If you are in the top 25% of advisors based on credentials, ethics, and business practices, 75% of your competition is lower quality advisors. Based on our surveys, you should win 88% of the time when investors make objective decisions. Your winning percentage is much lower when investors make subjective decisions that are based on advisor personalities and sales skills. What if you could develop a sales strategy that is consistent with industry trends and increases the objectivity of investor decision-making?
Let’s assume there are two types of financial advisors.
1. The first type has nothing to hide so they embrace transparency.
2. The second type has something to hide so they resist transparency. They do not want to disclose weaknesses that will cost them sales or current client relationships. Therein lays the business opportunity for higher quality advisors.
You can dominate sales situations when investors select advisors if your strategy includes practicing full transparency yourself, includes a documentation requirement, and creates maximum disadvantage for your competitors.
There is one caveat. Do not expect investors to know anything about transparency or how it helps them make better decisions. You are going to have to create value by introducing and practicing transparency. One method of introduction is to create a document titled “How Does Advisor Transparency Protect Investors?” and provide it to prospective clients. The document contains five important points:
1. Ethical advisors do not withhold information from investors.
2. Transparency provides the facts investors need to select the advisor with the best qualifications, not the best sales pitch.
3. Transparency focuses on Credentials, Ethics, Business Practices, and Wealth Management Services.
4. Investors should trust what they see and not what they hear.
5. Their selection of a financial advisor is far too important to base it on verbal information.
Credentials are your sources of competence. The most important ones are years of experience and valid certifications. I say valid because a lot of your competitors use fake certifications to deceive investors into believing they are more knowledgeable than they really are. You may want to emphasize education if you have degrees from schools that are above average.
Ethics is a measurement of your trustworthiness. You should volunteer your CRD number and you may even want to show the investor how to access FINRA’s BrokerCheck. If you are an RIA or IAR be sure to point out you are a financial fiduciary. Don’t assume investors know you are held to the highest ethical standards in the financial services industry.
Business practices focus on how you are compensated, the combined expenses for your planning and investment advice, the expenses of third party providers, and your reporting – in particular performance reporting. You should also describe your service strategy after prospects become clients.
Lastly is the number and type of wealth management services that you provide: Planning, investment advice, insurance, tax, and legal. Advisors provide various combinations of services based on what is available from their firms and the networks they have developed with local professionals (CPAs, attorneys).
I call the last step setting the trap. Based on your own transparency practices, develop a list of questions that investors should ask your competitors. Ideally, they use a document that you helped create that requires written responses. Investors win when they ask multiple advisors the same questions – it is easier to compare their responses.
Your competitors are faced with a tough choice. Do they refuse to provide the information, which may eliminate them from contention? Or, do they respond to questions that may require them to disclose weaknesses that they prefer to hide from investors. Let’s call it heads you win, tails they lose. The fact of the matter is no advisor wants to disclose information that could cost them money.
High quality advisors, who have nothing to hide, should win 88% of the time – when investors use objective processes for selecting professionals who will influence or control their financial decisions.
Jack Waymire spent 28 years in the financial services industry. For 21 years he was the president of an RIA that provided wealth management services to more than 50,000 individual and institutional investors. He is the author of “Who’s Watching Your Money?” and the founder of www.investorwatchdog.com, a website that provides free advisor research, ratings, and reports to investors. He is a columnist for Worth magazine, a contributor to major financial websites, and is frequently quoted by the media.