"How do you as a financial advisor help a client make a small fortune? Answer: Start with a big one." - Old joke among financial advisors.
In the dance of client and advisor, who leads and who follows? Let us say the client has lost money in an auction rate security fund, or watched as the housing bubble collapsed, or seen stock market holdings fall, or seen inflation and a declining dollar eat away at retirement income. Or, maybe, the client is motivated by a vision of a better world and is sick and tired of advisors who constantly bring that conversation back to ownership, tax, and control, recommending tools that keep money under management as long as possible, while having in the meantime only trivial effect on society. Or maybe the client wants to make a life change, and invest more money and more time in doing things that are inherently satisfying and valuable.
How, then, might a client-oriented advisor make a good clean buck off these clients who are fed up with Wall Street, and who want to have a positive effect on their family and communities? Here are some tips for winning ideal clients from the slower moving competition.
- Help the client articulate a vision for all the money. Vision to encompass self, spouse, heirs and community. Vision to engage with realistic economic, political, and environmental scenarios.
- Educate the client about traditional and nontraditional options, including those that do not pay you a dime. These might include philanthropy with direct gifts, social ventures, direct community investment in small businesses, or investment in things that will reduce the client's expenses or vulnerability. (Buy a farm, drill a well, add solar panels, create a co-op with local food producers, put money in a locally owned bank or credit union, pay off credit cards.)
- Use standard financial planning software to run scenarios, both traditonal and nontraditional. These may include such disaster scenarios as asset deflation, rampant inflation, environmental breakdown, climate change, terrorist strike, martial law, shock therapy for the US like that in Chile or Russia leading to rule by oligarchs, para-militarization of economic green zones at home and abroad, or slow burn.
- Charge a fee for the education, or do it in client development seminars.
- Charge a fee for the financial projections and "what if" scenario planning.
- Work with nonprofits on their key donors, getting referrals as the work prospers to the advantage of client, family, and community.
- Roll funds from the client's prior firm to your firm's investments, particularly those that are a little more socially conscious, or mission aligned with your client.
- Pay particular attention to qualified money. The client might want to cash out, pay income tax, and use the net balance to pay cash for a farm, but might be better off keeping the money tax deferred and using the income stream to pay a mortgage. Perhaps the client will want to roll that qualified plan balance over to an account you control.
- Pay attention to insurance needs. A client who is anticipating a major change of life (quitting a dull job, moving to the country, taking up a new venture, getting into farming, becoming a key player in the community through politics or philanthropy or activism, would do well to ask, "What happens if I die, become disabled, suffer a property casualty loss, get sick, or require long term care?" Run those scenarios in your financial planning software, and do what is right for the client.
- Caveat: Be sure to clear all marketing and educational and planning materials with your compliance officer.
Look at the financial dynamics vis a vis firms and advisors, i.e, who gets paid how. What we have done in the account above is to turn the client's fortune invested in traditional paper investments into a fortune invested in living assets - land, farms, community. Have we eliminated all the paper investments? No, not in the real world. We still will have a stock and bond portfolio, maybe some gold or gold stocks, natural resource funds, green funds maybe. We will still have transactions in stocks to be bought or sold. We will still have planning fees. We will still have qualified funds to manage. We will still have ample opportunities for insurance sales. We will also have great referral sources among nonprofits and community organizations. We have a vivid market profile, one that juts out against a flat competitive landscape. Yes, the International Bank of Wealth Bondage will have lost their best customers. But that may give The Bank of Wealth Bondage pause. Perhaps some day they too will do what is right for client and society and will win these accounts back. The only way, though, that the Bank of Wealth Bondage will give more than lip service to things they don't sell, is when the alternative is to lose the entire client account.
If you are reading this as a client, you can see that you need to actively seek out advisors who are willing to work with you in this more open way, and whose firms allow them to do so. It is your money, your life, your family, and your community. Leadership is of the essence. You must lead in this dance. By leading you will drive important systemic changes in the financial world, as well as in your local community ecosystem. Lead with your head, heart, and full financial force.
