Huntington Beach, Calif.-- General sessions of conferences tend not to produce a lot of insight into practical matters facing financial advisors. Often the speakers are celebrities such as former politicians, generals or athletic coaches, and while the material can be interesting, it usually is scripted and only loosely tailored, at best, to the particular needs and problems of the audience.
In a departure from that standard conference template, Securities America's annual meeting, held in June at a Southern Californian surf city, gave reps an opportunity to hear from ordinary people -- non-celebrities, that is -- regarding their hopes and concerns in approaching and dealing with financial advisors.
Consultant 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 a perfect statistically representative sample of consumer/investor opinion on financial advisors, would certainly counter FA expectations and, thus, prove enlightening.
Tom's Social Ties
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 might be described as 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. Bank of America's trust department had been overseeing the plan, but Tom had come to regard the fees that institution was charging as 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 proceeded to do so. As Bill progressed in his investing career, he naturally found his way to Vanguard, where his assets currently reside.
For all his 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."
Invest and Forget
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 boom, she invested on the basis of tips from friends or newspaper articles. Later, with her hoped-for retirement age approaching, she resolved to get serious about her money. Not unlike Tom's quest for referrals, her search brought her 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.