The 4 Things Every Successful Person Wants To Know About Their Personal Finances.
I had always believed that when I (or anyone) came into ‘Life Changing Money’ the smartest first step would be to hire a financial advisor who could help me ensure that I was totally set for life.
For example: I want to know exactly what I need to do to accomplish my financial goals without being in a state of constant worry about whether I’m doing the right things. I don’t want to lose my money to thieves, make bad purchases, bad tax decisions or lose forward momentum because of other bad choices and I certainly don’t want to run out of money too early. I want to know that there is somebody on my side, who is a world-class professional that is looking out for my interests in every aspect of my financial life and paying careful attention even when I’m not.
I mean, that’s what I always thought the words ‘Financial Advisor’ meant and I figured these people were everywhere. If anything, I was expecting that they’d smell the ‘fresh money’ and start coming out of the woodwork at me and I’d have to beat them off with a stick!
So imagine my utter dismay when, in 2008, I first discovered that the kind of financial advisor I just described did not even exist. Not a one… not anywhere… not at any price.
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Asking millionaire friends to recommend someone proved futile. None of them could say that their financial people were up to the challenge or any better than anyone else’s.
And it’s not as if there weren’t financial advisors coming out of the woodwork… there were financial planners, tax accountants, money managers, investment advisors, estate planners and insurance brokers of every description (oh my!) … but NOBODY who pulls it all together into any kind of cohesive strategy.
And even after you hire them all it’s like you’ve deeply offended them by suggesting they talk to each other. They just don’t think that way or work that way except, in a few cases, where they had paired up in the same office. But beyond that? Nada.
It falls to you and me (the clients) to find, qualify and hire all these people, to coordinate their activities, to somehow know enough to fit it all together and to implement whatever they’ve sold us. We’re somehow supposed to know what’s in our own best interest and what’s not — because, after all, it’s buyer beware, right? They want us to trust them, but do you even know how much they’re making off the sale? I don’t. [update 2010: this situation with hidden fees is slowly improving, particularly in Australia where some of the legislation has been changed]
And have you SEEN a financial plan? As if the process itself wasn’t painful enough, the end result is a report that’s thicker than any of my college textbooks (I took both Engineering and Computer Sciences — so I know about thick books). And what good is this thing a few years from now if things change, as they inevitably do? I want a clear, living action plan — not a new field of study!
It FEELS a bit like calling a plumber while your basement is filling up with water and after an hour long ‘free’ consult he sells you a ‘how to’ book and a box of tools.
So I’m left wondering: How are clients like me expected to place their financial trust in people who have such glaring blind spots? If I’m the one who is coordinating everything how am I supposed to assure myself that all of the bases are covered so that I can sleep soundly at night?
The fact is that I believe I am somehow expected to become an expert in all these areas of finance and oversee it all myself. The financial advisors, the entire financial services industry seem to be convinced we all WANT it this way.
Now, in some cases that’s probably true, there are always do-it-yourselfers and people who just want to be hands on — but for the rest of us we want some real, meaningful help. We want to FEEL completely safe, secure and comfortable with our financial life without making it a second career. We want it to be self-evident that the person who is advising us is actually on top of things and is CLEARLY putting our interests first.
And we KNOW from experience that we’d recognize this person the very moment we met them. That’s because we have occasionally seen this high level of personal service in other areas of our lives. If you think about it you’ll remember a few people, perhaps from other industries (a waitress, car mechanic, hotel clerk, some UPS guy, your bookkeeper or someone else) who really stood out from the crowd and who really went the extra mile to genuinely make your life easier.
Do you remember how it made you feel to KNOW you’re being taken care of? Of course you do. We all notice it. And we also know when we’re NOT feeling it.
You see, I tell this story to affluent people all the time and they always respond the same way: nodding with a sympathetic chuckle. It’s not a laugh, but more of a sad and incredulous “Oh, I know exactly what you mean”.
And NOT ONE of the affluent people I talk to will pipe up to say, “Oh, my person’s completely different! Give them a call.” It just doesn’t happen. What they DO often say is, “If you ever find someone who’s up to your standards, please let me know.”
So in the end we all resign ourselves to the fact that this is ‘just how it is’ and either we dig in and become our own financial expert or (as almost all of us do) we just set it all aside, do the best we can and hope for the best.
