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Helping Investors Understand an Adviser’s Value

The financial services industry is not always good about using clearly defined terms or language.

The term financial adviser is often misunderstood by both some clients and many prospective clients looking to hire one. The answer to what a financial adviser does should be answered both generally and most importantly, in terms of what an adviser can do for their clients.

The term financial adviser can have a number of meanings. Financial advisers may help their clients in areas such as:

For advisers, some prospective clients and even some existing clients do not always fully understand what an adviser does and can offer. The financial services industry is not always good about using clearly defined terms or language.

Differentiating Your Services

The label financial adviser is often loosely applied to stockbrokers and registered reps whose business is focused on selling financial products. It can also apply to financial planners whose services focus on financial planning services that may be provided on an hourly or flat-fee basis.

Often the term financial adviser conjures images of an adviser whose services are fairly comprehensive in nature, including comprehensive financial planning and investment advice. Some of these types of advisers may call themselves wealth managers and they offer these comprehensive services to wealthier clients.

Beyond this, many financial advisers have niche practices. They may gear their services toward specific groups of clients such as medical professionals, educators or others. They may also focus their services on the employees of a major company with a headquarters or significant presence in their geographic area.

If you’re an adviser, it’s important that you differentiate your services and your practice from the crowd. Be clear about what services you offer and the types of clients you serve on your website and in any marketing that you do.

Explain the Value Proposition

It’s important that financial advisers are clear in defining their value proposition to prospects and clients. While you likely offer advice in some or all of the areas listed above, it's important that you are clear as to how you do this, who your target clients are and why prospects and clients should consider working with you. Moreover, clients and prospects know that most every financial adviser they might consider does investing, financial planning and the other functions that we would expect to see. What clients want from a financial adviser are benefits and outcomes.

Michael Kitces, founder of the XY Planning Network and recognized expert on the financial advisory industry, listed six key value propositions that financial advisers provide in an article on his popular blog a few years ago.

  • Organization: Financial advisers help bring order to their client’s financial lives.
  • Accountability: Advisers work with clients to help set goals and priorities and then work with clients to hold them accountable for the financial commitments involved on their part.
  • Objectivity: Financial advisers bring an outside, detached third-party perspective to the relationship with their clients. They can provide advice without the emotional attachment to the client’s situation that a client naturally has, and they bring their broad experience into every client relationship.
  • Proactivity: Advisers help their clients plan for the next steps in their lives, including transitions such as retirement or other life situations that might arise.
  • Education: Financial advisers provide financial education to their clients as an outgrowth of the planning work they do with them. Financial advisers explain and teach clients about various aspects of their financial situation, an added benefit to them in working with an adviser.
  • Partnership: A good financial adviser will form a partnership. As an adviser it's important that you understand your client as a person including their goals, their fears and their thoughts about money and its role in their lives. It's also important that you are fully transparent with your clients about your fees and compensation. The best adviser-client relationships are those that are truly collaborative.

Ideally you will combine some or all of the above to provide a clear and consistent message to prospects and clients about what your firm offers. This should include:

  • Services offered: Clients want to know if you offer investing help, financial planning, etc. They also want to know if you offer specialized services such as advice on stock options and similar types of stock-based compensation, for example.
  • Your target clients: This might be an industry niche such as educators or medical professionals. Or it might be clients nearing or in retirement. Overall, clients and prospects want to know that you deal with clients with their types of needs and questions.
  • Your firm’s structure: Are you a fee-only fiduciary? Many prospective clients are looking for this type of arrangement and if you function in this way let prospects and clients know.
  • Your experience and designations: Are you a CFP or perhaps a CPA? How long have you been an adviser?
  • Who are you, what do you do when you aren’t working? Prospects like to have some idea of the person they would be dealing with.

In both your online profile and conversations with clients and prospects, they want to know what you do, your qualifications to provide these services, the benefits working with you can provide to them and who they will be dealing with.