I am empathizing with our financial advisor cousins today.
Bear Stearns was bought by JP Morgan in March. Lehman was bought from bankruptcy by Barclay's. WAMU is closed and sold to Chase (also JP Morgan). Merrill Lynch was acquired by B of A. Wachovia is cut up and being sold to Citi and Wells Fargo. A chunk of Morgan Stanley was sold to Mitsubishi. What the general public may not know is that all of these entities, without exception, have various wealth management groups, sometimes called "private client," "private banking," "private wealth management," "family office" and "private trust" groups, all of which perform more or less the same function - provide professional (sometimes expert) advice on what to do with large amounts (relatively) of capital held by individuals. What is going to happen to this industry of advisors after all this consolidation?
The good ones will thrive. Here's why.
Anything that is a product - insurance, marketable securities, mutual funds, iShares and index traded funds - is being commoditized. Even the asset allocation models - often just risk tolerance profiles plugged into a survey format that spits out document assembly software and pretty reports - becomes a commodity. The efficient frontier is old news, game theory has spawned losers out of hedge fund gurus, and it seems like the one or two honest dollars being made on Wall Street are by the shoeshine boy.
So if one is a financial advisor out there, how in the world might you be feeling after all these consolidations? Quite possibly frightened. Justifiably. There is a lot to be scared of. TIAA CREF sells no-load life insurance, Schwab provides Morngingstar and thirty-five or more other analyses on the latest mutual funds, and the best you're going to do is beat 75% of professional managers by buying index funds, which generate virtually no commission. Of course, 90% of that game is getting the asset allocation right, so maybe your company provides slightly better software than the other company. Its 91% for you. Market differentiation? Doubtful.
I have some comfort for you: we estate lawyers have already been through this. We can feel your pain, baby. The cheap word processor took all of the mystery out of document assembly, so our 100-page trusts now take about 20 minutes to draft, with all the custom language you would want. This happened to us gradually, not quite all of a sudden, over the 10-year time span from 1991 to 2001. It used to cost tens of thousands of dollars to buy the computer and software necessary to put together a decent set of estate planning documents. A few years later, you could do it on a laptop with a nice program for a few thousand bucks. Then we got EGTTRA in 2001 and we thought the sky was falling. You see, guys and gals in the financial advisory world: we have already been there.
The secret is that you know now all that you need to know to be a great financial advisor. Its a little like Robert Fulghum's book, "Everything I need to Know I Learned in Kindergarten." Breathe deeply and remember the following (stuff you already know):
1.Its about relationships. Not relationships with your boss, or your company for that matter. Whatever "branding" they invested in is irrelevant now. Relationships with three categories of people now matter: your clients, their families, and their other advisors. That's it. If you got those, then your clients are your clients. The firm next store has access to the same stuff your firm does. Don't be fooled. All that sets you apart is your relationship with your client and their circles. Walk the talk.
2. Care. Smart rich people recognize fakers and posers. So if you're pretending, get out. Retire. You will not make it through this environment. If you do not brag about being at your client's hospital bedside, or spending an afternoon breaking bread with their family, you are toast. You have to like people. I mean, like them not for their money, but because you made their life a little simpler, prevented a little catastrophe, gave them a little more sleep at night (and called them in the morning to see how they slept). That being said, however, you know you've overdone it when they say things like "why did I give you my cellphone number?" If that happens, you might consider sending them a handwritten note next time.
3. Show some class. You don't need a Brahmin's accent, but knowing a little about politics, religion, arts, and culture will sensitize you to things that may be important to them. They know money is important to you, and that is why they hired you. We all know - lawyers, accountants and financial advisors - that our clients hired us because we love to talk about, think about and analyze money. We understand it, we enjoy it, we study it, we scrutinize it. There is no shame in that. But doggonit (thanks, Sarah, for bringing that back into our vernacular), have something else to say! Read a book. Get a life.
4. Give back. I have no idea how this happens, but magically, cosmically, karmically, when you do something out of the blue and completely randomly to help someone else for no reason whatsoever - and get into the habit of doing this - your business will explode. I cannot explain this one. It just is. I got my projects, you got yours. You don't need to broadcast them all the time, but quietly pick things you're passionate about - early childhood education, advanced Algebra for 8th graders (one close friend who is an estate planning lawyer "cuddles" with small usually-sick infants at the maternity ward at her local hospital) - and just do them. Not because you can put it on your resume. But because you want to do it, you like it, you have a burning desire to say a big heavenly "thank you" to your Creator, and it satisfies your hungry heart.
5. Don't make the accountant or the lawyer your enemy. This used to work, because lawyers and tax preparers have been despised throughout history. But when times get very very tough, as they are now, lawyers get very popular. Alan Dershowitz once told me that lawyers reached their pinnacle of popularity in the totalitarian Soviet State in the late 1960's and early 1970s. In other words, when the government starts spying on your clients, regulating and taxing their businesses, and taking away their ability to marry who they want, buy what they want, and threaten to take away what little social security they have promised, those clients begin to think us lawyers are a pretty good idea to have around.
6. Client first. This is also very simple. If you are in a noble profession - and I believe you are - then this means putting the client's interest above your own. Yes, a higher commission on an identical product from a less-rated carrier would help you out this month, but at what cost? Or you may be the only one who knows, in that moment, that you oversold. But in a future moment, many years from now, you can almost guarantee that someone very smart will look at what you've done and ask some open-ended questions. You should be confident that you can answer those questions knowing you did everything you could to protect your client - not your boss, your company, or yourself. Your client may well survive your boss and your company.
7. Know that your future is secure by holding an edge. Whenever you think that your knowledge will become obsolete, ask yourself one question: is the financial world getting more complex or less complex? That's it. If your clients cannot understand it now, they are not going to understand it 5 years from now. If you stay current (which really means 'listen and learn'), keep their interest first, and don't blow it, you will only grow your relationships and hence, your business.
These are the seven rules of success. There's really not much more you need to know. The pot is stirred; there are some nervous people out there looking to make changes. The opportunity for new relationships is there.
Comments