What You Need to Know
- Successful advisors provide useful knowledge and help clients avoid mistakes.
- Be aware of each client's knowledge level and state of mind.
- Presenting your value to prospects and new clients is best done with examples tailored to the investor.
The obvious consensus is that the client is convinced that they’re better off with the advisor than without! This is the fundamental reason that clients pay their advisor despite the fact that lower-cost or zero-cost alternatives are available.
Being better off with the advisor is not about the advisor; rather, it is all about the client. Having seen volumes of material that describe why a client should use an advisor, I can tell you there is scarcely a note about how to make the client better off.
So how does the advisor make the client better off?
There are two principles that underlie successful advisors, and success is achieved by articulating these principles clearly. The first principle is to provide useful knowledge that the client does not have. The second is to avoid client mistakes.
Useful knowledge can be a change in approach, the solution to a problem or an opportunity. The advisor must therefore develop a repertoire of techniques, strategies, facts and sources that can be tailored to each client. If the advisor does any less, the client may be better off on their own.
Applying this principle may appear simpler with an uninformed client, but this is not the case. More often than not, the uninformed client does not know what they don’t know and therefore has little appreciation of new knowledge.
In addition to being knowledgeable, the advisor must be skilled at assessing the client’s knowledge base and communicating effectively at that level. The client’s knowledge base is not a simple order, but a random assembly of facts and falsehoods derived from experience. This makes the advisor’s job a difficult one since no two clients are exactly alike.
The ability to provide useful knowledge is demonstrated before the advisor is engaged, and then continuously during the relationship.
In direct contradiction with the usual practice of describing the advisor’s process to clients, it is far more effective to describe the ways in which the client can expect to be better off by relying on the advisor’s principles.
Useful Knowledge Examples
Bringing useful knowledge to the client will:
- Provide strategies that directly address the investor’s expressed concerns.
- Provide explanations that answer the investor’s specific questions.
- Render a professional opinion on specific assets held or being contemplated.
- Render an opinion on current investment strategy.
- Introduce security classes that are unfamiliar to the investor but may apply to their situation.
- Provide different strategies to achieve the investor’s goals, needs and time horizons.
- Recommend strategies to maximize protection while retaining potential return.
- Recommend strategies that may minimize the investor’s tax burden.
- Provide a personalized financial plan that encompasses the needs and obligations of the investor and the investor’s family.
The ability to avoid mistakes is described before and demonstrated immediately after the advisor is engaged. Upon engagement, the areas of interest to the client are examined in relation to the client’s situation and expressed desires and concerns. This often reveals potential contradictions or improvements.