If you have seen the movie Jerry Maguire, you will distinctly remember the scene where Tom Cruise, bagged goldfish in hand, leaves his agency over his thoughtful, passionate revision to the company's mission statement. You remember. ... the mission statement that aligns the agent to his athlete, creating a relationship and bond that ensures contracts are established purely in the best interest of the athlete. By acting in the athletes' best interest and safeguarding them in the competitive world of professional sports, the agent in turn, earns his fee, but more importantly earns the trust and long-term loyalty of his clients.
Shock and awe fell over the office in that scene. How an agent would think of such a preposterous, absurd notion to be so real and vulnerable translated in unspoken words to "weakness." The money was the focus, not the client.
I find myself thinking back to that movie from time to time and how it relates to our industry. With the tumultuous market conditions over the last several years littered with financial crises, bailouts and scandals, how do advisors rebuild their business financially? More importantly, how do we rebuild and strengthen client relationships?
There is no doubt that our major focus as advisors is, and should be, the study, analysis and review of our investment recommendations. It's our profession ... it is what we get paid to do. But what about all the other tasks, calls, meetings and service items that are not black and white? What about those personal touches that can't necessarily be measured or listed in a firm's summary of services?
In my opinion, that is exactly where the building begins.
Over the last several years our introductory meetings with prospective clients-listening to their stories of working with previous advisors and the structure of their relationships-have been a true learning experience for our firm.
In listening to their stories, the most common complaint we hear is not poor performance, but lack of communication. However, this is a broad statement. We all know the importance of communication with our clients, but let's take this a step further. In addition to the calls and reviews you may have with your clients, what education are you providing them on what they own and why they own it? I'm astounded to hear during our initial meetings that so many prospects cannot articulate what investment vehicles they own. Is it a mutual fund, a stock or a bond? If it is an annuity, what are the contract details? How was the previous advisor compensated? What are the internal fees associated with their investments? They often have little or no idea.
The immense amount of inappropriate products offered and investment vehicles sold throughout our industry to these people is baffling. During our discussion of goals and objectives of their current investments, it's very common for clients to say they don't know their asset allocation, or why these specific investments were chosen for them.
I think many of us know why these "specific" investments were purchased and, unfortunately, so often such purchases are motivated by compensation rather than the need of the client.
The initial meetings and start of a client relationship lay the foundation for their current and future understanding. They also begin to lay the foundation of a mutually respectful relationship. There are those clients who are well versed in investing, investment vehicles, and the concept of asset allocation and financial planning; others, taking little personal interest in the process itself, look to an advisor to make those recommendations. We all look to the professionals in our lives for their expert opinion, and once a level of trust is established we rely on their judgment.
I take it as an immense compliment when a client says, "I trust your judgment and that you will do what is best for me." However, during times of extreme market volatility and global turmoil, it is natural for investors to experience high anxiety and nervous emotion that can result in second-guessing the strength and direction of their investment plan. Without establishing a personalized plan and dedicating the time to educating clients on its importance, you are setting yourself and your client up for failure. Feelings of panic for a client can create impulsive, reactive behavior. It is critical that we try to equip clients with the tools and knowledge to handle such turbulent pockets of time in the markets. There will always be an event that rattles the retail investor. Always.
As advisors, it is important that we position ourselves as the core professional in a client's financial circle asking if we may discuss their goals and updates with their estate attorney and CPA annually. A well-organized, well-informed, client-centric team will enhance the likelihood of success. Financial advisors need to be seen as that leader.