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June 29, 2003 at 08:00 PM
Evolve Into A New Type Of Financial Advisor
By
Many financial professionals are caught in a vicious downward spiral that robs them of potential income, personal satisfaction and self-confidence. This is a result of the way that many professionals were taught how to run their business. In order to break free from this downward spiral, you must first consider the problems you face everyday:
Free Consulting. Most financial professionals are giving away their time and wisdom in the hope of attracting new clients. Some even prepare estate plans, perform business analysis, conduct review meetings and provide ongoing counsel for free, expecting to sell a product and get paid on the back-end.
Commission Trap. When you dont get paid for time spent advising existing clients or delivering information to potential clients, then you need to find more clients to whom you can sell more products in order to make a living.
Each Jan. 1, you have to start all over because you have no retained value. You need to get at least as many new clients as you got the year before just to earn the same amount of money.
This problem is only further intensified by your financial success. The better salesperson you are–the more you earn in commissions each year–the deeper the hole you dig. Typically, the money that you are making is spent on upgraded lifestyle. If you take on particular lifestyle expenses during a good year, you relinquish yourself to making at least the same amount to cover those costs in the future. When you have to keep increasing your production you are simply multiplying the stress.
Overhead. Not only do you have to get new clients while also providing service to the existing ones, but you also have to pay for the ever-increasing costs of growing a business. Overhead doesnt just mean paying rent; it means paying for people power, professional services, and technology. Finding and paying good employees is expensive, plus you have to factor in employee turnover.
Performance Losses. When clients lose money in an investment you sold them, they get upset and frequently panic, wanting out of their investments, which can include variable annuities and variable life. Furthermore, they stop telling their friends about you. If part of your income is derived from asset-based fees, this revenue can plummet–from the combined loss of customers and loss of market value.
Commoditization. To the average investor, it appears that most financial professionals today provide the same basic menu of services. To intensify it, commercials and talk shows make it sound as if any person of normal intelligence should be able to manage their own portfolio as well as–if not better than–a professional.
Not only do many of the products you sell seem to be mere commodities, even the financial planning services you offer are viewed as a dime a dozen. Charles Schwab constantly is advertising the use of its free advisors, if youll just do your trading with Schwab. When you are forced to compete based on price alone, then you know you are not being viewed as anything but another in a long string of potential products. You are a commodity.
Overload. Financial professionals have an unbelievable amount of information to manage. You must stay informed regarding taxes and estate planning, while simultaneously monitoring the performance of literally every investment vehicle you have ever sold. In addition, you must attend conferences, research new products and keep abreast of industry trends. That doesnt leave much time for free consulting, marketing or servicing your existing clients.
Put all of these problems together and it becomes a vicious spiral downward into a never-ending trap–always feeling compelled to provide more free services, to more people, in the hope of selling more products to earn more commissions, to pay for your higher overhead. The worst part is where it finally leads. There is no pot of gold at the end of this rainbow. There is only stress, burnout and an overriding dread at the end of the day where youre left wondering, “Is this it?”
If you simply cant take it anymore, then something has to change in the way you are doing business.
To escape this spiral, you must evolve into a new kind of financial advisor.
Shift your role. Shifting your role helps you to shatter the problems of performance losses and commoditization. Change your role from being just another investment advisor or salesperson to being a financial coach. You will be someone who saves investors from being their own worst enemy when it comes to long-term investing. As a coach, it is your job to offer investors a process that lends peace of mind with the investing experience. To understand this evolutionary trend, lets examine the three roles that the financial professional traditionally has fulfilled:
(1) Implementor–”any person or thing serving as a means to an end.”
This part of the role involves offering a wide range of investment products, research and recommendations. The financial professional is the means by which the client achieves the end of owning investments. An implementor is product-based.
(2) Advisor–”someone who is given the power to give advice or an opinion.”
The advisor role includes preparation of analysis, written plans, estate tax, retirement, education and managing risk. An advisor is planning-based.
(3) Coach– “a person who instructs, trains and expands others capacity to take effective action.”
A coach is client-focused.
As a coach, you will manage client emotions and behavior, and provide a system of discipline for reaching lifelong financial and even personal goals. Having shifted from product-driven to planning-driven, you are now becoming relationship-driven.
Traditionally, these roles have occurred in the order listed above. Both the financial professional and the client are used to thinking of the financial professional as a salesperson (or implementor) first and as a trusted coach last. Shifting your role means moving the role of coach to the beginning of the process.
