Good news! We are now officially in the worst stock market environment in the last 70 years. Most financial advisors are experiencing feelings “somewhere between moderate misery and extreme misery,” according to one pundit. Most investors are experiencing the same levels of misery, or worse.

The greed and malfeasance of the officers of some of America’s biggest corporations, the crisis of confidence in stock analysts’ reports, and the failure of auditors to effectively audit America’s investor reports have combined to create one of the biggest breakdowns in our industry since the Great Depression. In a recent article, Charles Schwab wrote, “In my four decades of working with individual investors, I have never seen such a profound crisis of confidence.”

But that’s all positive news. Why? Because according to chaos theory, the universal theory of change, major breakthroughs are always preceded by major breakdowns. Thanks to the current breakdown, we are now ready to usher in a new and better era for the investment industry.

Order Out of Chaos

According to chaos theory, when a system–whether financial, biological, or cultural–is functioning in an environment and that environment changes, the system undergoes stress and ultimately falls into regression. The French Revolution is a great example of this phenomenon occurring in a social system. We are now experiencing such a regression in the financial services industry. Once a system goes into regression, a catalyst can bring the system to a higher level of complexity. This higher level of complexity empowers the system to function harmoniously in the new environment.

After the Great Depres-sion, Congress created the SEC, which became the catalyst for the modern securities industry and the explosion of capital formation. World War II was a major breakdown in the world order. It was followed by an unprecedented explosion of creativity, wealth creation, and trade. The Marshall Plan was the catalyst that turned the breakdown into a breakthrough.

Our Breakthrough: A Client-Centered Industry

All industries go through three major phases. They start off by being very product-centered. During this phase, the emphasis is on getting the product manufactured and out the door. The engineers rule, and clients take a back seat. Henry Ford’s famous quote, “You can have any color Model T you want, as long as it’s black” perfectly defines this phase.

Once the initial demand has been satisfied by the industry, the focus shifts from manufacturing the products to distributing and selling them. During this stage, salespeople rule. The basic question asked by the industry is: “How can we sell more of these products?” The phrase “always be closing” defines this phase.

When the supply of products or services again meets the demand, the industry enters a third phase. When consumers have lots of options and experience, the power shifts from the manufacturer and the salespeople to the clients. In this phase, the clients rule because they write the checks. But no manufacturers or distributors have ever willingly moved to a client-centered business model; they’ve done it because they’ve had to. In the client-centered phase, the industry must answer a new question: “How can we better serve these people?” The automobile industry entered this phase in the late ’70s and early ’80s. We are about to experience it in the financial services industry.

When I got into the industry 22 years ago, I heard this old brokerage joke: “Well, the firm made money, and the broker made money–and two out of three isn’t bad.” As long as the firm and its salespeople were being taken care of, they did not care about the clients. Today, however, if you do not care about your clients and are not truly meeting their needs as they define them, you will go the way of the dinosaurs.

The old business model of packaging great stories and selling them to investors only to see them fail is broken. The industry needs to come up with a new business model that is based around serving the needs of clients.

Three Steps to Happiness and Success

Smart marketers know that it is much more effective to market the payoffs of a product than to market the product itself. Many current financial services TV ads focus on the payoffs of financial planning, but the industry itself is still focused on selling products. The industry must focus more on the payoffs the clients want from their money and less on the investments and processes themselves. This does not mean that you do not need a high level of competency. But technical competency must be in service to the client’s human needs.

As a coach, I believe there are three steps to achieving happiness. The first is to determine what will truly make you happy. The second is to create a written strategy to achieve your dreams, and the third is implement the plan you’ve created. Many investment advisors are good at helping people to devise plans and to implement them. Where they are lacking is in their skills to help people define what will create meaning in their lives in the first place.

The new value proposition for the investment industry must be focused around helping our clients to achieve their dreams and aspirations. Advisors must be agents of positive change who help clients create better futures as the clients define them. The old value proposition was: “We’ll help you beat the market by selecting the hottest-performing products [or managers].” It was very product-centered. The new value proposition must be more client-centered: “We’ll help you define what will create happiness, meaning, and purpose in your life, and then we’ll develop a financial plan to help you fund that goal and ‘live the good life’ as you have defined it.”

A New Business Model

In this new business paradigm, the clients’ dreams and goals for the future will drive the recommendations. To achieve the highest probability of achieving your client’s goals, you will employ strategies that have the lowest risk possible. You will also coach your clients to manage their behavior. In my vision of the future, financial advisors will no longer simply provide financial advice, but will become vision coaches and life planners. In this new and better business model, we will move from transactions to relationships based on goal-achieving processes. We will transform from an industry driven by greed and fear to an industry guided by caring and hope.

Wanted: New Technology

Our industry has spent billions of dollars developing new technologies that provide easier order execution, better access to information, and consolidated financial statements. However, very little money has been invested in the most important task: helping clients define what they want from their money. To become truly client-centered, we need new technology that will help clients define what they really want from their money.

This new technology would combine the “high tech” of modern portfolio theory and financial planning with the “high touch” of behavioral finance, positive psychology, and interest inventories to empower people to define their ideal life. This new technology or process could be the catalyst that transforms the industry into a client-centered industry. And it will also dramatically enhance our individual profits, reputations, and career satisfaction.

Some advisors and companies are already experimenting in this new, humanistic arena. Be on the lookout for ideas, processes, and technologies that can help you and your clients determine what will create genuine happiness and meaning in their lives and yours.

Making Dreams Come True

Teresa, one of the advisors I work with in Texas, has identified a unique target market: three- and four-star generals. These generals typically make about $150,000 a year when they are working, but when they retire, they go into defense consulting and can earn up to $500,000 annually. Since they have moved around a lot during their careers, one of their common dreams is to build their own home when they retire from the military.

Teresa was helping a retired military general and his wife clarify their dreams and aspirations. One of the wife’s dreams had always been to have a swimming pool, but her husband was convinced that they could not afford it. After doing some calculations, Teresa told them that they could go ahead and build their $80,000 swimming pool without affecting their financial security.

The wife was ecstatic. “When the pool is completed,” she told Teresa, “I’m going to have a party for our friends, and you are going to be my guest of honor. I want you to meet my friends and help them achieve their dreams just as you have helped me.”

When you help people define what they want and then show them an intelligent way to get it, you don’t get much resistance. You don’t have to do much marketing or selling. Your clients become marketing apostles. They recommend their friends to you not in order to help you, but to help their friends.

Today’s financial advisors have an unprecedented opportunity to dramatically enhance their value to clients. We have the potential to reinvent our industry to serve people on a much higher level than we have in the past.

The breakdown has already occurred. Let’s get on with the breakthrough!