Being a financial advisor is a hard job. It’s always been that way. In addition to needing to find and retain clients, you don’t know what the stock market will do next. If that isn’t enough, the general public has plenty of misconceptions about financial advisors.
1. You really can trade for free. They probably believe “free shipping” is really free too. It’s built into the price. In the case of stock trading, this might be the execution price.
Issue: They don’t see the value of paying more to place a trade versus doing it on their own for “free.” Some firms make their own market in stocks. Delayed price quotes on public sites may also play a role.
2. Yours is not a real profession. They consider “financial advisor” as “securities salesperson.”
What Your Peers Are Reading
Issue: They think there’s no training involved. They need to understand it’s a licensed, regulated industry. Training often takes years. Many newer advisors are brought into established teams. The industry has professional certifications indicating expertise in specific areas.
3. Anyone can do what you do. Newspapers used to run articles about “dartboard portfolios” implying a randomly selected group of stocks could outperform the market. When the market does well, we remember “A rising tide lifts all boats.” Many people think buying and selling stocks, ETFs and funds is easy.
Issue: When clients don’t know the work you do for them behind the scenes, they assume the small piece they see is the entire relationship. You need to tell them what you do on their behalf.
4. You are a robo-advisor with a pulse. The combination of robo-advisors and ETFs is compelling. It addresses asset allocation and rebalancing. The fact your own firm might offer it as a low-cost option on a “do it yourself” platform doesn’t help.
Issue: It’s hard to put a value on hand-holding. Over the years, people who invest on their own have tended to buy high and sell low, not the other way around. You can find statistics to make the case.
5. Lowest price wins. They think your business is commoditized. There’s little value added, so you buy financial advice the same way you would shop for a TV.
Issue: They don’t see the value you add. A long-term financial advisory relationship is more a journey, less a series of transactions.
6. All fees go into your pocket. A prospect or client might assume it’s a zero-sum game regarding commissions. They pay, you pocket. They don’t understand you only get a portion and the firm gets the rest. There’s lots of overhead connected to working in a tall building with your logo on the top.
Issue: Your client might discuss discounting. While you are agreeable, they need to know at some point the firm says: “At this level, we are done sharing. Anything else comes entirely from your piece of the pie.” In an aggressive discounting situation, you might be working almost for free. (Most clients wouldn’t want that to happen.)
7. The firm pays for everything they see. You have an assistant. Lots of computers. A private office. A wall-mounted TV. Back-office support. If they are a salaried employee, they might assume you are too.
Issue: You might pay a portion of your assistant’s compensation. This might be grossed up to cover benefits. You may have invested in your own technology. You may have other expenses to cover. They need to understand you invest in your business.