Sunday, July 29, 2007

Advisors as Leaders

Another short but sweet article from the fine folks at Pareto Platform online CRM. The more I use it, the more I like it. The knowledge base alone is worth the price. Todd V. is correct when he says for a lot of advisors, feeling overwhelmed is part and parcel of not having a 21st century office. Investing time and money in technology now can yield substantial savings in the future. Please let me know how you have saved time and money in YOUR practices. TD



The Leadership Challenge

By Duncan MacPherson, Co-founder, Pareto Systems

The moment your first client bought into your philosophy and empowered you to guide them, you became a leader, and to me, this is a big deal. Think about it: there is a good chance you are going to be in your clients' lives longer than any other professional they deal with.

You will help put who knows how many kids through college, and the advice you provide will affect several generations. Clearly, you have an important responsibility to your clients. What makes your job even more challenging รข€“ and interesting -- is that there is a substantial amount of delayed gratification tied to the solutions you provide. You a€™re not selling something that provides benefits today; you are providing clients with a promise for the future.

The Role of a Financial Advisor

Have you ever really thought about the magnitude of the role you play in your clients' lives? You don'€™t just manage money, you lead people. You manage your clients'€™ emotions and temper their expectations. For some clients, you'€™ve probably even become an important confidante. You are more than an objective and rational voice of reason; you guide your clients through a journey that will eventually transform their dreams into reality. You must occasionally marvel at this responsibility.

Peter Lynch said that successfully investing and managing your own money requires as much stomach as it does brains. When it comes to investing and managing someone else'€™s money, you need ten times the stomach. When you agree to be someone'€™s financial advisor, you accept the leadership challenge.

The Leadership Challenge

As a financial advisor, you accept responsibility for keeping your clients on track throughout the financial planning process, so that they can achieve their goals. For some clients, you literally have to protect them from themselves. Your clients'€™ friends and family members give them advice, and your clients may be tempted to act on these ideas.

Unfortunately, these ideas may sound enticing, but they are often flawed. Unsolicited advice like this can sabotage your well-crafted plan and wreak havoc on your clients'€™ financial futures. If you'€™ve read John Kenneth Galbraith'€™s book A Short History of Financial Euphoria, you know all about how dangerous it can be to €œrun with the wrong crowd. You need to protect your clients from the well-meant but poor advice of others.

You know how dangerous it is when investors start to believe the hype. Galbraith was right when he said, tongue firmly planted in cheek, that €œfinancial genius is a rising stock market. (I have a friend that isn'€™t quite so delicate. He says that €œeven turkeys can fly in a strong wind.)

When markets are good, people can second-guess their advisors and turn to online brokerages. Sadly, when markets shift, as they always do, then the stories inevitability come out about people who had their entire future invested in one company or sector and who watch their financial security evaporate.

You'€™ve read the stories of individuals who felt they had all the answers when it came to money when in fact they hadn'€™t even heard all the questions. You have resisted the urge to say €œI told you so when someone claims to be a victim of circumstance, when in fact they were victims of their own errors in judgment. It wasn'€™t the wind that blew them off course, it was the way the sails were set.

The Renaissance of Advice

Because you hear stories like this, you regularly encourage your clients to look past short-term events, and to focus on long-term outcomes. Sometimes you may worry that you sound like Charlie Brown'€™s teacher. After all, when you plead with your client not to get faked out by the fad of the year, your fail-safe value investment approach is not terribly exciting. Investment success is incremental, and you need to provide your clients with minor mid-course corrections while keep them focused on the beacon.

And there is a renaissance taking place: people are realizing the value of advice. Rather than focusing on what you cost, people are tuning into what you are worth. In the future, I think you'€™ll see fewer people calling you with an idea asking, what do you think? You'€™ll see more people responding to your suggestions by saying whatever you think.

Clients are recognizing financial advisors as leaders, and they are therefore becoming more receptive to the advice you provide. They feel good knowing that you have the knowledge to guide them through the financial planning process.

Accepting the Leadership Challenge

While people recognize the value of advice, they also need to trust the advice they are given. To earn your clients'€™ trust, you need to shift from a management to a leadership mindset. To do this, you need to focus on purpose just as much as on process. Steven Covey advises to €œbegin with the end in mind. When you do this, when you focus on purpose as well as process, your clients will have a clearer sense of why they are with you. They will acknowledge that you are their financial leader, and that you are important: you matter and your role has meaning and purpose.

Leadership can sometimes be thankless, because you sometimes need to protect people from themselves. You keep the fundamentals in place so that clients stick to a core philosophy which will turn their dreams into reality.

Leadership is also rewarding, however, because it is the fertilizer for organic growth. Your clients will only refer friends to you if they know it will reflect favorably on them.

If you provide sound advice and solid guidance, your best clients will become advocates for you, because they know that you will provide the same service to their family and friends. Clients know you will make them look good. Accept the leadership challenge and become referable!

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