Nick Murray’s Hard Truths for Advisors

An infinite number of FAs have sought the wisdom of Nick Murray, the preeminent Advisor to Advisors, via his books, monthly newsletter and nationwide speaking engagements. Indeed, the astute grand master delivers what they seek.

For more than two decades now, the highly respected coach and author has helped advisors find the crux of how to succeed in the financial advice business. In 2007, he received the Malcolm S. Forbes Public Awareness Award for Excellence in Advancing Financial Understanding.

Murray’s core focus is financial planning, especially retirement planning. To be sure, he proclaims retirement income “the central financial planning problem of our time.”

For some 25 years, he worked as a New York City-based wirehouse advisor with E.F. Hutton, Shearson Loeb Rhoades/American Express and Bear Stearns before going independent in 1992. That was when he also kicked off a speaking and writing career. For the past 16 years, he has focused solely on advising advisors.

The pundit’s monthly newsletter boasts 3,200 subscribers, for whom he conducts all-day conferences; and he also offers FAs “spot coaching” through “Nick Murray Interactive” (www.nickmurray.com). He has written 11 books, including “The Game of Numbers: Professional Prospecting for Financial Advisors” and “Behavioral Investment Counseling.”

The New York-based industry expert, with offices in Southold, Long Island, and Brooklyn Heights, commands $10,000 for a keynote presentation and $15,000 for a three-hour program. He accepts no after-dinner speaking engagements, however, and for breakfast and lunch events “will speak … only after the audience is finished eating and the wait-staff has stopped moving.” So says his website.

No such restrictions applied when Research recently caught up with the Queens, New York, native by phone and email. In a wide-ranging interview, the no-nonsense Murray, 71, generously—and candidly—shared his authoritative judgment about what matters most in financial services.

Research: Lots of changes are occurring in 2015—the end of QE, of course; interest rates probably rising; high volatility. Is this a particularly critical year for financial advisors?

Nick Murray: That’s getting into current events and the market—and that way lies madness. An advisor who focuses on those is doomed. He’s a lost soul because he thinks his job is selection and timing. Nobody’s job is selection and timing; everybody’s job is planning. As soon as you start thinking about the economy and the market, the brain freezes.

But surely an advisor should be aware of what’s happening in the world.

Yes, but you don’t change anything. All financial success comes from acting on a plan. A lot of financial failure comes from reacting to the market. Put that on my tombstone! It’s the mega-truth. If an advisor emphasizes portfolio selection and timing, he may be impeaching his own value proposition. No advisor can constantly deliver superior selection and timing: alpha. An advisor who positions himself as providing alpha in return for his fee is setting up a guaranteed negative value proposition.

Many FAs have difficulty probing clients about their life, what’s important to them and their goals. How does that affect their practice?

Somebody who has that trouble should give really serious thought to leaving the business. If you can’t find out what people’s emotions are about money, what they dream of and what they fear, I don’t know how you can build a relationship or create a plan.

Do you believe that advisor and client should connect emotionally?

Absolutely, or at least come to some common understanding about money. At the very least, they should have mutual respect.

To get that common understanding about money, how important is it for the FA to empathize with the client?

Empathize above everything [else]. Roy Diliberto [founder of RTD Financial Advisors] would say that the only two [values] in this business are integrity and empathy. I would add, passion.

You’ve written that your “mission in life is to help people make the right kind of plan” for their retirement years. When and why did that become your mission?

Ten or 12 years ago, as the first wave of baby boomers started retiring. That’s where the preponderant need is and where all the money is. I started to really focus on it when I was writing my [only] book for clients, “Simple Wealth, Inevitable Wealth.” It became clear to me that a life-sustaining three-decade retirement income is the central financial planning problem of our time.

But don’t most pre-retirees have some sort of retirement plan?

There are about 40 million Americans between age 50 and retirement. If 1% of them have a written, date-specific, dollar-specific retirement accumulation plan, I’ll buy you a new hat! But at age 50, something really magical happens: People begin to know they’re on the last rung to retirement. A 49-year-old is thinking about a Mercedes and trips to Europe; a 50-year-old is thinking about coffee and rice, and “How much can I start putting away for retirement?”

So advisors must create both a retirement accumulation plan and a retirement outcome plan?

It’s critical that, during the accumulation phase, people work on a plan—otherwise they’ll fail. As they approach retirement, it’s critical that they have a rational distribution plan—otherwise they’ll fail; that is, outlive their money.

That means there’s certainly a great need for good advice from advisors.

Yes, but planning advice rather than: How much do we put in international, and how much do we put in big cap—and all of that dross.

Doing a plan seems a good way to engage the client and build the relationship.

It’s the only way to engage the client. Everything else is sand.

Why do advisors need a great deal of help, support and coaching?

Because they don’t have a robust client-acquisition discipline. Prospecting is one element of it—in the early years, certainly a big element. But the problem is that people stop doing it. However, if you’re getting a significant stream of referrals and introductions, that’s your robust client acquisition discipline.

What else can advisors do to obtain clients?

Give seminars.

Some FAs say that the effectiveness of seminars isn’t what it used to be.

That’s like saying love isn’t what it used to be. Seminars work if you work them.

Please talk about the importance of the advisor’s value proposition as perceived by the client versus as perceived by the advisor. The two views may be different.

It’s intuitive, or ought to be. We get referrals and introductions from happy, productive relationships when [clients] believe our advice is worth significantly more to them than what we charge for it. People for whom we’re convinced we’re doing our best but who don’t appreciate it should be let go. We should never have an unhappy client.

Are robo-advisors a threat to traditional advisors?

No, because they can’t relate on a human level, and that’s drop-dead critical. It’s all that matters.

Your thoughts on the fiduciary standard for all advisors?