It’s inevitable. Social media is taking over marketing. Further, the “robots” are also storm trooping the industry in how financial advice is provided and how investments are managed.
The reality is that many parts of the financial advice process and investment management are becoming a commodity. As a consequence, many in the financial advisory business could suffer as a consequence of this move away from the traditional view of financial advice.
However, you can take advantage of this shift to increase your practice. The key to success is to differentiate your service model from other financial advisors and the increasing array of online resources and systems. The number one strategy for financial advisors is right under your nose at the initial step of the financial advice process. That is to have a much deeper understanding of your client’s needs and related behavioral finance biases, and to directly involve the client in the discovery process to increase engagement. Inadequate 5 to 20 question assessments that address only risk’ won’t cut it anymore. Neither will guess who the client is. Clients should be given the opportunity to participate in the completion of a comprehensive process which then enables the advisor to comprehensively know their client and their life journey.
As the new landscape for advisors evolves, you don’t have to bemoan it. If you adapt, you can seize this as an opportunity to actually grow your business. Look at the areas of the advisory process that can and should be commoditized. Leverage these technical platforms so that you and your team spend less time on investment management. Educate them, not only on the technology and investments, but more importantly, on how their approach to finances, investments and money can move clients towards achieving their life goals. The key starting point is to holistically identify the client’s financial personality. Then use those insights to help clients manage their behavioral biases to prevent setbacks or missed opportunities and further grow their nest egg to achieve their goals.
It’s time for financial advisors to recognize that clients don’t have to be lost to the new world order of do-it-yourself’ financial planning. Those financial advisors who have long ago invested in building relationships based on knowing their clients, knowing the plans they have for their lives, knowing and being a part of strategizing their financial roadmap to achieve their goals will not lose clients and actually grow their business.
Here are 7 practical tips:
- Use an independently developed and robust questionnaire based discovery process with clients at the point of entry and at annual reviews with existing clients. This will give you a clear insight into what they want to do with their finances.
- Focus on goals-based life planning and the financial plan to achieve those goals.
- Take the mystery out of investing. Proactively build areas in your advisory process where clients can manage their investments for themselves. This will keep them connected with you as their ‘go-to guy.’ Be a source of knowledge for the client.
- Build trust. Get to know how much clients understand markets and then educate them around the gaps (this builds trust.) Knowing their communication style and how they want to work with you will build trust quicker.
- Focus on the relationship being a two-way partnership.
- Match advisor to a client based upon their financial personality and communication style. This is a key differentiator for success.
- Help clients to understand their behavior during market movements. Understanding behavioral finance should be bedside reading for every financial advisor.
Time to develop your value position as a financial advisor. Don’t get left behind in the commoditization of the traditional financial advice process. Embrace the exciting Behavioral Finance future.