When financial advisers meet a new client, they may ask lots of questions about income, investments, and spending habits. Then they craft a financial plan built around the client’s answers, addressing areas such as asset allocation, taxes and retirement.
That’s the drill. But is it the right one? A more comprehensive approach consists of a series of deeper discussions that Bob Veres calls “collaborative planning.” A longtime commentator on the financial planning business, Veres is publisher of Inside Information, an information service for advisers.
“Collaborative planning means that you start with a thorough, multiple-meeting conversation about your clients’ goals, what money means to them, what they are saving for, and then helping them refine those goals,” said Veres, author of “The New Profession.”
Veres adds that because many people have not considered what they really want out of life, an adviser can forge lasting bonds with clients by facilitating this all-important discovery process.
Only after a series of searching conversations can an adviser create a truly comprehensive financial plan. Better yet, the savvy adviser guides the client to stay on track and make needed adjustments to attain goals.
This may sound like a simple recipe for success, but it doesn’t come naturally to everyone. Trained as technical experts, advisers might struggle to listen and probe. Some of them prefer to show off their knowledge by constructing portfolios and describing investment products, leaving befuddled clients in a daze.
“The biggest thing is letting go of the idea that you’re the expert and they’re not,” Veres cautioned. “They’re the expert in what they want and where they want to get to. Your role is helping them get there, not telling them what to do.”
To uncover your clients’ aspirations and goals, you need to devote more time to getting to know them. And that means boosting your productivity so that you squeeze more value from every hour of the day.
Veres cautions seasoned advisers to ward off complacency. He finds that some of them cling to outdated legacy systems or refuse to broaden their appeal to attract the next generation of clients.
“Most planners who are at least moderately successful are comfortable where they are,” he said. “They’re using the old top-down model of planning for their clients. They’re marketing themselves as if managing assets is their primary value. They’re still mostly working with clients their age who are all in or approaching retirement. And they’re slow to adopt automated asset management technology.”
As more advisers charge based on the time they spend serving clients (such as an hourly rate or a monthly or quarterly retainer), the assets-under-management fee structure will fade, Veres predicts. He favors this shift, arguing that charging a percentage of assets is “not a sustainable business model.”
He muses that few professions exist in which a consumer asks how much the service will cost and the provider responds, “I’m not sure. How much have you got?”
For Veres, embracing a fee-only model is only part of the answer. Another key to success involves harnessing the latest technological tools, from online appointment scheduling apps to electronic signature software, to maximize operational efficiency.
Automation also paves the way for aging advisers to improve the long-term viability of their practice. Rather than continue to impose a minimum asset requirement of $1 million or more for new clients, Veres posits that those advisers who streamline their operation are better positioned to welcome what he calls “the blue ocean of middle-income clients” who can grow with the firm as they accumulate assets over time.
“The biggest trap I see is not having a revenue and service model for middle-income and younger clients,” he said. “It takes a willingness to change.”
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