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Mitch Anthony's Intuitive Advisor

Becoming Indispensable to Your Clients

by Steve Sanduski

Steve Sanduski photoOver the next few years, it's going to become harder and harder to maintain the 1 percent AUM fee that is common in our industry. From my perspective, there are two possible ways to address this challenge:

  1. Deliver much more value for the fee than you do today. In this scenario, you'll need to use technology to augment and automate some of your services so your profit margins don't suffer.
  2. Lower your fee to remain competitive. This is obviously not an attractive option and would put you in direct competition with larger firms who have more resources.

Suffice it to say, continuing to do things the way you've always done them is not a viable option.

The pressure on your business model is coming from technology disruption, larger organizations' low-cost, call-center programs, the DOL rule, name brands in other industries who are raising the client experience bar, a new generation of investors whose beliefs around money are much different than Baby Boomers, and clients who are scrutinizing fees more closely than ever before.

Also consider the fact that we're eight years into a bull market, the stock market is at an all-time high, and it's likely we'll see a drop of 50 percent again at some point—are you ready for that?

It's been a great run for financial advisors over the past 30 years, but I firmly believe we've reached a moment of truth. The bread and butter of most advisors—the business of managing money—is about to make a radical shift.

Mitch Anthony and I believe the financial industry is making a shift from focusing on ROI to focusing on ROL (Return on Life™).

Until now, financial advisors have been paid for managing money. That service is being commoditized by robo advisors and large incumbent players.

Here are a couple of facts to consider: Schwab is providing money management at no cost to consumers, while Vanguard provides access to a Certified Financial Planner™ and will manage clients' money for just 30 bps per year. Subtract that from an average advisory fee of 1 percent and you get a 70 bps gap that must be filled with discernible value.

3 Ways to Become an Indispensable Financial Advisor

First, focus on the discovery process. The "discovery" meeting should not be one-and-done. It's an ongoing process throughout the relationship with your client that will ensure you develop a relationship that is rock-solid. It helps you gather and store your client's story about their perspectives on money, potential in life, and progress through transitions.

An indispensable financial advisor gets paid for understanding his or her client's:

  1. Past (how experiences have shaped their beliefs and perspectives about money)
  2. Present (their current financial and life situation)
  3. Future (what foreseeable transitions are on the horizon that need to be planned for)

Once you have a deep understanding of those three frames of a client's life, you can develop a personalized financial life plan that will help your clients get the best life possible with the money they have. And by understanding your clients' beliefs and perspectives about money, you can accommodate their behavioral tendencies in the plan and increase its odds of success.

When I refer to a continual process of discovery with your clients, I don't mean discovering what their favorite bottle of wine is. Continual discovery is focused on the values your clients want to impart on their children and how that affects their financial plan related to paying for college and leaving an inheritance. It means discovering your client's philosophy on lifestyle and whether that means tiny house living or living in the moment and enjoying life. It means discovering the life transitions your client is experiencing and can foresee happening, then planning for them consciously and intentionally.

Your focus should be on helping your clients optimize their lives while automating and monitoring the management of their money.

Second, apply a strict rule when determining whether or not to use client-facing technology, and use the rest of your time leveraging human contact with clients. Rather than trying to compete in a race you may not win, ask yourself one simple question before you implement any technology, "Will my client perceive this as an improvement to their experience with me?"

To become an indispensable financial advisor, you must continually enhance your client's experience in working with you. And by experience, I'm talking about things that would make your clients say to you, "That made a really big difference in my life." If you use the "made a really big difference in my life" definition, much of what passes for "client experience technology" today falls short. By contrast, technology that augments an advisor's ability to deepen the discovery process does qualify. Remember, you cannot digitize caring.

One failing I see in our industry is lots of technology that focuses on making our lives easier by pushing more work onto clients. Some of you might consider this "empowering" clients by giving them more control, but be careful about that rationale. The more work you have your clients do, the worst their experience, and the less you can charge.

Third, you need to offer more services at the intersection of what clients want and what other advisors do not offer. This is that much talked about, but ever elusive idea of "differentiation." Ask yourself, "Why would a client work with me?" Be honest. Can you answer that question in seven words or less? If not, listen to my podcast with Ian Chamandy.

If you're a "me too" advisor, the only reason a client would work with you is because you're cheaper or you're a better salesperson, neither of which is a good basis for a long-term advisor/client relationship.

One way to be different is to become a community organizer, not in the political sense, but in the relationship sense. Not surprisingly, the more pervasive technology becomes in our society, the more people crave real human connection. You are in an ideal position to create a community around your client base. Whether you have 50, 500, or 5,000 clients, you can facilitate connection and a sense of community among your clients that will help make you indispensable.

As an example, think about all the "Cons" that take place across the country. Comic Con is perhaps the best-known pop culture "convention" drawing more than 100,000 attendees from around the world. The Wall Street Journal reported on the "Con" phenomenon in an article and quoted an organizer as saying, "You get the energy, the community, the collective experience—people who are there for that thing that's never going to happen again." You don't get that with the internet. Most people still desire face-to-face experiences (at least part of the time) and as an advisor, you can create those opportunities for your clients to get together for memorable experiences that help make you indispensable.

If you want to have clients for life, you'll need to combine practical technology with human-to-human conversation to create a unique partnership between yourself and your clients. Doing so will lead to a life-centered path for financial planning that is personally tailored to each individual client and their specific life transitions, ensuring you become indispensable to your clients.


© 2017 Steve Sanduski

Steve Sanduski is president of Belay Advisor. Follow him on Twitter @SteveSanduski or connect on LinkedIn, and subscribe here to receive his blog and podcast updates.


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