Remember when you were a kid how snowball fights typically erupted totally unannounced? You’d be hanging out at the bus stop when – WHAM! – out of the blue you got smacked right on the side of the head with a snowball that you didn’t even see coming. When it happened, you’d quickly dust the snow out of your eye, set your sights on the assailant, and launch your counterattack.
While you didn’t know it at the time, you were, in fact, honing an important skill that might now come in handy to help you defend your practice.
The advisor profession has been hit on the proverbial head by a whole lot of mud. Our credibility, integrity, and worth have been called into question in a smear campaign launched by companies that profess a noble mission: to help Americans become better financially prepared for the future.
They are going about it by “reinventing” financial services and eliminating the need for an advisor. They are giving consumers tools to learn more about financial management, become better organized, and evaluate the effectiveness of their portfolios.
The functionality and sophistication of these personal financial management sites and mobile applications are evolving at warp speed. Take SigFig, for example. SigFig aggregates all investment holdings and then makes recommendations based on current holdings. It compares the holdings in a user’s portfolio against other investments in the same category and share class. It then suggests different, less expensive investments that perform better than the user’s current holdings. It even goes a step further. After reviewing the user’s trading patterns, it evaluates the brokerage fees. Advisors are evaluated according to the fees assessed and the performance obtained. This functionality has led to all kinds of provocative headlines, such as the one inviting you to “Find Out if Your Financial Advisor is Overcharging You.”
Another media darling is Jemstep, which served up this headline: “Use Jemstep to See if Your Broker is Wasting Your Money.” Jemstep’s ranking engine analyzes 80 attributes of more than 20,000 mutual funds and ETFs. Jemstep helps clients identify their financial goals, provides a ranked list of the “best investment options,” and tracks aggregated investment performance.
While the functionality of these tools may have been the baton that the media picked up in launching the smear campaign, Personal Capital marched to the front with its own marketing efforts. Personal Capital is a little different from some of the other personal financial management sites because it actually manages money. It positions itself as the next generation of financial services that has evolved by moving away from a paternalistic, craftsman-like approach. Its pitch is that clients should move money to them because they can invest it in cheaper, better performing funds while giving clients full transparency. One of its hooks is the “How Much is Your 401(k) Costing You?” calculator.
These services and dozens of others are gaining in popularity. They are free or come at a modest fee, and they have seized the attention of both venture capitalists and the media.
If we have learned anything from schoolyard snowball fghts and political campaigns, the best way to deal with an attack is to launch an immediate counterattack. If the suspicion, exaggerations, and fear prompted by the smear campaign are left to linger, credibility is destroyed.
It’s time for those in the business of giving financial or investment advice to wipe the mud from their faces and launch a counterattack. Here is an effective, three-pronged approach to take with clients:
- Ask clients whether they would be willing to turn over their life savings to a computer program. Most personal financial management services offer a mathematical approach to an emotion-filled process. They aggregate holdings, use algorithms to evaluate investments, and spit out recommendations based on a computer model. It is not only black and white and cold; it ignores the uncertainties of life. It also ignores the single most important role that a financial advisor fills: to act as a sounding board for clients throughout their lives.
- Demonstrate the enduring value of the professional advice model. The premise of many personal financial management sites is that the computer can do all the work better than an advisor. It has never been more critical than now, therefore, that you demonstrate your worth. You are your expertise. You are the knowledge, resources, and guidance that you provide. A computer program can’t begin to offer the sense of comfort and confidence you deliver to clients. Remind your clients that you are savvy and accessible, and that you genuinely care about their goals. Because the smear campaign seeks to create doubts about your motives in recommending certain products and solutions, make sure to remind clients that you always have their best interests in mind.
- Deliver a better online experience. An estimated 30,000 Americans are flocking to personal financial management sites every day! The word has spread. An organized, online financial view helps make money management easier. Personal capital, however, is asserting that advisors are unable to offer clients an online experience. The CEO has been quoted as saying that personal financial advisors are still stuck in “pre-electronic practices.”
Prove him wrong. Show clients that an organized, online financial view is most beneficial when it is part of a wise collaboration with a trusted advisor
Republished with the permission of eMoney Advisor. For more information about eMoney, visit http://www.emoneyadvisor.com/emacorp/default.aspx.