Much is written and spoken these days about transparency, disclosure and the fiduciary standard. The implication is that these are the ethical keys to being a good financial advisor. And while I think these things are important, I believe there is a higher standard. I believe that it's unethical and out of integrity to be a financially unsuccessful financial advisor. Furthermore, no matter how honest you are in your dealings with your clients, you are the most out of integrity as long as your financial house is out of order while you give others advice about their financial life.
Having a financially unsuccessful financial advisor would be like having a cigarette-smoking doctor. Ethics and integrity have more to do with who you are than what you say.
I believe the reason most consumers don't trust the financial services industry and retail financial advisors has less to do with Bernie Madoff or Allen Stanford or Wall Street executive bonuses and more to do with the fact that at some basic, intuitive level they know that too many of us are full of crap. In other words, they pick up on the fact that we don't have our own financial plans, we don't live within our means, we don't have adequate insurance, we don't earn enough or save enough to achieve our goals, etc., etc. As a retail industry of financial advisors, we don't walk our talk. This problem is much more pervasive in our industry than a few Ponzi schemers or practitioners of unethical sales tactics. And it's the biggest chink in our integrity armor.
My definition of true advisor success is delivering maximum value for the client, achieving business and personal financial success and enjoying quality of life (work-life balance). Fortunately, these are not mutually exclusive. In fact, they are highly interdependent.
The best financial advisors are leaders. They lead their clients by helping them have a compelling vision for their future and they lead their clients with the best financial advice to have the future they envision. There is only one kind of true leadership and that is leadership by example. This means that the financial advisor as leader is "walking their talk" by doing for themselves what they advise their clients to do.
I'm not suggesting you have to be rich to give financial advice to others. What I am suggesting is that you should have your own financial plan, preferably created by a financial advisor other than yourself who is helping you with objective advice to implement your plan and achieve your goals. Your business needs to generate enough money so that after your business expenses and your taxes are paid there is enough money to pay for your present lifestyle, get your own financial house in order and fund your family's future goals. Do you know how much money your business has to gross to have enough money to make your personal life work? What does it mean to get your own financial house in order? It's the same for you as for your clients, right? Here is a list of the basics:
Establish and maintain adequate cash reserves for emergencies and unexpected expenses. A good financial planner can tell you how much is right for you.
Taxes. This includes paying your taxes, in full and on time, and making sure that all of your financial choices are made with consideration of the tax consequences. A good financial planner will likely have you set aside your future tax payments regularly so that when they are due the money is available. Your financial planner, working with an accountant, can provide you with an accurate tax projection well in advance, as well as give you sound advice about the tax consequences of your important life and financial decisions.
Debt management and elimination. Are you paying the lowest interest possible for the debt you must have? Do you have a plan for reducing your debt on a schedule that works for you? These are elements of a sound financial plan.
Risk management, insurance. Life and business have inherent risks from which no one is immune. There are only two responsible choices: 1. Self-insure if you have the money to do so. 2. Lay the risk off to an insurance company. It's interesting that most people who can actually afford to self-insure still prefer to shift the risk to an insurance company. A good financial planner will review every type of insurance that exists and determine three things: 1. Should you have that insurance at all? (Depending on your age, it may not make sense for you to have long-term care insurance ... yet.) 2. How much of that insurance should you have? 3. What is the right type of that kind of insurance for you? (For instance, if you need life insurance, should you have term or whole life or something else?)
Asset accumulation and/or management. These are the assets that you are accumulating to fund your future goals or have accumulated to fund your present goals, depending on where you are in life. A good financial planner will make sure that you have defined your goals, have a clear target date for each goal's achievement and know the right amount of money necessary to achieve each goal. Then a plan is created to make that happen. People who are already wealthy enough to fund all of their goals need basically the same plan to know how these goals will be funded and how long their money will last to fund them.
Legal. This simply means having all the legal documents in place so that your wishes can be carried out, whether you are capable of doing so or not. In other words, if you are dead or incapacitated, what do you want to happen? A few of these legal documents might include a will, a living will, a trust, health directives, etc.
Can you imagine the difference in your confidence and your conviction when you are prospecting for new clients and giving your existing clients advice knowing that you are one of the few advisors who is truly walking your talk?
Imagine how easy it would be for the existing clients of non-walk-their-talk financial advisors to decide to work with you because you help them get their entire financial house in order and have done so for yourself.
In an industry where too many financial advisors are simply posers selling the products but not "drinking the Kool-Aid" themselves, you can lead by example. You can get your own financial house in order while you help your clients do the same. And doing so gives you an integrity competitive advantage and a tremendous sense of personal gratification.
Remember: Don't be a salesperson, be a trusted advisor.
For 23 years, Bill and his team have been helping advisors attain top 1% success as measured by value delivered to the client, financial success and quality of life. To learn more go to www.billbachrach.com or call 800-347-3707 to schedule a Success Road Map® consultation.