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Clients Come First – The Rest Takes Care of Itself

The financial services market shift from the product commission model toward fee-based consulting will test advisors’ capacity for survival and success. In order to thrive in the change, advisors must exhibit strength, smarts and adaptability.

Much like Charles Darwin theorized that those who survive are the ones who are able to adapt and adjust to a changing environment, all three traits build off each other to help practices adapt and remain profitable without sacrificing quality for clients.


Cultivate Strength To Endure Change

The shift in pay structure is only one of several important factors shaping the financial services industry and advisors. In order to endure the pressure and succeed, advisors need emotional, ethical, and professional strength and personal resolve. This strength is built up by confidence. It stems from competence, professional experience and access to resources such as mentors and best-practices materials.

Advisors must be prepared to let go of the industry’s fundamental structure. Some view commissions as a direct reward system to compensate them for hard work and results. Those advisors will need to make a difficult mental shift under the new structure and use client satisfaction and well-being as motivation.

Advisors who have always operated under this principle will have no problem achieving success in the new structure. They understand the simple answer to financial success — the golden rule. It’s the belief that clients come first and the rest will take care of itself.


Smarts Come From Experience

Advisors need to be smart in addition to intelligent in order to succeed. Smart means so much more than intelligent — it draws on experience, success and failure rather than education. Experience is more impactful because it flows from first-hand knowledge and is tied to the emotions of situations as well as the lessons learned. This includes the negative and positive feelings of trial and error — getting burned, seeing clients succeed, etc. — which are more effective and immediate instructors than a lecturer or an article.


Selective Adaptability

Without adaptability, advisors may exhaust their strength and smarts only to excel at obsolete tactics. The pay structure shift will be the first exercise in adaptability for American advisors. There is a worldwide movement away from commissions and toward fees. With this, we can look to other countries for insights and to set expectations. Once mandatory fees are a requirement in the U.S., advisors will do well to voluntarily charge a significant, but not prohibitive, fee for services and advice.

The next step in mastering adaptability is less direct, but just as important — selecting when to change. Advisors must be able to refuse adaptation if it doesn’t make sense for them.

Over the past three decades, the industry embraced technology with open arms as a tool to simplify operations. On the other hand, intrusive technologies that create electronic processes that used to be done manually open the door to advisor irrelevance and consumer reliance on do-it-yourself technology.

For example, computer-generated algorithms drew us away from needs- and values-based client relationships. Rather, we focused on numerical projections based on our knowledge of the client and the market. If the numbers look good in the eyes of our client, they can elicit an emotional response almost as strong as those words and diagrams describing deeply held values once did.

Impressive returns and numbers are an effective buying motivation. They are simpler and faster but easily replicated by machines. This automated, or robo-advisor, accessibility pushes advisors toward irrelevance and removes our indispensability. We can combat this by showing our clients how our knowledge and customization are indispensable when compared to a computer-generated algorithm.

Fee-based advising is the latest in a long line of challenges advisors have had to overcome on the path to success. In order to remain indispensable to clients and avoid irrelevance, advisors must focus on clients’ well-being as an end goal.

Nothing lasts forever in business, even indispensability. However, survival skills such as strength, smarts and adaptability will endure to ensure continued success. Keep up with your skills by learning best practices from fellow advisors and mentors. 


Rao Garuda, ChFC, CLU, is a 35-year MDRT member, with 24 Top of the Table and 24 Court of the Table qualifications. He is the author of several books, including The Meaning of Money: Creating Not Just Wealth on Your Balance Sheet But Significance in Your Life. Rao may be contacted at [email protected] 

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