The Client Connundrum
Over the past few years, there has been a noticeable difference around how many prospective clients are working with a financial planner (in some capacity) prior to sitting down with us.
Five or ten years ago, most prospective clients who were introduced were 'first-timers.' That is, they had never previously worked with another planner. Typically, there was a significant life event (job change, promotion, inheritance, etc.) which triggered them to reach out to a friend or colleague and seek an introduction. Those times are changing.
This new dynamic will likely cause more conversations pitting one planners advice against another, in order to differentiate and win client business.
As a client, nuance and context around these conversations is more important than ever. The ability to decipher between a subjective opinion and an objective fact is paramount. Are you being presented with an alternative solution or opportunity simply because it's different from what is being done now?Or, is this a true opportunity to act and be better off? This, is the client conundrum.
Peter Drucker acknowledges the value in different opinions and styles, so long as basic tenets are agreed upon. "Every decision is like surgery. It is an intervention into a system and therefore carries with it risk of shock. One does not make unnecessary decisions any more than a good surgeon does unnecessary surgery. Individual decision-makers, like individual surgeons, differ in their styles. Some are more radical or more conservative than others. But by and large, they agree on the rules."
Different styles and opinions should be encouraged and respected. Two different opinions does not necessarily mean that one is bad, and the other is good. A 7% allocation to emerging markets, or 5%? Does that allocation use a market cap weighted or factor ETF? Is there an automatic calendar-year rebalance or a drift threshold rebalance? One option may turn out to be better than the other, but you'll likely survive any of these outcomes. In these examples, a difference of opinion is mostly subjective, and should not, in itself, cause you to seek out a new financial planner.
But what happens when there are basic tenets that are broken? A lack of communication. Product sales being prioritized over planning. Emotional trading not in accordance with the client expectations. Tax consequences being ignored. Saying one thing and doing another. These are all examples of behavior that is objectively detrimental to improving client outcomes, and should absolutely move clients to seek another opinion.
Real financial planners out there can also be helpful as clients navigate these decisions. Support other people who are doing great work on behalf of their clients, even if it is 'costing' you a new one. Do not use a subjective opinion as a reason to undermine an otherwise extraordinary relationship.
On the other hand, continue speaking out against work that is objectively bad for the clients well-being. If it is obvious that something cannot be explained away, do your best work to save the client and get them back on track.
Lastly, I acknowledge the difficultly in making a change and moving on from a relationship. All I can tell you, from my own experience, is that if basic tenets are broken, change is probably a good thing. I'll leave you with the following from Drucker:
"The decision is now ready to be made. The specifications have been thought through, the alternatives explored, the risks and gains weighed. Everything is known. Indeed, it is always reasonably clear by now what course of action must be taken. At this point the decision does indeed almost 'make itself.' And it is at this point that most decisions are lost. It becomes suddenly quite obvious that the decision is not going to be popular, is not going to be easy. It becomes clear that a decision requires courage as much as it requires judgment. There is no inherent reason why medicines should taste horrible - but effective ones usually do. Similarly, there is no inherent reason why decisions should be distasteful - but most effective ones are."
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Source: The Effective Executive (Peter Drucker)
