The Honest Broker – Reflections on Seth Godin’s Comments

From the blog of the famous Seth Godin:

The honest broker

It really is a choice, one or the other.

Either you happily recommend the best option for your customer, or you give preference to your own items first.

Either you believe in what you sell, or you don’t.

Either you treat your best partners better, or you treat everyone the same.

Either you shade the truth when it’s painful to do otherwise, or you consistently share what’s important.

Either you always keep your promises or you don’t.

Either you give me the best price the first time, or you make me jump through hoops to get there.

Earning the position of the honest broker is time-consuming and expensive. Losing it takes just a moment.

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I want to comment on the idea of hiring a financial advisor, and working with me specifically, while incorporating Seth’s thoughts. This is intended to be a direct and honest assessment of how I stack up to Seth Godins’ principles laid out above. Here we go…

Recommend the Best vs Me First

I could comment on this on many fronts. First, I can say that I personally do everything I recommend my clients do – from insurance coverage, to legal planning, to investment selection. There is no difference between the quality of my advice to my clients and the quality of my advice to myself. Of course, when it comes to certain planning, age, risk tolerance and needs can cause strategies to vary but overall the thinking is the same on both mine and my clients’ plans.

Belief in What I Offer

As someone who’s been passionate about the financial world for a LONG TIME, I think I believe in what I do:)

Treating Best Partners Better

People I work with frequently, I treat very well. Again at least I try to. I work with other professionals and some I’ve known for a long time, and would do anything for. I have some longtime clients about whom I feel the same (of course my goal is to get all of my clients in that “position”:).

Shading the Truth vs Sharing What’s Important

An example of one of the more difficult things I have had to do is explain to clients (much to my embarrassment) is why certain funds performed so poorly during the recent market bust. Funds that were supposed to be income-oriented real estate funds were hit very hard – beyond what would surprise me. I had to face some clients with the difficult information that it would take time to rebuild those losses. The clients weren’t happy but I think and hope they appreciated that I did not run from that. I pride myself on risk management and this problem was most painful to confront.

Keeping Promises

I like to think I’ve been performing at least at the 95% level here. I’m sure I promised a copy of an article here, or an email there that was a few days late but I try my best here and use a good contact management system and have an awesome assistant (Lauren) to help me remember!

Best Price the First Time or Make the Client Jump Hoops

In working with clients, on planning I always suggest a flat rate vs hourly and try to keep it lower than I expect so that the client gets as good as value as possible. I don’t quote a higher price in case I get negotiated down. I talk through my process and time spent so that the potential client understands what work I will be doing and how much is involved in the financial planning process. It’s not just filling out IRA rollover paperwork. There are numerous spreadsheets and analyses to be done.

I also work with smaller clients than many other advisors. I scale my fees for larger clients (and more for charities) but I offer a fair and accessible option, especially to clients with less (sometimes FAR LESS!) than 1 million dollars to invest. Many advisors charge 1% on 1 million and 1 million is their minimum ($10,000/yr). I offer comprehensive services for less oftentimes because my client balances are smaller. All in all, I offer my best price for the work I do (and also offer 3 different levels of engagement to working together so something will fit each potential client’s financial situation).

Conclusion

I’ve been doing this for 17 years and hope that I’ve been a net benefit to society and to all of the people I’ve encountered. I think I’ve gotten much better at communicating. This is important because early on, passion sounds like a bad sales pitch. Later it sounds like welcome conviction and confidence to clients. I think I’m getting nearer and nearer to that latter stage.

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