In a recent post, Rohan of the alearningaday.blog wrote about the difference between Responsibility and Accountability.
His basic assertion, that the difference between the two lies in our ability to delegate them, brought to my mind an individual’s choice of paying for financial advice.
Advisors don’t always appreciate the difficulty this choice presents, and Rohan’s assertion sheds some very important light on the subject.
When someone chooses to hire an advisor, they are delegating some or all of the responsibility for their financial future. But, they know that only their families will experience the outcomes of the work. Only the client will know success or failure. Only the client will be accountable.
This is a huge decision.
And, advisors are expensive. If an advisor is managing $500,000 and charging the traditional 1% fee for assets under management, then the client is paying $5000 / year for the services. This expense is worth it for some people. Still, if you are going to hire an advisor, it is important to get your choice right.
Clients should take their time in making such an important decision. They should interview multiple advisors. They should ask lots of questions. Their doing so doesn’t indicate an inability to trust… it suggests a difficult decision.
If the advisor is irresponsible; if the advisor isn’t competent, makes mistakes, offers false or bad advice; if the advisor overpromises or doesn’t make realistic assumptions; if the advisor is delusional or dishonest, then the client and the client’s family suffers. Full stop.
The client can share responsibility for financial management, but never accountability for financial outcomes.
In the worst cases, the advisor may be held responsible for illegal activity, but most advisor problems are more mundane than they are illicit. Maybe it’s a lack of training, poor communication, fear of losing a client, or just not knowing the client well enough.
Whatever the reason for the failure, it can be devastating to a client family.
This is why clients ask so many questions when they’re interviewing advisors.
For Advisors
As advisors, we would do well to keep this in mind. When a potential client is kicking the tires on your practice, it is an opportunity to be helpful. Know your niche; know where you excel. You don’t need to sell every person on working with you.
You know your practice. You know if their needs line up with your specialty. You are in a better position to make sure that families are a real fit. If their needs don’t line up with your expertise, tell them and help them find someone that can do a better job – for them.
There are so many people who need our advice, the universe can’t help but notice when an advisor admits his/her own limitations and refers a potential new client onto someone who is a better fit for their needs.
For Clients
Do your due diligence. Ask all your questions. Make sure you understand all the answers. Take your time. Interview multiple advisors. Go back and interview your favorites again.
If you run into advisors who don’t want to answer your questions, or don’t answer them in a way you understand… move along. Those advisors are telling you they are not a good fit for your needs.
For All of Us
There are many advisors and many people seeking advisors. The challenge for both is to find the best fit. As advisors, we are probably in a better position to educate our clients and our potential clients as to what our circle of expertise might be.
And, for those of us who are students of the discipline, we would be happy to make introductions when we are not the right person for the job.
Helping a client find an advisor that fits their needs perfectly is a win – even if that advisor is not you.
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