Then some guy like Bernie Madoff comes along and cleans out hundreds of multi-millionaires who THOUGHT they were being taken care of (in the good way, I mean). Admittedly, Madoff was an extreme case, but fraud happens on a smaller (and less publicised) scale every week. It’s estimated that investment fraud in the USA alone ranges from $10–$40 BILLION every year!
Now, I’m an analyst by trade (and by nature). I don’t come from the financial services industry but I did start out in service-oriented businesses. To this day there are no words to describe how ‘gob-smacked’ I am:
The BEST POSITIONED INDUSTRY to serve families who are MOST ABLE & WILLING TO PAY A PREMIUM has UTTERLY IGNORED their BEST CLIENTS’ NEEDS!
It’s beyond preposterous; It’s profoundly insane.
And even many of the advisors themselves are miserable! I could understand it if these advisors were raking in the dough and laughing all the way to the bank, but they aren’t (not most of them, anyway). They almost always say there’s too much competition and no way to set themselves apart from the rest of the industry — finding new clients is hard and they’re worried about keeping the ones they have.
I know that these advisors are good people who WISH they could serve their clients better than they do, but they just can’t find hours in the day to make it happen. They don’t make enough off most clients to put in the time necessary. They often have to work ridiculous hours at the sacrifice of marriages and family just to keep up with what they already have going on. And the more clients they acquire the worse it gets! Ironically ‘success’ often leads to even deeper feelings of failure and anxiety.
And as if THAT’s not bad enough for them, the Dirty Little Secret is that MANY of these advisors go through periods of boom followed by periods of financial stress themselves.
How does this business model make any sense to anyone who works in financial services? [update 2014: All these years later and I STILL can not get my head around it. I just… can’t.]
Okay, so enough… I’m not trying to hate on these people, I just want you to know that I understand the source of our frustrations. So let’s talk about what I think the solution should look like:
Service (to me at least) is about making life EASIER for people, saving them time and doing everything possible to eliminate sticking points and discomforts.
Expertise is about always being 3 steps ahead of every situation (and ahead of the client too, no matter how sharp that client is) because YOU’RE the expert who does this thing for a living and the client isn’t.
An Advisor to me is an EXPERTISE SERVICE that is about putting the client’s needs first ahead of all others, even ahead of your own, because you are on THEIR side first and foremost — and besides, you know that you’ll be paid for it. You get ahead of every potential situation and you pro-actively head off anything that would cost the client undue stress, time or losses.
From the client perspective: If the advisor can’t demonstrate that they are doing the job better than we ever could (or would) do for ourselves, then they’re simply not providing the kind of value that we need, want and trust.
So I’ve got some good news for you, sort of. But I need to rewind my story a bit:
It turns out that I did meet this one guy, named Mark, who had built a hugely successful Financial Services practise in the early 2000’s by catering specifically to the needs and wants of his favourite clients — but by the time I met him he’d already sold that business and he was out! He wasn’t taking clients anymore!
The funny thing is that I met Mark through completely unrelated circumstances. Actually, it’s more like he found me. A third person (whom I had met in the audience of a technology podcast) happened to mentioned me to Mark and that led him to take a keen interest in my work.
At the time I was delivering 100% cloud-based content management systems and full-featured intranets that were a solid 5+ years ahead of the rest of the industry. Most people hadn’t even heard of ‘the cloud’ yet.
While most website providers were trying to figure out how to create simple membership sites (where you could let people log in to access protected content) I was already providing ready to use enterprise systems that could scale to millions of users with built-in apps and easy to manage security/access on unlimited levels — all at prices that small/medium sized businesses could readily afford.
Anyway, once Mark realized what I was able to do through the internet he told me that he was teaching a very select handful of Financial Advisors how to do what he had done! Mark had packaged all of his paper-based office systems (forms and documents and checklists and processes, etc.) into a complete system and was teaching it at a few live events that were being held by another industry speaker who was a close friend and mentor of his.
As Mark and I got to know each other I learned a lot more about his Financial Services practise and how exactly he was now teaching other advisors to duplicate his results. Make no mistake: this was a comprehensive, masterful system. He had crafted an insanely exceptional client experience unlike anything I’ve ever seen before, or since, in ANY industry. He didn’t just meet all of my expectations, he exploded them!
Not only that, but he had also solved all those behind the scenes problems that the advisors themselves were having. He had developed an entirely new way of doing financial services that worked in the best interest of EVERYONE concerned. And because he had himself been a ‘normal joe’ advisor for 20 years, he’d had to figure out how to smoothly transition from the old way of doing business to the new way without going broke or crazy in the meanwhile. The whole thing was simply brilliant!
