Why process is important

I know a few financial advisors who are transitioning their practices to an advice-first approach. One elected to make the change because she felt she would earn more money in the long run. Another believes he will be able to do a better job for his clients, which in turn will make it easier for him to create new advocates. He feels the advice-first approach will enhance the distinctive value of his practice compared to that of most other advisors.

“Advice first” means exactly what the term implies — you give advice prior to selling any products. This could be as simple as advising clients how much they need to save to reach their objectives. Click here to read more about advice first.

To facilitate a smooth transition from the transaction world to an advice-first platform, you’ll need to create a specific process. The reasons for doing so are obvious. You’ll want to foster good communication, both internal and external. With a process, it’s far easier to communicate to clients what you can do for them and why it’s important. And the communication with your staff greatly improves because you have a common frame of reference.

A well-documented process allows you to reduce your costs. Often, advisors and senior staff end up doing work that a more junior employee could do. When you’re able to see the steps of the advisory process on paper, you are able to ensure each team member is doing the right thing to fulfil his or her role and that these are the duties he or she is most qualified to do.

Having it all in writing means having fewer conversations with staff about what needs to be done and how to do it. And should a compliance officer flag something or, worse, should you end up in court because of an omission from your process, it will be far easier to defend yourself than if you had no clear procedures.

Process also creates continuity. There is continuity between client files, which makes the overall job easier. Even better, there is continuity in the services that you offer to each client in a certain situation. If the services that you provide to each client are determined by the mood of the moment, you may run the risk of upsetting one of your high-net-worth advocates. Imagine the disappointment if, for example, this client finds out that you’re offering a much higher level of service to someone of lesser means, someone that he or she referred to you!

A process also gives your advocates something to laud. In the past, perhaps you just verbally emphasized to them your strength at selecting individual securities. Even if you proved good at doing that, your advocates may not have felt they had much to praise you for.

Nowadays, cocktail party chatter is unlikely to consist of “I bet my advisor lost less money than your advisor.” However, it is quite conceivable that your advocate could say, “Despite the fact that I’m down a bit, I don’t really have any great concerns. That’s because my advisor has a process to follow in helping me achieve all of my goals. In fact, she just recently sat down with me and explained that we really aren’t too far off-track despite the bad markets we’ve all experienced. And, of course, she had some specific suggestions how we would get back on track.”

Then there’s the matter of fees. A process definitely makes it easier to justify charging a fee for asset management and planning. You will find that when your advocates fully understand what they are getting for the fees they pay, they will communicate that message to people they refer. It’s nice to have an advocate refer someone to you who not only meets your ideal client profile but is educated in advance about how you are compensated.

Let’s not forget about succession planning. When the person taking over your practice sees that you have a process, if smart, he or she will learn your process to offer the clients some continuity. Retention will naturally be higher. Of course, that wouldn’t make sense for your successor if you had declining revenues, but by adopting what we have discussed here, you will be highly profitable. The value is greater for advisors who charge fees, not just because of the quantum of the fees but because clients who pay fees year after year are often better clients.

If you don’t charge fees, will never charge fees or are prevented from charging fees by your company, nearly everything here still applies. What’s important in client loyalty is not whether your clients pay fees for the services you provide but, rather, if they would be willing to. Great advisors who have high-value processes will find that many of their clients would pay fees if asked to do so.

Implementing the right process will help you create a superior advice-first platform. It will also allow you to create an over-the-top client experience.

John A. Page, R.F.P., CFP, is a senior advisor at Page & Associates and the president of Wealth Enhancement Academy.

(04/02/09)