The big value propositions that financial planners offer—financial planning, asset management and the recommendation of financial products (which achieve returns we have little control over)—are all undergoing rapid commoditization. So it’s becoming increasingly difficult for advisors to differentiate themselves in a crowded “me too” marketplace or live up to the unrealistic expectations of their clients. 

The first step in the process of transformation is to confront the shortcomings. Advisors have become increasingly frustrated by the constraints of their current value proposition:

Performance: They are pressured to achieve a higher rate of return than competitors or indexes.

Prognostication: They are asked to predict the future of markets or the economy.

Timing: They must continually try to help clients avoid falling asset classes while capitalizing on emerging opportunities.

The consequences of this approach have harmed the life and business of the advisor. If any of the following statements describe you, you are at risk:

1. You need to constantly (quarterly/annually) prove your worth.

2. You are blamed for events and forces beyond your control.

3. You are perpetually compared with competitors and indexes.

4. You are wrong in your predictions.

5. You have to cope with clients who hold back information and assets.

6. You have too many clients.

7. You do not have enough time in your day to balance personal and professional commitments.

For advisors facing these problems, the timing for a transformation of the industry couldn’t be better, especially given the new scrutiny they face from the Department of Labor. The need for advisors to bring more substantive value to their relationships has never been more pronounced. 

A New Paradigm

Each quantum leap by the industry has introduced new disciplines. In the leap from sales transactions to asset management and asset allocation, risk-profiling tools were introduced. In the leap from asset management to financial planning, probability analysis, goals inquiry and more comprehensive discovery tools came into the picture. 

I am convinced the actions of the DOL are going to drive this industry toward the principles and practices of something new, what I call “ROL” (return on life) advice, as opposed to the previous paradigm, which was simply “return on investment.” 

A leap forward into ROL planning is bringing the development of new tools as well—tools that measure life transitions, financial satisfaction and fiscal philosophy. Tools that help clients merge their money and lives.

Introducing The ROL Revolution

The ROL value proposition simply states: “My job is to help you experience the best life possible with the money you have.”

The approaches and the processes promoted in the past are no longer enough to persuade clients to entrust their hard-earned and easily evaporating assets to advisors and planners who cannot assure them the future will be any better. Clients are looking for professionals who will keep the promises they make-—and the profession is seeking a value proposition it can fulfill. The answer is no longer based on predicting the markets, guaranteeing returns or outpacing competing asset managers, but rather on building a life-centered financial practice.

Primary ROL Propositions

If your goal is to bring value that cannot be commoditized and to have clients gain appreciation for your services, offerings that cannot be priced out by competition, then what follows will be of interest. The intangible values below encompass the wants and needs of your clients in their financial life—and only deeply interested financial professionals can deliver. The six core values of the advisor/client relationship in the ROL planning model are as follows:

1. Organization: We will help bring order to your financial life.

2. Accountability: We will help you follow through on your financial commitments.

3. Objectivity: We will provide insight from the outside to help you avoid making emotional decisions about important money matters.

4. Proactivity: We will help you anticipate the key transitions in your life so that you will be financially prepared for them. 

5. Education: We will explore the specific knowledge needed for you to succeed in your situation.

6. Partnership: We will work with you to help you achieve the best life possible.

A Brand-New Reality For You And Your Clients

A new focus: By focusing on transitions, rather than on transactions, ROL advisors will be better prepared to help clients address the accompanying financial challenges and opportunities from a fiscal perspective. 

A new stability: A life-centered value proposition is the only stable anchoring point for the advisor in an environment of rapid commoditization. “If you help me navigate financially through life, make the most of my life, and are focused on what matters to me, then your value will most certainly eclipse the price paid for it.” When you are confident in the value you bring—and the company you deliver it with—there will be no cause left in you for reacting timidly to the idea of absolute transparency. 

A new reality: Advisors practicing ROL planning will be able to make promises they can keep—to a manageable number of clients. The results are increased trust, a more balanced life and clients who are thrilled with the arrangement. 

The financial earth is shaking under the industry’s feet at this very moment. Those who want to stand out and deliver in the future should pay heed to the changing central value proposition of their businesses. 

Stay tuned for more on the ROL value revolution that is about to change this industry, making businesses more viable—and sustainable. As an advisor, you can be caught naked, or you can begin to implement return-on-life planning strategies into your client conversations pronto.

 

Mitch Anthony is the author of The New Retirementality (Wiley), now in its fourth edition.