Advisor philosophy trumps everything else

If I were asked to offer one piece of advice to a new advisor, it would be this:

Get to work on your philosophy. Not only will it shape the advice you give, it will also shape your practice, firm, personal financial strategy and legacy. Advisor philosophy is such a big deal but it doesn’t get treated with the care it deserves. Let’s change that.

Consider this: A seasoned advisor in my community is looking to sell his practice in order to retire. To better understand the possible opportunity for me to acquire the practice, we met a number of times, shared emails and had many phone discussions. The majority of these discussions were focused on the what and why of his decision to sell.

While these aspects are incredibly important, it wasn’t until much later that we delved into the details of how he actually does business. After hours of previous discussions, it took about 30 minutes for the whole idea to unravel as we discussed the details of how they build client plans and manage assets. It turns out their philosophy was almost the opposite of mine. Therefore, the idea of transitioning hundreds of his clients, who were accustomed to his ways of doing things, to my way overwhelmed me and caused me to completely rethink the opportunity. Had we shared our philosophies sooner, we could have saved ourselves time and heartache.

I share this story because this advisor may have a very difficult road ahead as he attempts, using his philosophy, to sell a practice that could have benefitted most from advisors within the practice succeeding him. In order to do that, he would have had to train advisors in his philosophy for years to ensure a smooth transition. Instead, he may be expecting a big payoff that may never come, as the market with his philosophy shrinks.

If you’re still wrestling with understanding what I mean by philosophy, consider these fundamental questions for yourself: 

• What do you believe the role of the advisor is in the life of a client?
• What is the profile of the client your practice seeks to serve and actually does serve?
• What strategies do you employ to solve your typical client’s greatest concerns?
• Which strategies do you purposely avoid using in your practice that may be widely used by other advisors?
• What role do you, as the advisor, play in your process and within your team?
• Are you an advocate of active investment management or passive?
• Do you believe life insurance should be used only as a risk management tool, or as an investment?
• Do you promote annuities to clients? If so, do you position them as income-producing assets, as safe investments or both?
• What marketing principles do you believe in; are you a direct response marketer or a “get your name out there” marketer?
• Are you choosing to build a practice to support your lifestyle or are you building a practice to sell outright at a later date?

As you can see, the list of questions to ponder when defining your philosophy is vast. Skipping any of these will cause a lot of indecision and confusion as you choose which forks in the road you’ll take in your advisor journey.