What can we do for our customers that they cannot do alone? What can enable us to manage their money better than them?
These are not always easy questions to answer as a financial advisor. But modesty aside, we need to be able to explain to potential customers how we can help them and why we’re worth it. And once we’ve convinced them to make that decision, we have to demonstrate that we’re really following the path.
It’s a two-part process: explaining our value, and then continually demonstrating that value in the months and years to come.
So what is our value proposition? For me, it boils down to five key contributions that we can offer that many clients cannot achieve without an advisor.
1. Manage emotions and control prejudices
Even if the client is brilliant, a genius, and smarter than any advisor, chances are they’ll be emotional about their money and find it hard to stay focused and unbiased when talking. it’s about managing your own wealth like advisors do.
They can hold onto a stock as it goes up and up without any strategy to protect themselves, only to see it crash. Or they could panic and go cash if the Dow Jones falls 3% for four straight days without having the discipline to recognize that they may miss the rally. A good advisor will have the discipline to stick to an investment philosophy and follow the data. Historical data shows that over the past 20 years, seven of the best days have occurred within about two weeks of the worst 10 days. As professionals, we need to help clients manage their expectations and emotions.
I’ve seen so many clients insist on holding a stock simply because they “like” it, even though its earnings and profitability tell a different story. And I’ve seen so many clients try to bail out at the wrong time.
This is where we come in. Advisors are motivated by objective factors – no emotions are allowed. We provide the process, philosophy and discipline that clients often cannot exercise alone.
As advisors, we have resources that clients don’t have access to themselves. This can take the form of investment opportunities, exclusive research and information, or access to specialists who can help with more complex situations, such as estate planning or liquidity events.
Everyone’s financial situation is different. Financial goals and timeframes for investing vary from person to person. Creating a financial strategy is not unique, which is why having a personalized investment strategy is so important. Advisors can sit down with a client and help them map out a personalized financial roadmap tailored to their personal needs and goals. Some advisors also specialize in particular areas, which can help clients navigating unique situations.
3. Brainstorm and listen
As advisors, we take and return calls from our clients. We listen to their thoughts, whether it’s their worries and complaints or their hopes and dreams. It’s meaningful and it matters. We can serve as sounding boards, even if we don’t always have the answers.
Customers may have complex issues that we have never seen before. But just talking about the pros and cons can be a great way to build a good client-advisor relationship. I had a client who was struggling to retire. She was so concerned about cash flow, but no longer enjoyed the expensive city she called home. We thought about what it would mean to retire somewhere with a lower cost of living. At first she just mentioned it in passing – almost like a dream. It had little to do with his finances. Instead, she thought she missed her local friends but grew closer to her family as she got older. In the end, she followed the plan. She is now enjoying a stress-free life in retirement, with no cash flow problems. Our years of coming and going have gone beyond the numbers. I listened and made sure I heard his concerns.
Don’t minimize the importance and usefulness of simply explaining things to customers. We should be spending a lot of time here. Good advisers will describe to their clients, in clear and direct language, exactly what is happening in their investment portfolio – the portfolio they have created – as well as in the market and the broader economic landscape. A good counselor knows how to communicate and breaks things down at an easy-to-understand level. We shouldn’t be condescending and use big words and inscrutable jargon. We just have to be nice and polite and really support what we’ve created so the customer understands from start to finish.
I say to myself: “If I were a client, what would I like to know? And then I try to provide those answers.
At each quarterly meeting with a client, I make a point of going over what I think is obvious. How much money did the client start with? How many are there now? What is the dollar increase, percentage increase and how do these returns compare to the benchmark? What’s the proper reference, anyway? What were the fees paid, to the nearest penny? What is the income estimate and what was the earned income? How much can you draw without hitting the principal?
In describing our relationship, we hope clients will say, “I meet regularly with my advisor and he clearly explains my money to me. I understand what is happening. I even understand what is happening in the markets. I always shudder when I onboard a client who says, “I really have no idea what’s in my wallet. Be the advisor who takes the time to explain – it’s invaluable.
5. Be close confidants
A good advisor functions as a trusted partner. I am a partner not only to my clients, but to the other advisors in their lives. For example, I work with clients’ tax and legal professionals, helping them develop strategies to prepare for all stages of life.
I explained to clients what will happen when they die and the steps I will take to prepare their financial wealth. I am dedicated to supporting my clients. I’m careful not to overdo it, but I don’t underestimate the importance of this advisory role.
Believe me, being a good advisor is not an easy role for clients to fill. To do this successfully, to really demonstrate our worth, we have to put our heart and soul into it. Remember: being a human replaces being an advisor. Sometimes showing compassion can be the most important thing.
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All posts are the opinion of the author. As such, they should not be construed as investment advice, and the opinions expressed do not necessarily reflect the views of the CFA Institute or the author’s employer.
JP Morgan Wealth Management is a business of JPMorgan Chase & Co., which offers investment products and services through JP Morgan Securities LLC (JPMS), a registered broker-dealer and investment adviser, Member FINRA and SIPC. Annuities are made available through Chase Insurance Agency, Inc. (CIA), a licensed insurance agency, doing business as Chase Insurance Agency Services, Inc. in Florida. Certain custodial and other services are provided by JPMorgan Chase Bank, NA (JPMCB). JPMS, CIA and JPMCB are affiliated companies under the common control of JPMorgan Chase & Co. Products are not available in all states.
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