360 Discovery & The Future of Advice

Kevin CullenDirector, Practice Managemen

Loring Ward

For Advisor Use Only – Not for Public DistributionLWI Financial Inc. (“Loring Ward”) is an investment adviser registered with the Securities and Exchange Commission. Securities transactions may be

offered through Loring Ward Securities, Inc., an affiliate, member FINRA/SIPC. 11-238 (09/11)

Agenda

• Who is Loring Ward?

• The Importance of Client Discovery

• The “Art” of the Conversation

• Our “360 Discovery” Process

• Next Steps

Loring Ward is a Wealth Management firm committed to helping you create better client experiences:• Founded in 1990• $8.1 billion in AUM• 94 employees• Headquartered in San Jose, CA• Help Advisors build, manage & grow successful wealth-

advisory practicesas of 1/13

About Loring Ward

Efficient Markets Hypothesis — 1965Eugene F. Fama, University of Chicago• Based on extensive research on stock price patterns• Current prices incorporate all available information and

expectations• Current prices are the best approximation of intrinsic value.• Price changes are due to unforeseen events• Mis-pricings do occur but not in predictable patterns

Behavior of Securities Prices — 1965Paul Samuelson, MIT 1970 Nobel Prize in Economics• Market prices are the best estimates of value• Price changes are random• Future share prices are unpredictable

• Markets are efficient• Planners build long-term plans based on broad market

projections• Active managers

• Help to improve market efficiency• Results are unreliably unpredictable

Core Solution - What We Believe

Core Solution – The Challenges of Active Management

Source: Standard & Poor’s Indices Versus Active Funds Scorecard, March 2012. Index used for comparison: US Large Cap — S&P 500 Index; US Mid Cap — S&P MidCap400 Index; US Small Cap — S&P SmallCap 600 Index; Global Funds — S&P Global 1200 Index; International — S&P 700 Index; International Small — S&P Developed ex. USSmallCap Index; Emerging Markets — S&P IFCI Composite. Data for the SPIVA study is from the CRSP Survivor-Bias-Free US Mutual Fund Database — Government Long —Barclays Capital US Long Government Index; Government Intermediate — Barclays Capital US Intermediate Government Index; Government Short — Barclays Capital US 1-3Year Government Index.

Loring Ward’s ApproachTake 3 risks worth taking as identified by academic research:

1.Invest in stocks2.Emphasize small companies3.Emphasize value companies

Core Solution - Take Risks Worth Taking

The risks associated with investing in stocks and overweighting small company and value stocks potentially include increased volatility (up and down movement in the value of your assets) and loss of principal.

Core Solution – Diversify,. Diversify, Diversify

Diversification does not guarantee a profit or protect against a loss..

Advisors Who Can Benefit Most from Our Core Approach

• Value proposition is not“Beating the market”

• Value proposition is advanced planning and trying to deliver market rate of return over the long term

• Committed to defined client experience & process

How Much Do You Know About Your Clients?

• Their values and vision

• What health issues concern them?

• Their lifestyle goals?

• Their family dynamic?

• What retirement they envision?

The Importance of Effective Discovery

• Dodd/Frank Reforms: “Know Your Client”

• Become a “Catalyst” for your Clients

• Help Clients Organize their Thoughts

• Clarify Client Issues

Where Discovery “Fits” in the Wealth Advisory Process

Existing Discovery Methods

• Discovery or “Interrogation”?

• No System

• Process Benefits the Advisor, not the Client

• Focus of Discussion is on Money

• Purpose of Discovery is to Sell Product

Effective Discovery Requirements

• Process Must be Visual

• A “Structured Conversation”

• Discuss Life Issues in Relation to Money

• Use Client-Friendly Language

• It’s Not About You!!!

“Above the Line/Below the Line”

Needs Concerns Opportunities Goals

Discovery Meeting Essentials

• Must be a “fit” — pre-qualify prior to meeting• Setting Must be Comfortable• Avoid presenting financial solutions• Review financial information AFTER

discussion of life issues• Meeting length- Needs to be as long as it

takes for both of you to gain an understanding of relevant information

Discovery is a Conversation

The Power of the Conversation

• Puts clients at ease• Creates a “we” space

between client and advisor

• Facilitates a more personal discussion by changing the meeting dynamic

• Conversational approach reinforces your brand

Skills of the Conversationalist

• Body language, eye contact, facial expressions

• “Give and take” communication• Ask high value questions

– Where are you now? Where do you want to be

– “Minesweeper” questions• Practice “empathic listening”

How Detailed Does the Conversation Need to Be?

• Understand client needs, concerns, opportunities and goals

• Identify life areas that will impact wealth plan

• Focus on gap between present and future

The 360 Discovery System form Loring Ward

A Simple Three-Step Discovery Process

Set theStage

LifeDiscovery

Financial Discovery

StepOne

StepTwo

StepThree

• Ensure there is a ‘fit’• Explain your process• Outline its benefits• Gain “buy-in”

• Overview of Client’s life• Focus on key life areas• Reinforces advisor’s approach

• Ties life issues to wealth planning• Identifies potential planning needs• Engages in financial discussion

Information Gathering

• Ask permission to take notes

• Don’t let note taking get in the way of listening

• Let the client see what you are writing

• Use a white board or mind map

“When Do We Talk About Money?”

1. Financial discovery looks at the broad issues

2. Client prioritizes for you at the end of financial discovery

3. Conversation can now move to client financial information and risk tolerance

Loring Ward Tools

• 360 Discovery Package– Life Cards– Financial Life Map– 360 Discovery Workbook– Worksheet, Sample 360

Review• Regional Workshops• Webinars, Podcasts, Blogs

Next Steps: Self-Evaluation

1. Review your current discovery system — do you have a disciplined, repeatable process?

2. How would you rate your ability as a conversationalist? What do you need to do to improve?

3. Are you an “empathic” listener? How can you strengthen your ability to “hear” your client?

4. How effective are you in understanding your clients life issues? Do you have an effective method to uncover your clients needs, concerns, opportunities and goals?

5. Can you make your discovery process more visual?

Questions?