An Advisors Greatest Fear

An Advisor’s Greatest Fear

Is compliance your greatest fear or your greatest friend?

Maybe that depends on how you do business.

Take a look at some excerpts from recent articles:

SEC Chairman Mary Jo White last month said she believed her agency also should write fiduciary requirements for brokers, a broader rule that would apply whenever they recommend financial products to clients, not just retirement advice. Ms. White said the agency was only at the beginning stages of a ‘long process’.
Source: https://www.gfmag.com/topics/syndicate/34073192-labor-department-set-to-propose-tighter-broker-standards

The Obama administration is set to propose new rules requiring brokers who recommend retirement-account investments to put their clients’ interests ahead of personal gain, according to people familiar with the matter.
Source: https://www.gfmag.com/topics/syndicate/34073192-labor-department-set-to-propose-tighter-broker-standards

And now for some recent headlines:

Regulators offer best practices for serving seniors.
Source: http://www.financial-planning.com/news/regulatory_compliance/15-Best-Practices-for-Protecting-Elder-Clients-2692566-1.html

FINRA looks to streamline communication rules for brokers.
Source: http://www.investmentnews.com/article/20150416/FREE/150419938/finra-board-approves-changes-to-public-communication-rules

It’s going to be a long process so wouldn’t you rather be ahead of the curve than behind it when it comes to putting the best interests of your clients first?

One of my advisor clients told me that he was done with accepting compliance nightmares as clients, no matter how much money they have. This advisor made a conscious decision to stop using situational risk profiles and adapt an objective system.

Many of my clients envision themselves as big risk takers and will check the box for aggressive in the risk profile. There are many other factors that we discuss with the client to determine the type of portfolio we create for them; and many times that portfolio is more conservative. But when their portfolio produces average returns, they become upset and threaten leaving our firm. Then we need to have the risk tolerance conversation all over again and justify why we are in a less aggressive portfolio, says the advisor.

The advisor made a pro-active decision to use Financial DNA as a condition of doing business with his firm. Yes, it takes a little time and effort to complete, but we don’t work with clients who won’t do it. Now I can clearly see from a client’s report that if their propensity to take chances score is 73% and their risk tolerance is 50%, I will know up front that I will need to manage the emotions of the client during volatile markets. And, I will have a specific strategy that is customized to the client’s unique personality.

Why would an advisor change the way he does business? He knows that 93.6% of the financial planning process is the behavioral management of the client Source: Question of Financial Advisors, Meir Statman, 2000 so he can objectively uncover all the risks associated with a client: financial, investment and personality. And, now he has a documented methodology that supports putting his client’s best interests first.

Don’t wait for legislation to tell you how to manage your client’s emotions. Become a behaviorally smart advisor and help your client’s stay committed to you and their financial plan.

Peggy Mengel

Peggy Mengel - Business Coach - The Biz Sherpa

As CEO and founder of The Biz Sherpa, I coach and consult with executives on developing deep and strong relationships with clients, staff and most importantly, themselves. When you align your talents, passions and strengths with a strategy that fits your uniqueness, you will transform yourself, your client experience and your business.

Throughout my career, one my driving principles is to understand people before numbers. It is this philosophy that ignites my desire to help financial services firms meet the challenge of driving results through a behaviorally based strategy.

How can your firm balance the demands of effectively managing people and maximizing profits? Start building business from the "inside-out" with a coach who understands your industry and your challenges.

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