In today’s increasingly complex financial world, it is inevitable that high net-worth clients will require expertise beyond the ability of an individual advisor.
So, what is an advisor to do? Do we acknowledge our limitations and assist clients in seeking out other advisors, even though they may be competing with us in some way? In their book, The Right Side of the Table, brothers Scott and Todd Fithian explore the issues around this question and the advisor’s changing role.
The authors make the case that an advisor may have a place on the client’s professional advisory team, but it may not be “at the head of the table.” That position is most appropriately occupied by the person best qualified to be the client’s “trusted advisor,” who may come from any discipline.
“The book’s title is a metaphor for the traditional conference-room table, around which we have the client and all his or her professional advisors,” says Todd Fithian. “The advisors each take a seat next to or across from the client, based on the role they are best suited to play. In some situations, the financial advisor will be the ‘trusted advisor,’ leading the orchestration of all the experts. In others, the financial advisor may have a subordinate role and may, in fact, be a ‘client’ of the trusted advisor.
“The financial advisor has to accept his or her place at the table,” he concludes, “and perform to the best of his or her ability in that role.”
Accepting that role may be difficult. While many advisors position themselves as “quarterbacks” of their clients’ financial affairs, they may not like losing that status to another professional.
As the book notes, however, all seats at the table are “up for grabs.” Simply advocating that financial advisors are best suited to sit at the table’s head won’t cut it with increasingly discerning HNW clients who are regularly exposed to advi-sors of all stripes telling them: “Trust me, I can do all this for you.”
Speaking of trust brings me to one of the most useful concepts in the book — the Trust Formula.
Every advisor has spent hours crafting a financial or investment plan that would marvel the masters, only to have the client fail to act on it. Many reasons have been assigned to the breakdowns in this process, ranging all the way from “the client just doesn’t get it” to the client being poached by a brother-in-law who recently started in the business.
The authors would argue that there is very probably another reason — insufficient trust. They offer the Trust Formula as a method by which both clients and advisors can measure and evaluate the level of trust in a relationship and, as a result, determine who sits where at the table.
The Trust Formula is C + R + I + SO, in which:
C = credibility. How good is the advisor at his/her craft?
R = reliability. Does the advisor deliver as promised?
I = intimacy. Is there a willingness to discuss tough topics candidly?
SO = self-orientation. Are client interests placed above all others?
The importance of each variable in the formula depends on where you sit at the table. On the side with the client and trusted advisor, intimacy is paramount and the advisor must possess considerable skill in discovering the client’s deepest desires. At the end of the table, at which advisors are operating as “experts,” credibility and reliability reign, and delivering an accurate, sound recommendation on time are the measures of satisfactory performance. Finally, at the opposite end of the table, at which we find the advisors operating in “sales” mode, lack of self-orientation is essential.
As Fithian says: “HNW clients typically have four key seats at their tables — accounting, legal, investment and insurance — and the accountant traditionally takes the role of ‘trusted advisor.’ By understanding how the seats are emotionally assigned by the client, financial advisors have the opportunity to apply for the job.”
Fithian also offers an insight into compensation for financial advi-sors. “The public and the industry have not yet really reconciled the value of the ‘trusted advisor’ role,” he says. “There is no accurate model for pricing it because most advisors who assume the role are compensated for doing something else in the process, and it is taken for granted that is appropriate and sufficient. As advisors develop their expertise in the capacity of trusted advisor, they will hopefully assume their rightful places at the table and be compensated accordingly.”
@page_break@The Right Side of the Table encourages you to examine your business and redesign it in light of changing client perspectives of their professional advisors. IE
All seats up for grabs at a client’s table
The professional from any discipline best qualified to be a client’s “trusted advisor” should get that role
- By: George Hartman
- October 3, 2007 October 3, 2007
- 15:39