Left-brained financial advisors with right-brained clients

Any intelligent fool can make things bigger and more complex...it takes a touch of genius - and a lot of courage to move in the opposite direction. - Albert Einstein

If you can't explain it simply, you don't understand it well enough. - Albert Einstein

Imagination is everything. It is the preview of life's coming attractions. - Albert Einstein

When you look at the typical relationship between the financial advisor and the mass affluent, you find that advisors have worked more on being liked than they have on any other part of their professional development. For an industry where commissions and assets under management are the lifeblood, this is understandable, but not excusable. For an industry where it is so difficult to transfer funds based on the paperwork and effort, getting people signed on is a huge accomplishment and thanks to regulations, that relationship becomes that much more inelastic. As a result, you find that advisors spend 80% of their time getting you in the door and 20% of their time with you for the rest of the relationship. Cadence, tempo, frequency aren't rewarded, unless you have money in other places. Why does customer experience appear to have a lower threshold for financial advisors?

As much emphasis as there is on customer experience within other areas of financial services, why is this a lost art within the wealth management community? When a customer reaches out to a typical company, they usually call for one of three reasons: (1) They want to get something accomplished, (2) they want to get something fixed, or (3) they want to improve the quality of their life. When a new or existing client reaches out to a financial advisor, it is because they approach the relationship from a transaction standpoint rather than an experience standpoint. They think about their money and not a lifetime of experiences that money can create. They have generally been broken by an industry and a culture and they have stopped thinking differently.

Why do financial advisors seem to have immunity from delivering a valuable customer experience? They answer is, they don't. Why aren't the reasons the same? Or are they the same, but they are implicit and buried underneath a relationship paradigm that advisors have defined for decades? One reason this exists is because it is easy for a consumer to comapre Wal-Mart with Target, but it is virtually impossible for a consumer to compare two advisors. Another reason is that a Wal-Mart or Target customer experience is easy to define a start and an end, where with an advisor it is a continuous relationship with various frequency and depth of touch points.

Advisors and clients have grown to accept this relationship, because the paradigm is so strong, it have become part of our culture. Neither side has imagined the possibilities. As a result, the desired experience is the iceberg beneath the water surface. What's more disappointing is that it is easier to ignore the adverse impact on your life than it is to imagine the possibilities. The question is, do advisors have a fiduciary, ethical, and personal responsibility to challenge and quantify the cost of status quo, both tangible and intangible, to improve their practices and the lives of their clients?

The tangible and intangible costs of status quo is high for both parties. Both are sacrificing in the relationship under today's paradigm of the relationship in the form of:

• Unnecessary costs
• Non-value add complexity and effort
• Lack of control

Unnecessary costs

From an advisor perspective, there is no greater cost than acquisition costs. So delivering a customer experience that just drips of loyalty would make referrals the rule rather than the exception. However, advisors tend to not be able to get out of their way of industry paradigms and this adversely affects the relationship in terms of loyalty, but not necessarily satisfaction. One thing that may be causing this distinction is that customers recall the amount of effort to set up the last account and they aren't dis-satisfied to the point of re-creating that effort.

Meanwhile, consumers are paying a huge tangible price that adversely affects their quality of life. In David Loeper's book, "Stop the Investing Rip-off", he illustrated how a couple investing $7000 a year into their 401(k) - including employer match - with a 7.5% return, would have $2.5MM after 40 years. That sounds great, but if your fees were 2.5%, $1.7MM would go to financial services. Oh, and in 40 years, $2.5MM will be closer to $800,000.

2.5% may sound unrealistic, but when you consider that financial services contributed $1.1T to GDP in 2006, and there was $44T in U.S. financial assets, it comes to 2.5%.

What is the cost to the quality of your life, even to have that number 1% lower? 1% could mean retiring five years earlier, or having that much more to invest in your present or future lifestyle. 1% could be the difference between dream and reality with your experiences and your most audacious goals.

Non-value add complexity and effort

Advisors by the nature of the business and the nurture of their training introduce a lot of complexity to a relationship that doesn't require it. From the language they use, to the amount of documentation they require, financial planners introduce effort on their own behalf and on behalf of the client that is not valued and does not differentiate. This complexity also adds to the cost of the service.

Consumers are looking for a low-effort relationship and they will seek high and low to find it and maintain it, but the second their relationship with a company becomes higher maintenance, that is when they consider leaving and often do.

Lack of control

Control takes many forms in the investing space: control of the investments, control in your portfolio performance assumptions, and control of your life.

Advisors like to have control of your investments and make decisions on posturing your investments. Actually, you are losing control. You are losing control in the investment choices. You have no control over the companies that your portfolio is invested in. You add another layer if you are investing in targeted mutual funds in terms of what they charge, what they invest in, and how they invest.

When all this happens, you no longer have rational confidence in your portfolio performance assumptions. You introduce uncertainty. You introduce the risk of underperforming the market, but more importantly, you have placed your lifetime aspirations in jeopardy simply because you don't know what to expect out of your portfolio. Thus, you are now out of control of what you can and want to do with your most audacious plan and whether you can achieve that.

Transitioning to and Delivering an Appreciated and Valued Experience

This traditional experience that advisors have been delivering for years, it has been built upon the concept that many associate with the left-side of the brain. Advisors tend to introduce concrete recommendations, analytical concepts, built on past performance, and what they "know". Question is, what do they know, especially when they place the "past performance is not an indicator of future results" on everything they tell you?

Now, contast this concept with clients and their thinking on the right-side of the brain. Clients have abstract ideas and dreams that they want fulfilled, they are filled with creativity and uniqueness in their own lives that can't be set to an equation. Unique clients want to be treated uniquely. They are thinking about their future and what they believe....quite a difference from the advisors line of thinking.

In Frank Luntz'a new book, What Americans Really Want...Really, he talks about his experience consulting with Merrill Lynch and changing their titles from "financial advisors" to "investment specialists". I would argue that Americans don't want "investment specialists" either. They want "Experience Enablers", but we have a long way to make that vision a reality.