They’re Buying Advice, Not a Portfolio
People express their trust in you, or lack thereof, in different ways. This week brought with it some interesting and encouraging developments. I had a meeting with a client who informed me that he would call me or his CPA whenever faced with a financial decision. He didn’t say the words, “I trust you” but his intent was clear. I called another client after the 387 point drop in the DJIA to see how he was doing. This particular client is approaching retirement and I expected him to be a little concerned. To my surprise he wasn’t and in fact said, “I trust you completely. Do whatever you think is best.” Still another client said, “I trust you 100%.” These are the things that inspire me and are the reasons I do what I do. The common thread between each of these clients is that they didn’t buy a portfolio or a financial plan, they bought advice.
There is such an abundance of information out there that it is reshaping the role of the advisor. Before the Internet age was in full swing, those in the industry had a corner on much of this information. Now that it is so abundant and can be accessed so easily, there is a real need for advisors who will help the client make sense of it all. I view this to be my role, pure and simple. Not everyone will agree, however.
Many advisors are stuck in the product sales mode and are always on the prowl for their next score. But I believe the tide is changing. Clients are growing increasingly aware of this mentality and are becoming more and more suspicious. Many companies have seen this development, too, and have attempted to change.
It’s interesting to me how a company will adopt certain phrases like Trusted Advisor or Total Wealth Management but not change the culture of their organization. Without a fundamental shift in philosophy, the phrase is little more than a hollow marketing slogan.
It’s time we realize that clients are the reason we exist and without them we would not be in business. The philosophy is simple, “treat others as you would like to be treated.” Gaining trust is everything.
What do you think? Agree or disagree?
Log you comments below.
Mike, here’s my take on financial planning (been doing true FP’s for 15 years): FP’ing is the loss leader to get people in the door (like Walmart (ugh) does to get people to buy more expensive stuff so they CAN make money). Once we get the time intensive FP done at a “low” fee (compared to what it is REALLY worth if we charged what it really takes from an hourly basis to do the planning), THEN we can do the asset management account/investments/etc. which makes the REAL money. Consequently, it’s only with the more affluent we can make money and make it worth our time/their time. Don’t get me wrong, FP’ing is my first love. Unfortunately, all this other goes along with it. If I only did FP’s, then I’d have to charge $10K to $20K per plan (OR MORE) to make it worth while. And, how many clients can afford THAT? See what I mean? Agree or disagree? Best regards, Keith Schnelle, CFP, AIF.
While I disagree with the “loss leader” comment (at least from my prospective), I do agree that it is labor intensive and unless the fee properly reflects this, it would be hard to make a living on planning alone. Not trying to be nosey but I do have a few questions.
Do you try to do planning for the majority of your clients? What hourly rate do you charge (or deem fair)? What’s the average NW of your clientele?
I’m interested in charging Retainer Fees – but question what it would be that the client receives in years 2 + that would create enough value to warrent an ongoing fee. For many the initial plan is a much needed “ah-ha” moment and somewhat disturbing. But, once implemented, what is it we offer, truly, besides AUM that would translate into an ongoing fee?
I’m not interested in one-time only fee for the financial plan, but do want a long-term relationship. Not everyone I meet has enough AUM to meet my required minimum revenue. Perhaps I should just not take that particular client into my practice?
What do you think?