Today, anyone who deals with people’s personal finances seems to refer to themselves as a financial advisor. Since the term “financial advisor” is not regulated, this leaves a lot of room for confusion. Using the term “financial advisor” is an attractive way for a salesperson to disarm their prospective client. Most people would prefer to be “advised” than to be “sold” something.
We would like to put aside a discussion of the inherent conflict of interest in a sales relationship in order to focus on another aspect of what the term “financial advisor” can mean for consumers. How someone spends their time as an “advisor” can be just as important as their business model.
Let us take a look at two business models: the asset gatherer and the financial counselor. The asset gatherer’s primary motivation is to get more accounts in the door. Most of their time is spent identifying prospects, scheduling appointments, and then closing the deal. Over time the skill set they develop tends to mirror the requirements of their business model. This may leave little time for developing the competencies of a financial counselor, who may spend most of their time talking with their clients, not in an attempt to get more assets from them, but to discuss issues that are important in their lives.
Consumers need to know more than how an “advisor” is paid. In order to receive the quality of advice that is crucial to a successful relationship, consumers should also focus on how an advisor spends his or her time. When interviewing prospective advisors, inquire as to how they spend their day. Ask what percentage of their time is spent counseling clients on planning issues, instead of discussing their accounts.
The first step in establishing a relationship with an advisor is really trying to determine what type of an advisor suits your needs best. Is it an asset gatherer or a planner/counselor? Do you want someone who will view you as the client, and not your money as the client? The choice is yours.