So he was wondering if his system could be sold online to established advisors, but he had several concerns. He wanted to ensure that the integrity and service-oriented aspects of his business plan would stay completely intact. He didn’t want it to get diluted or abused in ways that would not be backed up with real delivery on all of the promises made to end clients.
Well, I loved Mark’s story, his business perspectives and his personal values because they were completely in alignment with my own. My technologies had ample capability beyond what he was asking and I was ready for a new challenge. The more we talked about what was possible with the my technology… well, a partnership was inevitable. But that’s a completely different story for a different audience.
The good news for YOU is that there are some Financial Advisors out there now who CAN get every aspect of your financial house in perfect order and keep it that way forever. The sad part is that there aren’t a lot of them (yet).
The bottom line is that I sincerely hope that YOU will soon be able to hire someone in your community that is the kind of Financial Advisor that I have (sorry, he’s not taking new clients). Here’s what it would be like to be a client of an advisor like mine.
First of all, you’d hardly have to lift a finger. You don’t have to study anything, you just attend a few one-hour meetings each year. That’s it.
The meetings are focused like a laser on the real issues that matter to you (and your spouse if you have one) and about making the best possible, measurable progress towards your goals. All of your financial goals are clearly defined and you know exactly how much money each one needs to be totally funded, how much money is already allocated to each goal and whether you’re on target to achieve the goal in the time-frame you’ve specified. They’re even prioritized to ensure the things you care most about get funded first.
The reports you’re given at these meetings are simple one-page reports that can be completely understood in just a minute or two and there are only about 5 or 6 of them. These reports cut right through all the noise and explain everything you could ever need or want to know about your finances! If you do have a question the advisor just pulls out another one-page report that has the answers. You’re going to wonder why you EVER had to sit through tedious meetings with stacks of printouts. This is just so much better.
And the conversations are like that too. His team has already done all the work of figuring out all of the options and the pros & cons of those options and have come up with recommendations that are clear, prioritized and even post-dated action items: most of which are tentatively planned months and years ahead! All you’ll need to do is focus on the recommendations that fall under today’s meeting priorities.
This is like a living, breathing plan that his team of experts is correcting every time you meet with him! Over time you’ll recognize where they have modified the future recommendations to account for changes and fluctuations of the markets and any other changes in your situation. It will be blatantly obvious to you that there’s a well conceived plan on the table and you’ll have no doubts at all that it’s getting accomplished. You’ll see it for yourself and won’t need to take anyone’s word on it.
In just a few hours per year, you will somehow know more about your financial situation than you ever could have imagined. You’ll have comprehensive plans for every imaginable scenario, even all of those ‘uncomfortable’ topics. It’s really reassuring to know those things have been discussed and that solid plans are in place well before there’s an actual incident.
And that’s just a hint of what it’s really like for you, there’s so much more! For example, there’s true, total transparency: You’ll know exactly who earns what from you and the advisor even comes to you with full disclosure of any internal conflicts of interest (such as someone profiting from a recommendation). You pay a flat annual fee for oversight, so you’ll know that money isn’t even a factor in your advisor’s recommendations. Your advisor will even report to you about the things the team ISN’T doing properly! I mean, who DOES THAT?
Seriously, you’ll KNOW that it doesn’t matter at all what the markets do over the short term, they’ll fluctuate and you’ll adjust accordingly. It will be obvious to you that you have a full team of world-class experts (in all those many areas of finance) who are doing for you infinitely more than you could EVER have done for yourself (even at 10 times the price) and you’ll have an advisor overseeing it all that you KNOW is absolutely on your side in every conceivable way.
It’s astonishing what the right advisor can really do for your peace of mind.
So yes, I pay a substantial annual fee, but it’s worth every penny (and more). It’s a fraction of what it would cost me to do this by any other means and it is by far the best money I’ll ever spend.
I’m GLAD that my advisor is amply rewarded and is excited about what he does, I wouldn’t have it any other way! And I certainly wouldn’t give up my kind of financial advisor for anything else.
I always promised that if I found a truly great advisor I’d let people know, so consider this me keeping that promise.
My sincerest wish for you is that you will have a financial advisor like this in your life, sooner rather than later. Please, for your own sake, don’t stop searching until you do.
