Why buy a cow?

(March 2008) My grandmother was born in St. John’s, Newfoundland. It is a province known for its rich culture, charity and propensity for fun. If you frequent Canada’s most eastern province, you will come to realize that Newfoundlanders have wonderful expressions for just about anything.

One such expression is “why buy a cow when you can get milk through the fence?” I believe this phrase could apply to what you do.

We live with a constant surge of information from national daily newspapers, television channels, dedicated financial writers, self-professed gurus, speakers, analysts and bloggers. Then we have marketing — a constant montage of what’s hot and what’s not. Your clients are swimming in a sea of information and starved for knowledge all at the same time.

Everything you do — products, solutions, services — has become commoditized. Your authentic advice is the one unique thing that you have to offer.

Your instinct and interpretation of what a client needs can’t be found in any marketing medium. That is why, despite the onslaught of “free” information available, the investing public needs you. They can’t get what you have for them anywhere else. It is not tangible and it cannot be measured. Advice extends beyond specific boundaries of measurement.

The question I ask, then, is this: “Why do clients place so little value on advice?”

When I began in the industry, advisors had access to the valuable information. We were the front gate of the product marketplace. Today, your clients likely have more information than they can digest. This is where our roles have changed. Today, we are guides at the front gates of knowledge. We need to spend less time discussing the merits of different products and more time assisting clients to assemble an intellectual framework from which to manage their money.

We need to create sanity, order, address client worries and detach their concerns. Today, we are navigators in a complex marketplace, not prospectors exploring for the next big win.

I believe in the advice channel. When you give a person a hammer, it doesn’t make them a carpenter. When you give a person an investment, it doesn’t make them an investor. Advice is the know-how required to utilize the tools in hand.

Advice is your lifeblood. Why does it seem that many clients place little or no importance on our advice? I suspect because we ourselves place very little emphasis on it.

In the past month, a couple of national institutions have produced startling surveys that say Canadians are doing a poor job of preparing for retirement. Only a small minority have financial plans. If you look at the fund flows from early January you will find almost all new money is being committed to short-term funds. Does this mean that these clients no longer have long-term time horizons? Canadians are not listening or adhering to our advice and advisors are reluctant to dig in their heels and provide astute direction.

I actually see advisors succumbing to client pressure, abandoning good investment portfolios in search for the best short-term, one- to three-year numbers. Guess what? Your clients can buy those investments on their own. By giving way to their short-term anxieties, you are discarding the value of your own advice.

The continuous challenge of being an advisor is staying counterintuitive. When the markets are robust, it is time to trim back client expectations. When markets are lousy, it is time for clients to realize that it is not time to abandon the ship. If you are not repeatedly reinforcing this message, your clients will surrender to the masses.

It may sound idealistic, but I know the risk of standing pat. Clients want performance all of the time. I do realize that making short-term fixes to a portfolio might extend your tenure with a few clients, but I strongly believe that once you have broken the seal of advice and given way to a client’s short-term demands, you have begun a journey down a very slippery slope.

I think it is time for us to look at this problem. Do you adhere to a set of principles in both good and bad markets? Do you value your own advice?

Shawn O’Brien is vice president, Atlantic Canada, at Connor Clark and Lunn. For more information, contact Shawn at sobrien@cclgroup.com.

(03/13/08)