A client-centered business model, left, versus an advisor-centered one.
One of our financial advisors has a cool-looking travel mug. The outside is decorated with blue, pink and red fish scales, and in fancy script is written the phrase, "Secretly a Mermaid." While I have never seen her transform into a sea creature, she does spend a lot of time in the pool at the YMCA, so who knows?
I thought of this recently when I realized that earlier versions of our business may have unknowingly been advisor-centric. Our intentions were always good and we never harmed clients, but the reality is that the internal framework of our firm was built to support advisors first.
Our mission is to "guide clients throughout life's most important financial events with service and expertise above and beyond client expectations." However, our structure and organization were built to support advisors as they manage clients and their money.
In an advisor-centric firm, the advisor serves the clients. Clients call the advisor for advice, they ask him or her for service, and they look to the advisor for investment management or help with investment selection. Clients ask the advisor for tax advice. They ask the advisor for suggestions on planning for college, for buying a new home, on saving for retirement, for benefit selection at open enrollment, for 401(k) allocations, for retirement income planning. They ask the advisor to update their address, their bank information, for help with wire transfers when they buy a house, for beneficiary updates when they get married, divorced, or widowed. And they call their advisor when their kids do any of the above!
Being advisor-centric doesn't mean the advisor works completely alone. These firms often have staff. But staff are there to support the advisors. Their interaction with clients is often limited. They take messages, schedule appointments, process paperwork and act on instructions from the advisor. But all the important conversations happen between the advisor and the client. Who talks to the client about required minimum distributions? The advisor. Who takes trade instructions? The advisor. Who makes investment recommendations? The advisor. Who manages the financial planning software? The advisor. Staff might be allowed to place trades after the advisor talks to the client, but not always. In advisor-centric practices the advisor's value is often positioned as being "hands on" client accounts, so allowing a staff member to make a trade would be to diminish the value of the advisor, and move the advisor out of the center of the relationship.
John Knowlton is managing director – corporate development for Credent Wealth Management, a $700 million hybrid RIA with locations in Michigan, Indiana and Texas.
