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Financial Planning > Behavioral Finance

Lawyers & Advisors: More Similar Than You Think

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When you think of professions that pay well, being a lawyer is high on the list. You’ve heard how parents hope their child becomes (or marries) a lawyer or a doctor. Yet some lawyers might look down their noses at financial advisors. The two professions are actually quite similar. How?

10 Similarities

When considering lawyers, TV dramas give us plenty of examples. Think about the profession in terms or corporate and criminal attorneys, not ambulance chasers running ads on TV.

1. Helping people with problems. Lawyers represent people in criminal cases or defend against lawsuits. Advisors help people who aren’t adequately prepared for retirement, seek financial independence or need to fund their children’s education.

2. Hiring their expertise. People can choose to defend themselves in court, but they usually don’t. They want someone who can make the best possible case on their behalf. Experience has value. Many investors go the self-directed route, yet it takes time, expertise and discipline to do well. They often ask friends to recommend someone good.

3. Research. Lawyers examine the evidence, challenge witnesses or look for precedent. Advisors assess the temperament of clients and design financial plans to help them toward their goals.

4. Results are out of your control. Lawyers can have a good case yet still lose. Advisors can make sound recommendations yet are at the mercy of market action and global events.

5. Paid anyway. Corporate lawyers and criminal attorneys are compensated whether they win or lose. (Contingency cases fit into the category of those “other lawyers.”) Advisors utilizing managed money or asset-based pricing are paid as they try to do the best job they can for their client.

6. Establish the case for an alternative. In court, the prosecution presents their case and the defense presents an alternative to the jury. Advisors may have a prospect who doesn’t want to take action. They make the case why an alternative to the client’s current strategy may have greater potential to help them reach their goals.

7. Precedent is important. Lawyers look for similar cases where a judge made a decision in their favor or interpreted the law to their advantage. Advisors know although past performance is no guarantee of future results, the market and the economy operate in cycles.

8. TV and media portray the profession negatively. In many TV dramas and mysteries, lawyers and financial advisors are often villains. It’s very rare to see a financial advisor portrayed as altruistic.

9. Prospecting. Career success at large law firms often involves bringing new business through the front door. Advisors know they need to find clients in order to succeed.

10. Licensing and oversight. Both professions require licenses issued at the state level to practice. Both can be sued if the client feels wronged. Both professions are subject to disciplinary action.

4 Differences

Obviously it takes more time, study and expense to become a lawyer. Let’s look at other differences.

1. Fee negotiation. Advisors expect prospects will push back on fees and get discounts. Attorneys are often stricter with fees for the general public.

2. Opacity of fees. With fee-based accounts, clients have a pretty good idea what they are paying. Law firms may be telling you how long their research took, billed by the hour at different rates based on the qualifications of the people involved.

3. No trailers. People generally consult a lawyer when they need one. They pay on a transactional basis. Advisors often collect recurring fees.

4. Going to jail. If a lawyer loses a criminal case, the client might go to jail. If an advisor tries but doesn’t deliver, the client might lose money, but not their liberty.

In the purest and highest sense, both professions help people solve problems. Lawyers often help people out of situations while advisors help people along a journey to a goal. Both add value and are paid well for the services they provide.

— Check out Doctors and Advisors: More Similar Than You Think on ThinkAdvisor.


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