world with his athletic skill, Michael Jordan was cut from his sophomore basketball team. Even though he captured six championships, during his professional career, Jordan missed over 12,000 shots, lost nearly 400 games, and failed to make more than 25 would-be game-winning baskets.

Failure didn't stop Vincent Van Gogh from painting, Albert Einstein from theorizing, or Michael Jordan from playing basketball, but it has paralyzed countless leaders and prevented them from reaching their potential.

At some point, all great achievers are tempted to believe they are failures. But in spite of that, they persevere. In the face of adversity, shortcomings, and rejection, they hold onto self-believe and refuse to see themselves as failures. 

As an advisor, it is very possible you have been beat up by the market and your clients.  Now is the time to go back an review what brought you to a level of success before the downturn.  Don’t give in to adversity, but press on and press through with perseverance.  The winning basket is right around the corner!

- Brent Rolsten

WSJ...."The Odds of a Depression" - Interesting!

By ROBERT J. BARRO

Central questions these days are how severe will the U.S. economic downturn be and how long will it last?

The most serious concern is that the downturn will become something worse than the largest recession of the post-World War II period -- 1982, when real per capita GDP fell by 3% and the unemployment rate peaked at nearly 11%. Could we even experience a depression (defined as a decline in per-person GDP or consumption by 10% or more)?

David Gothard

The U.S. macroeconomy has been so tame for so long that it's impossible to get an accurate reading about depression odds just from the U.S. data. My approach uses long-term data for many countries and takes into account the historical linkages between depressions and stock-market crashes. (The research is described in "Stock-Market Crashes and Depressions," a working paper Jose Ursua and I wrote for the National Bureau of Economic Research last month.)

The bottom line is that there is ample reason to worry about slipping into a depression. There is a roughly one-in-five chance that U.S. GDP and consumption will fall by 10% or more, something not seen since the early 1930s.

Our research classifies just two such U.S. events since 1870: the Great Depression from 1929 to 1933, with a macroeconomic decline by 25%, and the post-World War I years from 1917 to 1921, with a fall by 16%. We also assembled long-term data on GDP, consumption and stock-market returns for 33 other countries, sometimes going back as far as 1870. Our conjecture was that depressions would be closely connected to stock-market crashes (at least in the sense that a crash would signal a substantially increased chance of a depression).

This idea seems to conflict with the oft-repeated 1966 quip from Paul Samuelson that "The stock market has predicted nine of the last five recessions." The line is clever, but it unfairly denigrates the predictive power of stock markets. In fact, knowing that a stock-market crash has occurred sharply raises the odds of depression. And, in reverse, knowing that there is no stock-market crash makes a depression less likely.

Our data reveal 251 stock-market crashes (defined as cumulative real returns of -25% or less) and 97 depressions. In 71 cases, the timing of a market crash matched up to a depression. For example, the U.S. had a stock-market crash of 55% between 1929-31 and a macroeconomic decline of 25% for 1929-33. Likewise, Finland had a stock-market crash of 47% for 1989-91 and a macroeconomic fall of 13% for 1989-93. We found that 30 cases where there were both crashes and depressions were also associated with wars. In fact, World War II is the worst macroeconomic event of the period, with strong U.S. wartime economic growth as an outlier.

In the post-World War II period, the Organisation for Economic Co-operation and Development (OECD) countries were strikingly tranquil up to 2008. The worst macroeconomic event in that period came in Finland in the early 1990s. Sweden also faced a financial crisis in the early 1990s, though it reacted quickly and is now being touted as a possible guide for leading the U.S. out of its current economic crisis.

Outside of the OECD, there have been many linked stock-market crashes and depressions since World War II -- including the Latin American debt crisis of the 1980s, Mexico's financial crisis in the mid-1990s, the Asian financial crisis of the late 1990s, and Argentina's financial turbulence that lasted until 2002.

Looking at all of the events from our 34-country history, we find that there is a 28% probability that a "minor depression" (macroeconomic decline of 10% or more) will occur when there is a stock-market crash. There is a 9% chance that a "major depression" (a fall of 25% or more) will occur when there is a stock-market crash. In reverse, the chance that a minor depression will also feature a stock-market crash is 73%. And major depressions are almost sure to have stock-market crashes (our data show the probability is 92%).

In applying our results to the current environment, we should consider that the U.S. and most other countries are not involved in a major war (the Iraq and Afghanistan conflicts are not comparable to World War I or World War II). Thus, we get better information about today's prospects by consulting the history of nonwar events -- for which our sample contains 209 stock-market crashes and 59 depressions, with 41 matched by timing. In this context, the probability of a minor depression, contingent on seeing a stock-market crash, is 20%, and the corresponding chance of a major depression is only 2%. However, it is still the case that depressions are very likely to feature stock-market crashes -- 69% for minor depressions and 83% for major ones.

In the end, we learned two things. Periods without stock-market crashes are very safe, in the sense that depressions are extremely unlikely. However, periods experiencing stock-market crashes, such as 2008-09 in the U.S., represent a serious threat. The odds are roughly one-in-five that the current recession will snowball into the macroeconomic decline of 10% or more that is the hallmark of a depression.

The bright side of a 20% depression probability is the 80% chance of avoiding a depression. The U.S. had stock-market crashes in 2000-02 (by 42%) and 1973-74 (49%) and, in each case, experienced only mild recessions. Hence, if we are lucky, the current downturn will also be moderate, though likely worse than the other U.S. post-World War II recessions, including 1982.

In this relatively favorable scenario, we may follow the path recently sketched by Federal Reserve Chairman Ben Bernanke, with the economy recovering by 2010. On the other hand, the 59 nonwar depressions in our sample have an average duration of nearly four years, which, if we have one here, means that it is likely recovery would not be substantial until 2012.

Given our situation, it is right that radical government policies should be considered if they promise to lower the probability and likely size of a depression. However, many governmental actions -- including several pursued by Franklin Roosevelt during the Great Depression -- can make things worse.

I wish I could be confident that the array of U.S. policies already in place and those likely forthcoming will be helpful. But I think it more likely that the economy will eventually recover despite these policies, rather than because of them.

Mr. Barro is a professor of economics at Harvard and a fellow at Stanford University's Hoover Institution.

Catch a Wave!!!!!!!

Catch A Wave

Have you ever sat on the beach and watched other people surf?  You are sitting in the warm sunshine on the soft sand enjoying the cool breeze in your face and your biggest worry is did you put on enough sunscreen. There are times to do that.  We need to take the time to refresh and recharge to handle the pace at which we work.  However we can only sit there so long when it is time to get back out and do what we can do.

Right now the surf is up.  In fact it is a rip tide of tremendous proportions.  Everyone wants to stay on the beach and be safe...but is it really the best place to be.  After all if you are a surfer it is the big waves you are interested in.

There is no thrill compared to dropping down the face of a huge wave, staying on the board to the bottom, accelerating to speeds yet unfelt, and then leaning into the wave to go faster.  You hear the roar of the wave behind you and it sounds like a thousand yards of tearing silk.  You get low on your board and the wave encircles you into it’s womb and you realize again why you love to surf.

Those on the beach will never feel what you feel.  They will watch you and wonder at how you can do what you do.  Just like your clients are watching you now.  They are hoping you are out there finding the right wave and making the right moves.  It is times like these that will test us and we will become better advisors for it.