The seven steps to creating a lasting adviser relationship
June 2018 | Justin Hooper
It is quite common for dissatisfaction to creep into relationships where somebody is paying an expert for advice — whether the adviser is moving too fast or too slow, or the feeling that all contact will lead to some form of ‘sell’. Accountants, lawyers, stockbrokers and advisers in many fields can often be perceived as not having delivered value, depending on how they are engaged by the individual.
These relationships are often established on a basis that dooms them to failure. In seeking to solve specific problems, clients typically focus on short-term outcomes and give little thought to longer-term considerations.
By following the approach outlined below, you can significantly enhance the chances of establishing a successful long-term relationship with your adviser.
STEP 1: Treat the selection as recruitment
Your adviser is going to play a very important role in your life. He or she is going to know a lot about your personal circumstances and they will likely have a big influence over major financial decisions you make. Your adviser is going to be well paid for their contribution, so it’s important to select the right person.
Have in mind the ideal candidate, the attributes they should possess, the services you need, and the value you want.
STEP 2: Begin with a thorough understanding of your ‘home base ’
Be clear about the purpose of the exercise, how you are going to make decisions, what financial concerns you have, and how easy it will be to access all your information.
You should also be clear about your preferred communication style. For example, do you just want to know the bottom line or would you prefer to understand detailed analysis before you make a decision?
STEP 3: Define the role
This will include how long you expect the relationship to last, what tasks you expect your adviser to perform, how you anticipate measuring the success of the relationship and what type of reporting you expect.
STEP 4: Profile this adviser
Do you want to work with someone in a large, branded company who may have possible product biases, or would you prefer your adviser to be independent? Does it matter to you if your adviser earns commissions? What are the minimum qualifications, experience and capabilities you expect your adviser to have? Do you want an adviser who can integrate your emotions about money with technical strategies and one who understands the connection between your career or business with your finances?
Be clear about how you want the adviser to work with you. For example, do you want someone who will challenge your assumptions and provide leadership or someone who is more of a technical expert?
Try to gain an understanding of the adviser’s ‘money beliefs’ as these will play a big role in the advice you receive.
STEP 5: Get testimonials
Gain an understanding of an adviser’s attributes. No two advisers or advisory firms are the same. Every one of us has our own distinct value proposition – that is, the value we bring to a relationship. You need to be clear about what differentiates one adviser and their firm from others.
Look in particular at what they don’t do very well and what they are not interested in doing. It can be a good idea to ask for a referral from someone who is no longer a client or someone who chose not to be a client.
STEP 6: Gain a clear understanding of the conflicts
It’s impossible to eliminate all conflicts in a relationship. No two people can ever be 100 per cent aligned in every way, so that is why it is so important for you to understand where conflicts may arise.
Start with the fee structure. Is it an hourly-based fee, transaction-based, asset-based or fixed? Is there a performance fee? If it’s hourly-based, you carry the risk of how long it takes. This may mean the adviser is unlikely to be proactive.
If it’s a fixed fee, the adviser may be very proactive and push you to complete the exercise quickly. An asset-based fee could encourage the adviser to take risks or ignore assets not under their advice.
Find out how the adviser will bill you. Will it be on a monthly basis? Will you receive a regular invoice or will the fee be deducted from your assets or bank account?
STEP 7: Do a pre-mortem
A post-mortem is an analysis of what went wrong afterwards; in a pre-mortem, assume it’s gone wrong and explain why. This will help you become comfortable with any risks not addressed in the recruitment process.
Research by Professor Bill Danko in the USA proves that there is a high correlation between financial success and the quality of advice. To get quality advice over a long period of time, you need to have a high degree of certainty about the adviser you use.
Create some form of scoring system weighted by the factors most important to you, or find one that covers all of these aspects. Most ‘how to find an adviser’ questionnaires or websites are of very little value. Establish your own criteria.