"Are You my Advisor?"

"Are You my Advisor?"

October 23, 2020

As the world begins to open up again, I am finding myself finally being able to meet with people in person (albeit safely distanced of course). This means seeing my clients face to face but also getting introduced to new contacts and potential clients. Inevitably, the conversation turns to financial advice and 9 times out of 10 my new acquaintance has already dealt with an advisor in the past. This is not at all surprising when you think about it. Personal finance can be a very complicated subject and one that most of us have never received any formal education on. It is only natural that the majority of people would seek some sort of financial advice at a point in their lives. But what is striking is number of people that I talk to that have received guidance in the past but have not spoken to that advisor in some time. Even more surprising is that many of those people are continuing to pay a fee for advice that is virtually not existent.

               How does this happen? Why is it that so many people struggle to remember the name of their advisor much less receive any real advice? How does an advisor become just a name on your statement? Well, there are several reasons so let’s dive in!

Size Matters

               Most of the people that I find in this situation are working with an advisor with an exceptionally large practice with many clients. At first blush this may seem like a positive because it shows that clients want to work with that advisor. This can be true if the advisor has a strong support team around him or her that takes good care of their clients and is responsive to their questions. However, the opposite can also be true of larger practices. More clients means more work for the advisor and if the work becomes too much for them to handle then guess who is going to get the majority of their attention? That is right, the clients who make them the most money.

               Now look, I am not saying that every client requires the same amount of work and attention. Sometimes a client only needs to hear from their advisor annually and other times it is much more frequent. However, if the advisor has too many clients, then the smaller accounts often fall by the wayside. The solution to this problem is that the advisor’s business should grow as the number of clients grows. Support staff should be added, and new advisors should be brought on board to care for all of the clients.

               If you find yourself in this position, it may be time to reevaluate your options. Search for an advisor with a smaller business and a more personalized approach. If you like the idea of working with a larger team, pay attention to how quickly they follow up and how smooth the onboarding process is. A great place to start looking for a new advisor is your local chamber of commerce business directory! Provisio is a proud member of the Michigan West Coast Chamber of Commerce and you can find our listing in their business directory here.


Poor Training

               This is actually an area where I can speak from experience. Early on in my career I worked for a firm whose primary purpose was to sell life insurance products. Therefore, our training revolved around sales, more sales and how to get even more sales. Unfortunately, this is how many advisors are brought into the industry. With a scarcity mentality and pressure to bring on new clients and fast, little attention is given to learning wholistic financial planning. This causes the advisor-client relationship to become very shallow and transactional.

               The result of this poor training is that the advisor ultimately fails out of the industry, the big firm keeps the client (and the revenue), and the client is worse off than when they started. The biggest culprits of this type of behavior are the “captive” agents and advisors. Firms like the large insurance companies of the world who sell their own products and have an incentive to do so. These firms often offer “financial planning services” but their bread and butter is their own products.

               The best way to avoid this situation is to work with an independent advisor. Simply put, work with an advisor whose firm does not create its own products. Provisio partners with LPL Financial, the largest independent broker dealer in the country. The great thing about LPL is that they are completely independent and create no product of their own. By partnering with them we are able to take advantage of their resources and platforms without being pushed to sell product or aggressively acquire new clients.

Price War

               For awhile now, the financial services industry has been in an all-out race to the bottom on price. Many brokerage firms now offer free trading and online platforms. Other’s offer funds that track the market with extremely low expenses. None of those things are bad in and of themselves. However, it has led to a decrease in the quality of service across the board. While the lower prices are great for consumers, firms and their advisors are less willing to put in the time and effort for a single client. In other words, you get what you pay for!

               The various regulatory industries that govern financial services have not made it any easier by villainizing some forms of compensation over others. In short, it is significantly more difficult to make a career as an advisor now than it used to be. At Provisio, we take an active approach to financial planning and are constantly evaluating our compensation to ensure that it is fair for all parties. We do our best to ensure that our fees are inline with the level of service that we provide.

Here we are again at the end of another blog. I am sure that you are expecting a song of the week and don’t worry I will deliver! But first, if you are enjoying this blog, I would greatly appreciate it if you would tell a friend about it! You can send them this link to subscribe: https://www.provisioretirement.com/a-wing-and-a-plan. Now, for this weeks song!