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You’ve all seen the seductive ads aimed directly at your clients, "Stop paying high commissions," "$8 trades," and "free information." The best part is, the boast, "no advisor is necessary," because you can do it all yourself. The TV, the Internet, magazines and newspapers are packed with them. What’s a client to do—Or an advisor?
Suddenly, in this era we call the information age, everyone is supposed to be their own financial advisor. The rationale goes like this: Because of the Internet, the public now has access to some of the same information as the advisors do, and so armed, they can apply it to their own financial affairs. The implication is that consumers will have the very same positive outcome they would have by seeking professional advice. After all, the reasoning goes, they possess all the information it takes to make long-term, sometimes irrevocable, decisions regarding their investments, retirement plans, insurance policies, and more. While it is true that everyone can gather information and buy products and services over the Internet or through a marketer on a toll-free phone line, one fact remains that is always overlooked.
It is this: There is a big difference between information and knowledge!
Because people have access to this tidal wave of information, the ads want consumers to believe they will know what to do with it. Incredibly, some ads even encourage people to hold investments for 20 minutes rather than 20 years. They delude people into believing that this newfound information gives them some edge over professional advisors. What about the knowledge gained from intensive financial education combined with the experience of working with hundreds of people? What about the judgment that comes with that experience after 5, 10 or 20 years or more of professional advice? Occasionally we will have to remind clients and prospects that this is not the knowledge age, it’s the information age.
One thing, though, is true today. Many more men and women will walk into your office after spending hours online gathering information. They will know the basic issues in investments, insurance and financial planning and details like the differences among no-load and A, B, or C mutual fund shares. They will ask about mortality and expense charges on variable life and annuities. They will ask more intelligent questions than ever before and expect their advisor to offer more intelligent answers.
They will, in short, expect you to show the value you bring to the relationship. Dan Sullivan, a.k.a. "The Strategic Coach," puts it this way: Do not expect opportunity without creating value for others. So, ask yourself: "In this high-tech era of easy access to information, what value do I bring to a client/advisor relationship?"
The information age has raised the bar on our ability to be professional financial advisors. It is not enough to give information, or to have great sales skills or great products. We must continue to provide knowledge, judgment and a personal relationship.
This is what advisors bring to the kitchen and conference tables of consumers all over America. Let me give you a personal example.
Several months ago my daughter Heather, a teacher, asked me to go along to shop for a car. She had never bought a new car and I was happy to help. I thought to myself, I’ve bought numerous cars since my first VW Beetle back in college and I knew how to get a good deal. In retrospect, though, I had to admit I’d always felt I’d been screwed regardless of how hard I negotiated.
As a capitalist and a business owner, I don’t begrudge the car dealer from making a profit. But I didn’t want the salesman and his manager giving one another high-fives the moment we left the showroom. I wanted everyone involved to feel like it was a fair deal. Had I been shopping for myself, I must admit, I probably wouldn’t have checked the Internet. But since this was my daughter, I decided to surf the web.
I found a wealth of information, such as:
Because of this research, we knew what a fair deal looked like. The salesman and the manager recognized that we’d done our homework. They found just the car my daughter wanted at one of their storage lots in a different town. The dealer and the salesman still made a profit because they brought value to the process.
When Heather left the dealership, car keys in hand, her dad felt like he had made a good deal. Driving home, it occurred to me that because I’d gathered enough information to ask the right questions and know a fair deal, I felt better about the car-buying process.
I think our clients feel the same way about working with us after they have done a little homework on the Internet or elsewhere. Thankfully, most clients will want our professional advice and for us to apply our knowledge and judgment to their personal situation.
So the next time someone walks into your office and talks about buying financial products and services from a dot.com company or over the telephone, show them the value you bring to the financial planning process. And, remind them, there’s a big difference between information and knowledge.
James P. Ruth, CFP, is a registered representative and president of Potomac Financial Group, a financial advisory practice in Gaithersburg, Md. He is a former Maryland state NAIFA president. He can be reached by phone at 301-948-3900 or by e-mail at pfgroup@erols.com.
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