What makes for a successful financial advisor?
That question can lead to a debate over commissions versus fees, or designations, or maybe assets under management and target-client profiles.
But a recent study suggests the answer to the question is subtler-centering on the issues of trust and confidence. Put another way, clients want an advisor who is more of a friend than a number cruncher.
"This study says it's not all about money," says Jeffrey R. Lauterbach, chairman, president and CEO of Capital Trust Company of Delaware, and an author of the study. "I think the study says that people have been successful because they have set out to help people, and they derive satisfaction from doing so."
The study, titled "The AttitudesandBehavioral Styles of Successful Advisors," consisted of written survey responses from 492 advisors and follow-up telephone interviews with about 30 of the respondents. Those surveyed included investment advisors, accountants, attorneys and other financial services professionals drawn from Capital Trust's advisor database. Capital Trust conducted the survey with The Wendling Group, a management-consulting firm, and Bill Bonnstetter, a management consultant.
The study, which basically set out to find what made successful advisors tick, concluded that client-oriented advisors were finding more success than their sales-oriented counterparts. "Our findings ... clearly demonstrate that successful advisors are people-oriented, with a strong desire to build relationships and to assist others to achieve their potentials," the authors of the study wrote.
The survey, for example, found that 63.2% of respondents placed the most importance on "utilitarian" values, which for the purpose of the study were defined as "a passion to gain a return on all investments involving time, money and resources." The second strongest values were "social," defined as "a passion to invest myself, my time and my resources into helping others achieve their potential."
Advisors placed the least value on "aesthetic" concerns, which the survey described as "a passion to experience impressions of the world and achieve form and harmony in life; self-actualization." As the survey authors put it, "Building relationships and doing what they like to do are more important to them than having the finer things in life."
How advisors defined success also reflected these values, the study says.
Among the statements made by advisors in follow-up interviews were:
"It is enhancing other people's lives versus just selling a widget. It is helping others have a better quality of life."
"It means more than a dollar sign, more in satisfaction than what I can make. I like to like what I'm doing; the ultimate is to enjoy what you're doing. I have a strong desire to do something that is needed."
"I would like to be able to develop a relationship of trust with the client, which comes from the client realizing I care. It is also establishing rapport with the client as an extended family. It is not about the number of clients, but the quality of the relationship."
Not "Control Freaks"
Although the survey respondents all were running successful businesses, Lauterbach says, there is an irony to the survey results: The advisors don't fit the classic mold of an entrepreneur.
The missing elements are a high sense of individualism, an ego-driven desire to carry out a vision and the tendency to act as a "control freak" when it comes to carrying out important tasks, he says.
Anecdotally, he says, the survey produced another revelation about successful advisors: They became financial advisors almost by accident.
"Most people in these roles stumbled into them," Lauterbach says. "They didn't set out to do this. They started somewhere else, found it unpalatable and unrewarding and gradually found satisfaction where they are now," he says.
For 37% of those interviewed, meanwhile, significant life events eventually led them to their current careers. When asked how they chose to become advisors, some of the comments included:
"It was more of a shift over the last 10 to 12 years, where I had a movement into a broader definition of success rather than just the material elements. The dramatic shift was more of a development process as I kept moving and changing the bar through analysis and introspection."
"Probably when I entered college. My father had just died. It became my responsibility to become man of the house taking care of Mom. It was a real wake-up call because if I didn't do it, it wouldn't get done. I had to choose what I wanted to do, where I wanted to go and how I was going to run it: career, family, choices."
"I guess I had been in prior jobs where I had good income, but I did not get much out of them on a personal level. Really, it was in 1990 when I decided to do something that gave me satisfaction on a personal level."
The survey should, Lauterbach argues, dampen the sometimes-furious debate over whether clients are served better by compensating advisors through fees or commissions.
"If you're an advisor and you are successful in helping a client achieve their personal dreams, the client will be grateful and they will want to compensate you," he says. The type of compensation is "irrelevant to the client," he argues, because "the clients got what they wanted."
Some advisors addressed this issue by talking about how they feel they are different from their peers:
"I don't go after selling the highest commission product like others do."
"Passion! About life, things. I hold myself to high personal standards of excellence, sometimes to other people's annoyance. Tenacity, don't give up too early in the game."
"I'm brutally honest with clients about what I think. All of one's life savings can be entrusted to me; it's a big responsibility. I want to make sure that what I do is the best thing for them. Clients are not as dumb as many people think."
"I'm constantly looking for improvements through introspection and feedback ... Ethically, I could build the business five times bigger, but I can't do it that way and be able to sleep at night."