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David Humes

The New Value Proposition (May 2001)

"Advice, advice, advice," has been, is, and ALWAYS will be, the mantra of the financial advisor - so what is changing? Much! The advice many clients are looking for is going through a MAJOR metamorphosis.

Traditionally, clients have been seeking advice and recommendations from financial advisors about the financial products and product mix they should hold in their portfolio. While they continue to seek this type of advice, our clients have also realized that this information is readily available at financial institutions, through the media, and on the Internet. So the question that is often on their mind, but may not always be expressed is - Am I getting good value by working with my financial advisor? Should I use a discount broker? Should I buy financial products directly through my financial institution? Should I take a closer look at all my alternatives?

The advisory channel, by definition, is the pro-league of our industry, where the competition is fierce for the high net worth sector of the population. As you move up the ladder of competitive sports, the reaction time required to execute accelerates considerably. To survive, one must learn to read and react, but to excel, the really great athletes learn to anticipate things before they happen. One of the vital dynamics of being able to anticipate what will happen is to have a keen sense of observation of what is going on around you. It is in life's observatory that we will identify where our expertise is most needed.

The Value Proposition

So where is our expertise most needed? What do our clients want and expect from us in order to continue to retain our services and refer us to their friends and relatives? What kind of value-added service do they truly want?

A recent industry publication splashed across its cover that lifestyle planning is about to become THE value proposition of financial advisors. Why is that? Is it true that lifestyle is suddenly on the top of the agenda for our clients?

A renowned writer, consultant and executive coach, Lance Secretan, wrote in his book Inspirational Leadership, "profits are up, but people are down."

His statement encapsulates best the difficulties our clients are often going through in this time of great change. Reading into this statement, we can all probably remember numerous clients who, in their pursuit of the almighty dollar, have forfeited both health and relationships and are now spending these same dollars to salvage whatever they can from either.

This illustrates the timeliness and the opportunity to add value to our clients' lives by helping them draw their maps of lifestyle destinations that will reflect more balanced lives. As financial advisors, we can give economic value to these choices and then integrate the figures into our clients' financial plans. By applying this holistic approach to the planning process, we amplify the fact that there is more to financial planning than just the numbers, thereby collectively raising the bar of our profession.

Financial advisors who are tuned into this reality, are donning the hats as both coach and general manager of their clients' lives.

As coaches, they are now helping clients establish their lifestyle goals. As general managers, they make the strategic alliances necessary with other professionals who can help their clients achieve their goals. Of course they also continue to provide their clients with sound advice when it comes to the selection of financial products and ensuring that they have a balanced portfolio that reflects their custom-tailored investor profile.

At the same time, many clients who reverted to using discount brokers last year are coming back for professional advice. They are coming back as victims of the market euphoria. They are coming back soaking in blood-baths and licking their wounds. If we dissect what happened, many of these so-called investors were swept away by the plethora of information and hype they were exposed to. Today's reality of the walking-wounded reflects what happens in the long run to most investors when they try to go it alone without professional advice.

Know Your Client

Nick Murray recently stated that all the information in the world does not add up to wisdom, but it is necessary for a knowledgeable person to apply judgment before we have the ingredients necessary to take purposeful action. Information overload and highly volatile markets have created an environment where the qualified advisor is needed more than ever. The know-your-client (KYC) requirements in their existing format represent the bare minimum required to be able to make investment decisions on behalf of our clients. Advisors who undertake to provide comprehensive financial and lifestyle plans for their clients should expand upon these standards. In other words, the onus is on advisors to secure the additional information required to carry out their expanded value proposition.

Let's examine the information on a KYC report in its present form. If you know your client's annual income and net worth, do you know that client? If you are aware of their approximate investment knowledge, financial objectives and concerns or their risk tolerance, do you have the bricks and mortar to build strong relationships? I think not, but this is all the information requested on the KYC form. With only this information available, we are destined to fail in our quest to advise clients professionally.

Enhanced Lifestyle Planner

So what then is the answer to this dilemma? I for one am using a program called the Enhanced Lifestyle Planner in my practice. This Internet-based, state-of-art technology allows my clients to determine comprehensive lifestyle goals in less than 30 minutes. Through the report that is generated, my clients tell me what they perceive as their personal strengths and skills. They provide me with insight into their hobbies and interests, second career possibilities, exercising and travel plans, and future dwelling requirements. It really gets them thinking and they love it. This report provides the basis on which in-depth financial advice can be given and solid plans formed. I've always said I can't give an accurate diagnosis of a situation with only part of the x-ray.

If you wish to survive and thrive in the advisory arena in the future, it will be necessary to continually review the way you are managing your practice and providing services to your clients, because the changes that are coming will continue to be fast and furious. We must move all our functionality to process, or what Dan Richard's has labeled auto-pilot. The fact is, our clients want a consistent, repetitive experience and they want more and more value in exchange for their loyalty. With shrinking margins we cannot afford to operate our practices on manual, but must switch to automatic or preferably cruise control. In other words, we must be continually innovative and continuously anticipate the needs of our clients.

Time vs. Money

Further we are destined to throw time offside if we fail to unsubscribe to the prevailing myth that time is money. The fact is that, for you and your clients, time is much more valuable than money. The human condition tells me that effective effort can produce a substantial increase in monetary gain, but for all of us, time is limited to 24/7, that's twenty-four hours a day, seven days a week. If your clients have acquired vast wealth but have no time on their side, what good is it to them? On the other hand if they have limited financial resources but are blessed with good health, there is an abundance of options available.

What about the boomers who are well on their way to achieving economic independence, but experience little direction or purpose in their lives? As an advisor, increasing your ability to empower clients to repossess their time and their lives will prove to be more important than financial results. These undeniable facts remain; firstly, money by its nature is not an end in itself, but a means to an end; and secondly, advisors cannot add more time to their clients' lives. However, with wise intervention and through sound advice, they can motivate them to add more life to their time.

The Advisor's Insight will appear as a monthly column written by David D. Humes, CLU, CH.F.C., CFP, PL.Fin. If you want to share some insights you have for providing value-added services to your clients or have any questions or comments on the article you have just read, please write to David Humes at Remember to visit if you want more information on the Enhanced Lifestyle Planner.

Copyright: "Copyright 2000. All Rights Reserved"
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