Dance With the One That Brung Ya’ The steps to a client-centered financial industry. BY ADAM MILLER Adam is a Candidate for CFP® certification, a trusted fiduciary and fee-only financial planner at Elderado Financial. He works passionately to help families preserve their wealth, pay less in taxes and give more to the people and organizations they care about.
I am not going to lie to you. I was, and still am, a horrible dancer. In high school I would take a date to dances, but then I would awkwardly stand there as folks danced around me. Some girls would be kind and stick around as I made poor attempts. Others would head over to the group of guys that could really move. My first dance with my wife was not until our wedding dinner, safely after we had tied the knot. I can’t recall where I heard the phrase, “Dance with the one that brung ya,” but it stuck with me; especially as those kind ladies put up with my lack of rhythm. I am reminded of the phrase once more as the financial industry and its consumers wait for the effects of new regulations. For years Registered Investment Advisors who act as fiduciaries for their clients have been spreading the news that they are legally obligated to do what is in the best interest of their clients. Groups such as FPA (Financial Planning Association) and NAPFA (National Association of Personal Financial Planners) have been working to communicate the need for a fiduciary standard on Capitol Hill. Their efforts may be paying off. Congress is working toward a fiduciary standard for investment advice that would apply to both Registered Investment Advisors and Broker Dealers. The fiduciary standard is an important step towards an industry that is client-focused, but it is not the last step. Instead, brokers who have been in a sales oriented industry for years will need to reconnect with the needs of their clients. They will need to listen to the age old advice, “Dance with the one that brung ya.” Putting on the fiduciary hat will not change the way that business is done at wire-houses and brokerage firms. Commission based brokers will have to lose their sales mentality and they will have to begin meeting the needs of clients. A 2005 study found that clients’ primary financial concern was losing their wealth. Their secondary
desire was to mitigate taxes. Clients were calling for a consultative approach, where a financial planner would work hand in hand with other trusted advisors to ensure that the clients’ entire financial landscape was being tended to. For years, the brokerage business has been focused on sales instead of focusing on servicing client’s comprehensive financial needs. I enjoyed the 2006 Will Smith film, The Pursuit of Happyness. In the movie, Chris Gardner, the character played by Smith, struggles in his pursuit of a career as a stock broker. I had the joy of hearing Chris Gardner speak a few years back. He held up his hands and showed us a crook in the little finger on his right hand. He attributed this to the endless calls he had to make on a rotary telephone, dialing for dollars. In contrast, a Registered Investment Advisor acting as a financial planner spends the day in a much different way. A meeting with a client and her accountant to discuss tax planning for next year. Lunch with an attorney to discuss the best interest of a mutual client regarding the client’s charitable trust. Phone calls to current clients to ask what needs have not been met. A fee-only financial planner’s job is to coordinate all of the financial efforts of their client. The financial planner is not paid by commissions on a sale; a planner is retained by clients who pay a fee in exchange for beneficial, consultative advice. “You will get all you want in life if you help enough people get what they want.” Zig Ziglar This quote is certainly true in the financial industry. This is the reason that financial planners don’t have to follow the broker route of “dialing for dollars.” If folks in the industry would truly offer consultative financial advice, people would notice. Clients would be impressed and they would tell their friends and neighbors the good news. CPAs and legal professionals would notice and they would refer their clients. I look forward to the baby steps that the financial industry is taking toward a fiduciary standard. But I wait with anticipation for the day that the financial industry loses its sales focus and all advisors are inclined to “Dance with the one that brung ya.”