The Financial Advisor's Guide to Irreproducible Service Part 1: This Time... It's Personal

One allegation about the financial advising field that has always bugged me is that the service FAs provide is somehow “commoditized”.

This is nonsense, poppycock, and possibly balderdash.

Financial advisors are no more “commoditized” than are doctors, or lawyers or any other important profession that requires expertise, judgment and effective communication.

Nonetheless there are loud voices propagating this myth, and a significant portion of the citizenry (including prospects/clients) who buy into it.

The service you provide to your client is valuable. There is a mountain of data available to support that fact.

But to fight the spurious commoditization charge, your services should be more than valuable; they should be invaluable.

Said differently, your services should be irreproducible by others.

There are three hallmarks of irreproducible service. Yours should contain all of them.

Hallmark 1: It must be Personal – It seems obvious, I know, but stay with me on this one. Because 1) Nearly every advisor I’ve met describes his/her approach with statements such as “I get to know my clients”, and “I put together plans that meet clients personal financial goals", 2) Most sincerely believe in this assertion, and 3) Few actually recognize what they're up against.

Clients are continuously being subverted by psychological forces that pull them out of a productive framework of personal, goal-based, future-oriented investing into a destructive framework of money-centered, market-based, today-oriented investing. This pull is like gravity - constant, invisible, unnoticed and unavoidable.

Think of it this way, part of what you do is provide a window through which your clients view their portfolios. our meetings, they leave with a clear perspective on where they are invested and why. But there is a layer of gunk constantly building up on the glass blocking, obscuring, and distorting their view. You have to constantly clean off the gunk to reinstill the right perspective. If you let it go too long, it doesn't only threaten the clarity of clients' perspectives, it threatens your relationship. (e.g., "It's not about short-term performance," said the advisor to the client who's account is down 10% so far this year.")

Why don't clients maintain that healthy perspective? One reason is the typical language of investing is the language of numbers. Numbers are so easy to use, such great shorthand that once you begin focusing on them it's difficult to focus on anything else. And for those numbers to have meaning they have to be viewed as a means to an end (e.g., their lives, their values), and not an end in and of themselves.

Another problem is the constant exposure to "the market" in popular culture. The market isn't some beautiful siren's song. It's a loud drunk at a party. (You don't even want to listen, but damnit he won't shut up!) It steals clients' attention whether they want it to or not.

What starts as a carefully crafted “personal approach” based on "getting to know your clients" and "their unique financial goals" drifts into an amorphous blob of an account. Clients go back to thinking in terms of general dollar figures. They start comparing their accounts to “the market” which by definition is a short-term mindset. Now the framework is about "performance", the most capricious of foundations to build a relationship.

So what makes the service you provide personal? Several things.

  1. Avoid focusing on the means (e.g., numbers/dollar amounts) and focus on the ends (e.g., the circumstances of their lives). The more conversations are framed in terms of dollar figures, the less personal they will be.

  2. Get specific. Ends (goals) that are more detailed are more personal. Rather than talk generally about a goal (e.g., funding college), dig a level deeper (e.g. the classes, the experiences, the friendships).

  3. When you are talking about those goals, allow the client to make an emotional connection to them. That is to say, dig into **_how clients feel about goals, why they are so important, what it would mean to realize the goals. _ **Forging this emotional connection is perhaps the most underappreciated aspect of making investing personal. Emotions are what move people. Goal-setting, the discovery process... these should not be intellectual exercises. The markets will make people emotional in the short-term. That's bad. Fight fire with fire. Let their long-term motivations be emotional as well.

The next post will reveal Hallmark 2 of Irreproducible service: Coming soon.

And hey, let's be careful out there.

Yours truly.

- Dr. Frankenstocks

Frank Murtha, Ph.D.
Marketpsych Insights