Advisors: Stop acting like you're so rich.
Advisors eager to attract the mass affluent may be cultivating the wrong image, creating an empathy gap between themselves and their prospective clients.
Nick Richtsmeier, executive vice president of Trilogy Financial, believes that too many advisors are cultivating images of wealth, luxury and even apathy that turn off many Americans saving for their retirement, says Nick Richtsmeier, executive vice president and chief innovation officer of Trilogy Financial, a financial planning firm with more than $2 billion in client assets headquartered in Huntington Beach, Calif.
“It’s an empathy gap that is the effect of decades of culture in the financial services that creates a barrier between people who give advice and those who need advice,” he says. “For years, the benchmark for good advice was affluence – a good advisor appeared to be wealthy. In the past, most people did not begrudge an advisor doing well, but we’ve entered an age driven by digital and social media and the subcultures of Generation x and the millennials.”
Richtsmeier describes the stereotypical image of a financial professional as one wrapped in luxury cars, exclusive neighborhoods, expensive clothes and jewelry. Affluence is exaggerated to create a façade of extreme self-confidence, while value propositions reduced to pithy investment aphorisms and promises of wealth or income for life.
This stereotype of financial advisors leaves the industry vulnerable to disruption, says Richtsmeier, who argues that advisors must stop cultivating the mirage of affluence.
“Clients today are more interested in facilitating high-quality decision-making,” says Richtsmeier. “They want to know that their advisor understands them. There’s a shift; people put a much higher value on authenticity and transparency than they do on appearances.”
For one thing, the façade of luxury sends the wrong message to clients who are often being told to save more and spend less. As advisors use content marketing on thriftiness and budgeting to attract new clientele on the internet, the trappings of wealth “start to smell of hypocrisy unnecessarily,” says Richtsmeier.
While the industry pivots to address low levels of representation of women and minorities among the ranks of financial advisors, such efforts do not address a growing income and lifestyle gap: The average financial advisor makes approximately $140,000 a year, says Richtsmeier, but the average American household reports an income of less than $100,000 a year.
An image of wealth and success was once important to advisors, says Richtsmeier. The long-standing belief was that investors would not want to work with an advisor who did not appear to be successful in maintaining his or her own financial affairs. Such beliefs led advisors to buy designer suits, luxury cars and boats and embrace leisure activities like golf and tennis.