Financial advisors have trouble with regulators for more than one reason, but the obvious one is this.
Most of an advisor’s clients cannot separate the important parts of what they receive from the trivia. Many financial advisors use complexity to establish their credentials. The complexity seems to create a need for their service, but unfortunately makes it harder for the client to value the service.
No one values highly what they don’t understand
Complexity makes the regulator’s job easier
When there is a tangled web of details, facts, and artifice, it is easy enough to find people who see no value in some part of it. That part becomes the focus of regulatory change and all the rest, valuable and not, is ignored. Embedded commissions are one of the current issues being attacked.
No one seems to realize that advisors are doing more than reaping checks from upstream fund companies. Pity it is not so easy as that.
The other services will disappear with the money that finances them. Then what?
The fault lies with advisors, not their clients and not even the regulators
When people quibble about price they are not challenging the number, they are challenging what they got for it. Same thing with regulators, but they get nothing at all so are completely unable to assess value and price. People cannot, and certainly do not, value the things they cannot see. Show them.
Advisors must make what they do more obvious.
Investment or insurance acquisition is the tiniest part of the job. Calming fears, tempering greed, communicating, motivating people to plan, and to be disciplined in implementation, matter greatly. Advisors who are paid by product commissions earn nothing directly for the valuable services. It is a poor business plan to let clients take these things for granted while at the same time they look to reduce the embedded fees in products.
Where to start.
Ditch complexity. Learn to get to the gist of the problems and demonstrate how certain products provide value in solving those situations. Never mind the features. Focus on the benefits.
Computer scientist, venture capitalist, and writer, Paul Graham says it well:
When you’re forced to be simple, you’re forced to face the real problem. When you can’t deliver ornament, you have to deliver substance.
Most successful advisors deliver substance but within a web of ornamental complexity. It’s a communication problem. Learn to explain, offer choices and ask, “Was this valuable for you?” Have the people focus on the substance, not the trivia.
Clients make better decisions when they understand what is happening and why.
Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario. In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.
Please be in touch if I can help you. firstname.lastname@example.org 866-285-7772