By now, most people recognize that over the past several decades there has been a marked shift in the financial industry. These changes have not been limited to the names of the industry’s leading firms, the structure of products, the number of disclosures to be made or how fees are charged. There have also been significant shifts in psychology, specifically how financial firms and industry professionals perceive their relationships with clients.
Recently — especially within the past several years — we’ve been hearing more and more stories about advisers pushing unsuitable investments on clients, or becoming indignant at the loss of all or even part of an account. In sum, advisers seem far less focused on their clients’ needs. It is as if these service professionals have forgotten that they work for their clients — not the other way around.
It’s no secret that the culture of large wire houses and Wall Street firms has been undergoing a similar shift over an even longer time frame. By now, it seems Wall Street banks have almost zero interest in serving their clients, let alone making money for those they serve. Instead, the name of the game is to move as much money as possible from their clients’ pockets to their own before clients wise up.
Then, when things go bust, they fleece taxpayers to refill their coffers and start all over again, having never missed a bonus check in the meantime.
Investors need to be mindful of these attitudes in finance. No, advisers won’t always make money for clients, but there are bigger issues to consider. One is whether an adviser properly understands his or her relationship with a client, i.e., that he is an employee who can be fired at will. And he should be fired if a client ever becomes concerned about either of two things:
- The person who is managing their money.
- The system being used to manage the client’s money.
There are some managers today, although they are becoming a smaller and smaller minority, who manage their own money the same way they do their clients’ — who eat their own cooking, so to speak. This is a great benefit for most clients, who can rest easy knowing that their adviser is in the same boat. If they’re losing money, so is their adviser; if clients are having sleepless nights, likely their financial adviser is as well.
An even more important concern, though, is that a financial adviser never forgets whose money he or she is managing. Clients select advisers to provide services (e.g. managing money, helping a client with problems they have, assisting with account administration, moving money across generations) and advisers are compensated for services rendered. In the event a client ever decides to make a change that leaves no room for an adviser in their new financial plans, the adviser should be willing to do everything they can to make a client’s move away from their firm as easy as the move into it.
During these transitions, an adviser should hope that the client finds a satisfying relationship that helps them achieve their financial objectives and that the client is better off for having been with that adviser.
Dock David Treece is a partner with Treece Investment Advisory Corp (www.TreeceInvestments.com) and is licensed with FINRA through Treece Financial Services Corp. He provides expert content to numerous media outlets. The above information is the express opinion of Dock David Treece and should not be construed as investment advice or used without outside verification.
