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Financial Planning > Trusts and Estates > Trust Planning

At FPA Denver, Defining Advisor Value and Rebuilding Trust

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An all-star panel of industry personalities gathered at the FPA annual conference on Sunday for a frank discussion of how new fiduciary standards might impact the advisor industry and day-to-day business.

The roundtable discussion consisted of the following individuals:

George Tamer, TD Ameritrade Institutional

George Kinder, Kinder Institute for Life Planning

H. Jude Boudreaux, CFP

Geoff Davey, FinaMetrica

Don Trone, Strategic Ethos

Ed Jacobson, Ed Jacobson and Associates

Carl Richards, Prasada Capital Management

Julie Littlechild, Advisor Impact

Roger Wellington, Kinder Institute for Life Planning

Gary Klaben, Protinus

The following is a truncated transcription of the conversation. A full transcript will be posted upon completion. Moderator Marie Swift of Impact Communications began by asking how advisors can define and communicate their value to clients in order to rebuild trust in the post-downturn economy.

Geoff Davey:  The rise of the fiduciary will be important in addressing this issue. A fiduciary standard is mandated in some places. Those advisors that adhere to a fiduciary standard will be a point of difference for the consumer moving forward, but only if the fiduciary standard is enforced.

Julie Littlechild: On average, client trust has probably been eroded. However, we did a study of advisors and found that among the group we spoke with, it was not really a factor. So it was interesting to get an idea of the different ranges to which trust had been eroded, from “a lot” to “not much at all” Advisors need to address trust issues before they become a problem.

George Tamer: We put together a letter that explained the difference between a Madoff-type of advisor and the type of advisors we do business with. We reassured them that what happened with Madoff absolutely could not happen at TD Ameritrade.

George Kinder: I’ve spent a lot of time in England recently. They are about to impose fee-only advice as the only business model across the board. What we need to do is think of our practices 10 or 15 years in the future and take those steps now. What will it look like? There will be a fiduciary standard, there will be CFPs and you will have to have a well-articulated life planning process for your clients.

Ed Jacobson: You also have to go from the global policy setting to the personal or transactional process. For our type of advisors, we have always been fiduciaries, so we don’t have to apologize. It’s not as if those things George [Kinder] talked about for the future isn’t already implemented.

Don Trone: Think of Stephen Covey’s five areas of mistrust. They are mistrust of self, relationships, organizations, markets and society. There is little we can do about a mistrust of self and society. We can, however, deal with a mistrust of relationships, organizations and markets. We have to know where this trust comes from before we can effectively deal with it as professionals.

Julie Littlechild: These are big concepts. The question becomes about applying them everyday in our practices to address trust.

George Kinder: People say, “I trust my advisor, but not al the others.” That means the level of trust is actually very low. Life planning restores that trust. The client becomes aware of the fact that we do indeed care. Lie planning begins with the client coming to the advisor with a problem. The second phase is what we call “lighting the torch.” It’s the excitement they feel that comes with the realization they can live the life they’ve envisioned. It restores their self-confidence. If everyone had a life planner, we would restore the other two areas of mistrust, society and self.

Ed Jacobson: That entails the planner saying, “We will be with you.” We can’t guarantee that the life plan will be achieved, but we can guarantee that we will be with you every step of the way.

Jude Boudreaux: Trust at the advisor level is ruined by the little things. Do what you say you’re going to do. Return phone calls. If you can’t get to them right away, call the client and let them know that it is on your list and you’ll get to them ASAP.

George Tamer: Is the advisor going in to each and every meeting with a plan? Do they ask themselves afterwards if they achieved what they set out to do? They need to have that confirmation from clients. It’s one thing to deliver on what you promised, but is a n effective feedback process implemented in the practice?

Geoff Davey: Part of the problem is that many advisors did not properly explain downside risk. This downturn was not much different from the downturn of 1973 and1974. Advisors need to explain what

happened then and tell their clients it might happen again. They won’t be happy about it but they will respect the advisor having told them. The industry downplayed downside risk. Advisors have self-interest in properly explaining it.

Jude Boudreaux: If we were all planners, rather than some of us being investment advisors, it would be different. But if we’re getting paid strictly on asset management, there is very little we can do when it all goes south.

George Kinder: We have been given a golden opportunity to rebrand. Think of it like the Apple Store. We go in there and are so excited, but their just things. Where is the Money Store? Until we get that same level of excitement, we aren’t where we need to be. This is an ongoing challenge and opportunity.

Don Trone: We look at trust as just one step in a number of congruent steps. They are:

  1. Decision making
  2. Stewardship/covenant (passion/discipline)
  3. Trust
  4. Loyalty
  5. Leadership
  6. Fiduciary ethos

The steps ca not be skipped.

Julie Littlechild: We find clients talk about trust in exactly the same way. We can’t assume that because they are with a commissioned advisor that they don’t trust that advisor.

Don Trone: There is no correlation between trust and registered status. Clients trust wirehouse guys.

George Tamer: We must explain the difference between brokers and advisors. We have to articulate the potential conflict of interest and why the advisor model is better.

Jude Boudreaux: If we break down the walls, we won’t need to explain to clients by saying, “Here is my conflict, control for it before you decide whether or not to take my advice.”

Carl Richards: It’s confusing. I see it as a secret society almost. There is no area in the yellow pages for “real” financial advisors. So it’s an incredibly complex challenge.

Gary Klaben: Brokers do the best they can given their environment, but it is a broken system. I don’t see this changing until big organizations/wirehouses change. Maybe it will take regulation like in other countries.

George Tamer: But that is the opportunity to differentiate and grow your practice.

Carl Richards: We get it, but clients don’t. There is assumed level of care. No one was jumping up and down with me when I left Merrill Lynch to go independent. At the time I didn’t understand why.

Ed Jacobson: There are things that matter, and things we can control. The overlap of those to circles is what we need to concentrate on.

Jude Boudreaux: One thing we need to do is ensure that the next generation of advisors does not have to rely so heavily on sales when first entering the business. Lawyers do not hire new associates right out of school and say, “Now go out and solicit new clients.” They are tied to a mentor, and they are given a clear path towards ownership.

George Tamer: Our research shows that once the fiduciary model is explained, that is the model clients want to go with. We must articulate that better.

Roger Wellington: The term “fiduciary” is inside jargon. Clients don’t know that term. How do we have a meaningful, insightful conversation not using that term? We need to put it in Google translator.

Carl Richards: How do we make the secret society of “real financial planner” less secret? One conversation at a time.

Ed Jacobson: We have many people at the table, but not all spoke to the same level of Covey’s trust, which made it so effective. We need all voices at the table. If we only had advisors it would be a great conversation, but an incomplete conversation.

Don Trone: Leadership, trust, loyalty and an effective decision making process. Skip over the word “fiduciary” and get to these softer skills.


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