Which Client are You?

I believe there are 3 types of people who walk into my office questioning whether they should hire an advisor. For purposes of a simple description, we’ll call them the Non Client, the Typical Client, and the Absolute Client. There’s the Do-It-Yourselfer, or the Non Client. There are very few, if any circumstances in which an advisor would be able to convey an equal value for the fees they might charge this person. They prefer to do it on their own, and if emotionally divorced from their money, they likely can. When these folks find themselves working with advisors, often because a spouse strongly suggested they do, advisors experience a lot of inertia from them. I’ve laid out the 3 traits that one needs to be able to do it themselves. I absolutely believe that people can successfully manage their own financial goals and investment portfolios. At WealthAdviceMadeSimple , I am going to offer some ideas that may help them remain independent, or possibly point out areas that are worth a professional’s help.

On the other end of the spectrum is the Absolute Client, often considered a delegator, the one who for any number of reasons, knows they need to hire a professional to assist them with their planning. They may not have the desire (often a function of time), the financial acumen, or the ability to compartmentalize their emotions in order to make the tough decisions related to their finances. They find great value in the counsel of an advisor. If fees increase over time, they accept it because they find great value in that trusted relationship. Or, they may not be with the right advisor yet, but they recognize they need an advisor. I will spend time trying to help the Absolute Client in selecting the right advisor. The wrong advisor can be very damaging. There are some basic questions to ask a prospective advisor to get you started in determining if they will be a good fit. More to come on this topic!Embed from Getty Images

Caught in the middle is the Typical Client. They are struggling to either commit to hiring an advisor, or they have hired an advisor and they are questioning the value proposition. In other words, they want to validate the advisor relationship on a regular basis. They are seeking a direct correlation (at least annually, if not more frequently) between the fees paid and their portfolio values, or net worth. Ex. If I pay $7,000 in fees annually, I want to see $7,000 of identifiable value each year. The issue arises frequently because financial advice is not tangible and is rarely recognizable in a linear fashion, as was requested in the previous example. Often, the advice yields benefits in a lumpy fashion. One year, considerably more value than the fee will be realized, but may not be as considerable in the next year or two. It typically is realized over time, through at least a full market cycle. Often, it’s not a what an advisor does, it’s what an advisor stops an emotional client from doing themselves. Yet, you can easily see where the Typical Client has a dilemma. We are talking about value that is sometimes obscure. How do you measure the mistake an advisor may stop a client from making?

No matter who you are, you must be confident in your decision. If you are a Do-It-Yourselfer who is constantly questioning your decisions, or worse yet, one who has a spouse questioning your decisions, then it may be appropriate to marry some professional advice to your own work (no pun intended). If you are an Absolute Client, or delegator, you need to be sure you have the right advisor working for you, someone who is always placing your interests ahead of their own. If you are caught in the middle, then you owe it to yourself to regularly examine the value of your advisor relationship. Ask non-threatening questions of your advisor such as “Help me understand all of the things you are doing for me? Or, how do you anticipate that you will be able to continue to provide value for me going forward?”

It is important to realize that the common core for all three of these people is trust, either in someone else or themselves. Trust is something that is nurtured and not found overnight. Be patient and never stop trying to better understand your relationship with money, and your advisors if you have hired one.


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