Today, any wealth manager can deliver the same comparable set of financial services and products. This does not mean that all financial products and services are equally good. It means they are, in most cases, fungible.

A self-evident example of this is life insurance. If you have a client in need of life insurance and you go to a carrier for the product, cannot any other wealth manager go to that same carrier for that very same product? Another example: Consider all the wealth managers using the same broker-dealer. In principle, anything on that platform is available to all the advisors using it.

What about proprietary strategies? Quite a few wealth managers and tax professionals claim to have strategies available only to them. But if the strategies are legal, they aren’t proprietary—someone smart can and will replicate them. Those professionals who develop new strategies will often get a first-mover advantage, but over time even the most brilliant approaches become commoditized.

Again, some financial products and strategies perform better than others. There are certainly distinctions in quality. However, since all possibilities are potentially available to all wealth managers, differentiating on financial products and services in many cases is difficult.

This doesn’t mean wealth managers don’t try. Here’s my favorite comment (somewhat paraphrased) from one who unsuccessfully pitched his investment proficiency: “My 60/40 portfolio using index ETFs is better than your current advisor’s 60/40 portfolio using index ETFs.”

If we conclude that wealth management products and strategies are commodities or—if nothing else—very fungible, where is the competitive advantage? Where is the differentiated value you bring to clients?

You Are The Value
The value is you. More precisely, it’s the nature and quality of the relationship you develop with your prospects, clients, referral sources and the professionals who work with you, such as your team or specialists you bring to the table. With wealth management products and strategies put to the side, the only thing left is the level of rapport you establish and nurture.

If you look at numerous studies of financial and legal professionals, this conclusion is not surprising and, in fact, the majority of wealth managers readily agree with it. Yet most financial and legal professionals are not taking the requisite steps to build optimal relationships with people who could be central to the success of their practices.

It’s up to you, for example, to know what financial solutions are most appropriate for clients in their particular situations. It is your proficiency at mixing and matching the various wealth management services and products that can make all the difference. It is your ability to derive synergies from these combinations. The bottom line is that when it comes to your clients, it is your ability to get the results they need and want that gives you a competitive advantage.

Your ability to truly understand clients—their hopes and dreams as well as their concerns and insecurities—is critical. So if you want to build a highly profitable wealth management practice, you most likely must become an expert at discovery.

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