Yes: You Can Become an Indispensable Financial Advisor—Here’s How

indispensable financial advisor

Over the next few years, it’s going to become harder and harder to maintain the 1% AUM fee that is common in our industry. I see a couple potential ways this could evolve and I have some recommendations on how to solve this problem and become an indispensable financial advisor.

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Evolution 1: Deliver much more value for the 1% fee than you do today. In this scenario, you’ll need to use technology to augment and automate some of your services so your profit margins don’t suffer.

Evolution 2: Lower your fee to remain competitive. This is not an attractive option and would put you in direct competition with larger firms who will crush you.

Continuing to do things the way you’ve always done them is not a viable option.

The pressure on your business model is coming from technology disruption, Vanguard and Schwab’s low-cost call-center programs, the DOL rule, name brands in other industries who are raising the client experience bar, a new generation of investors whose beliefs around money are much different than Baby Boomers, and clients who are scrutinizing fees more closely than ever before.

Oh, and let’s not forget, we’re eight years into a massive bull market, the stock market is at an all-time high, and yes, it will drop 50% again at some point—are you ready for that?

It’s been a great run for financial advisors over the past 30 years but I firmly believe we’ve reached a moment of truth. The bread and butter of most advisors–the business of managing money–is about to make a radical shift.

My colleague Mitch Anthony and I believe the financial industry is making a shift from focusing on ROI to focusing on ROL (Return on Life™).

Until now, financial advisors have been paid for managing money. But that’s being commoditized by Robo Advisors and large incumbent players like Vanguard and Schwab.

Schwab is giving away money management for free and Vanguard will give you access to a Certified Financial Planner™ and manage your money for just 30 bps per year. Subtract that from an average advisory fee of 1% and you get a 70 bps gap that must be filled with discernible value.

And while we know the services you offer are better than what Vanguard and Schwab offer, consumers have a harder time discerning the difference due to those firms’ trusted brands, marketing prowess, and low fees.

You need a way to clearly differentiate your service in a crowded marketplace to become an indispensable financial advisor to your clients.

How do you do that?

3 Ways to Become an Indispensable Financial Advisor

First, place a continual focus on the discovery process. The “discovery” meeting is not a one-and-done deal. It’s an ongoing process throughout the relationship with your client that will ensure you develop a relationship that is rock-solid and impenetrable. It helps you gather and store the client’s story about their perspectives on money, their potential in life, and their progress through transitions.

An effective discovery process answers The Three ROL Questions™.

  1. How did I arrive at my perspectives on money? (Past experiences)
  2. How can I get the best life possible with the money I have? (Present situation)
  3. Am I financially prepared for life’s big transitions? (Future expectations)

In other words, an indispensable financial advisor gets paid for understanding a client’s:

  1. Past (how experiences have shaped their beliefs and perspectives about money)
  2. Present (their current financial and life situation)
  3. Future (what foreseeable transitions are on the horizon that need to be planned for)

Once you have a deep understanding of those three frames of a client’s life, you can develop a personalized financial life plan that will help your clients get the best life possible with the money they have. And by understanding your client’s beliefs and perspectives about money, you can accommodate their behavioral tendencies in the plan and increase its odds of success.

When I say an indispensable financial advisor engages in a continual process of discovery with their clients, I don’t mean discovering what your client’s favorite bottle of wine is. I mean discovering the values your clients want to impart on their children and how that affects their financial plan related to paying for college and leaving an inheritance. I mean discovering your client’s philosophy on lifestyle and whether that means tiny house living or living in the moment and enjoying life. I mean discovering the life transitions your client is experiencing and can foresee happening then planning for them consciously and intentionally.

Essentially, it’s all about understanding your client at a much deeper level so you can help them get the best life possible with the money they have. Your focus is on helping your clients optimize their life while automating and monitoring the management of their money.

Second, apply a strict rule when determining whether or not to use client-facing technology and the rest of the time you leverage your humanness. Rather than trying to compete in a technology arms race, ask yourself one simple question before you implement any technology–Will my client perceive this as an improvement to their experience with me?

To become an indispensable financial advisor, you must continually enhance your client’s experience in working with you. And by experience, I’m talking about things that would make your clients say to you, “That made a really big difference in my life.” If you use the “made a really big difference in my life” definition, much of what passes for “client experience technology” today falls short. By contrast, technology that augments an advisor’s ability to deepen the discovery process does qualify. Remember, you cannot digitize caring.

One failing I see in our industry is there’s a lot of technology that focuses on making the advisor’s life easier by pushing more work onto the client. Sure, you might say you’re “empowering” the client by giving them more control, but be careful about that rationale. The more work you have the client do, the worst the experience for them is and the less you can charge.

Third, you must offer more of the services at the overlapping intersection of what clients want and what other advisors do not offer. It’s that much talked about but ever elusive idea of “differentiation.” Look in the mirror and ask yourself, why would a client work with me? Be honest. Can you answer that question in seven words or less? No? Then you need to listen to my podcast with Ian Chamandy.

If you’re a “me too” advisor, the only reason a client would work with you is because you’re cheaper or you’re a better salesperson and neither of those is a good basis for a long-term advisor/client relationship.

One way to be different is to become a community organizer. No, not in the political sense, but in the relationship sense. Ironically, the more pervasive technology becomes in our society, the more people crave real human connection. As an advisor, you are in an ideal position to create a community around your client base. Whether you have 50 clients, 500, or 5,000, you can facilitate connection and a sense of community among your clients that will create a formidable moat around your business.

As an example, think about all the “Cons” that take place across the country. Comic Con is perhaps the best-known pop culture “Convention” and it draws more than 100,000 attendees from around the world. The Wall Street Journal reported on the “Con” phenomenon in an article and quoted an organizer as saying, “You get the energy, the community, the collective experience—people who are there for that thing that’s never going to happen again.” You don’t get that with the internet. Most people still desire face-to-face experiences (at least part of the time) and as an advisor, you can create those opportunities for your clients to get together for memorable experiences that help make you an indispensable financial advisor.

Melding Technology and Humanness

The indispensable financial advisor of the future will combine practical technology with human-to-human conversation to create a unique partnership between the client and advisor. This leads to a life-centered path for financial planning that is personally tailored to each individual client and their specific life transitions. Do this and you will have clients for life.

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Steve Sanduski

Steve is the founder of Belay Advisor and a NYT bestselling author, podcast host, speaker, and financial advisor coach.

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