Meeting in Huntington Beach, California, a Southern California surf city, Securities America reps enjoyed an unusual departure from the typically more scripted general sessions, often led by former politicians, generals or athletic coaches.
Instead, Chip Roame, managing principal of Tiburon Strategic Advisors, moderated a panel of four consumers in their 50s and 60s whom he had not met until they walked onto the stage.
Roame began the session by explaining that these four people, while not constituting a perfect statistically representative sample of consumer/investor opinion on financial advisors, would certainly counter FA expectations and, thus, prove enlightening.
And so Securities America reps were introduced to Tom, Bill, Judy and John, none of whom were clients of the Securities America reps. (Securities America is part of the Ameriprise Financial broker/dealer network.)
Tom is every advisor's bread-and-butter client. He's been with his Morgan Stanley Smith Barney advisor for 25 years, including through various transitions. (When they started out, his advisor was at Kidder Peabody.)
The CFO of a construction company, Tom initially was looking for an advisor to take over management of his company's financial plan, which Bank of America's trust department had been overseeing and whose fees he found excessive.
How did he choose his advisor? "I knew attorneys, I knew CPAs," Tom remarked, echoing a common panel theme that consumers want to go to advisors they can trust, and find such advisors through referrals from friends and acquaintances--most especially from their attorneys and CPAs. (In Tom's case, it was his attorney's recommendation that cinched the deal.)
Tom gave his advisor half the company's assets initially, then the other half after observing him for a year. Three years later, Tom moved his personal assets to this advisor, whom he now describes as "a very close personal friend."
Tom's loyalty to his advisor was evident throughout the hour-long panel. If his broker switched firms, Tom would move with him. If his broker were to die or retire, Tom had great faith in the rest of his advisor's team, which included the advisor's siblings and children.
Bottom line: It was Tom's relationship with his advisor that seemed paramount. Tom sees his advisor weekly, and noted the "social basis" of their relationship.
The second panelist, Bill, was Tom's opposite on the spectrum of hot prospects. A successful Orange County dentist, Bill is a confirmed, lifelong do-it-yourself investor. That investing track commenced in dental school, when insurance salesmen tried selling whole life products to dental students.
Asked why they should purchase the more expensive products rather than term life insurance, the reps replied that no one really had the discipline to "buy term and invest the rest."
Bill figured he had that discipline and promptly did so. As Bill progressed in his investing career, he naturally found his way to Vanguard, where his assets currently reside.
For all Bill's low-cost investing efficiency, Bill unintentionally revealed a vulnerability that might provide fertile ground for ambitious prospectors. He stated his financial objective as having "just enough money to swallow my last dime." Since that goal is impossible for anyone to coordinate, he may well leave himself exposed to outliving his income.
Should prospecting advisors steer clear of the Bills of the world? Most likely. But if they want to give it their best shot, Bill offered a tantalizing tip to advisors in the panel's best one-liner: "You should make your services look more like an educational institution than a sales institution."
In fact, he also acknowledged his pleasure in his CPA being a CFP, and all the planning wisdom that entails. Still, caution is advised. Bill admitted to enjoying the free food at advisor seminars, but has never graduated from prospect to client.
The two remaining panelists, Judy and John, had much in common.
Judy described herself as someone who didn't know what to do in investing. During the dot-com era, she invested on the basis of tips from friends or newspaper articles. Hoping to retire soon, she needed to get serious about her money. Not unlike Tom's quest for referrals, she went to her company's human resources staff to get the name of an advisor, with whom she is now working.
John has been investing through his company's 401(k) plan for 26 years, and is eager to retire soon. He echoed Judy's "invest and forget" preference, and wants an advisor he "can trust and believe in."
While both have client profiles closer to that of Tom, they had one thing in common with Bill. When an audience member described "holistic financial planning" as opposed to strictly "investment management," the whole panel lit up.
Judy said she'd have gone that route had she known it existed. If this panel is indeed representative, some consumers want a relationship with their advisor (Tom). Some want to do it themselves (Bill); some want to "invest and forget" (Judy and John).
But all the panel members seem to appreciate the benefits of an educational approach.