Beware of What Makes Your Advisor ‘Different’ From the Competition

I get asked this question all the time: How are you different from your competition?

Fair enough!

The “financial services” title is pretty opaque. There’s a tendency to think of Investment and Retirement Planning firms as one in the same. I believe this is due to the lack of effort — call it laziness, if you will —in which our industry sets standards and guidelines separating the two. One financial service practice may focus on the growth of money (accumulation) and another on income planning (decumulation) and overall retirement planning (e.g., knowledge of Social Security, tax planning, long-term care, etc.).

Yet, when a potential client interviews a financial advisor, they may get a potentially false “yes, we do that” answer, said only to win the sale.

Fees, costs, charged expenses, and not always being completely disclosed can put a drag on building trust. When a customer experiences this, a familiar idiom may apply: Fool me once, shame on you; fool me twice, shame on me.

In a recent article in The Wall Street Journal, reporter Andrea Fuller talks about the frustration she experienced trying to get an answer as to how much she was getting charged by her advisor. She voices her opinion that if you are going to have a pretty standard portfolio blend (usually not too far off of tracking a low-cost index fund) you should expect additional services along with the money management.

What this may include is:

  • Tax planning
  • Tax preparing
  • Design of an income plan (making sure it is tax efficient)
  • Assistance with choosing insurance needs (long-term care, annuities)
  • Legacy planning
  • Overall assistance with financial needs, even with money the broker/advisor may not be earning a fee on

Now, I’m going to say this again: Many advisors will say that they offer all of those services, but will they? After “the sale” is made, as a client, what will the experience be from here on out?

I would be especially cautious of “advisors” who sell insurance products only. The reason is that these products usually pay an upfront commission to the advisor/insurance agent. There is nothing wrong with that with two exceptions: 1) The more you put into the product, the more they get paid (ask why they are recommending the amount for you to purchase the product), and 2) Once they are paid, the financial incentive to follow up and service you as a client is gone. “On to the next sale” may be their motto!

The proof is in the pudding.

If an advisor tells you that they are experienced and knowledgeable about retirement planning, ask them to give you a tutorial on Social Security and/or long-term care. Ask to see their planning software, and get a sampling. Ask for their credentials and do your homework to see if they are hard-earned.

If you ask an advisor how they’re different and they answer, “We’re less expensive,” be cautious. Everyone needs to be paid, and no one works for free.