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Financial Advisers: “A Crisis of Confidence”

Posted by Larry Doyle on May 23, 2009 7:38 PM |

Are you confident in the financial advice you are receiving?

A recent report in InvestmentNews, Financial Advisers Face a Crisis of Confidence, indicates that an overwhelming number of investors are not happy with their financial advisers. In fact:

About 80% of affluent investors — that is, those with more than $500,000 in investible assets — are “disgusted with their adviser because their adviser is spooked,” he said.  

Wow!! How is it that such an overwhelming percentage of investors can develop disgust with their adviser? Very simply, as with any service, if you are not getting professional coverage for the fees charged, a level of disgust can easily develop.

Based on my experience, I have dealt with a wide range of professionals in this field. A small percentage are outstanding, a few more are more than satisfactory, a large percentage are decidedly mediocre, and plenty are borderline, if not totally incompetent. I would venture to say the same assessment could be made of many professions. How does this happen? 

Financial advisers are primarily trained to do two thngs: sell products to generate commissions and gather assets to generate fees. I have been involved in training programs as participant and adviser. Additionally, I have been solicited more than I care to remember. All too often, I have experienced people and programs geared toward products and services.

Very infrequently have I experienced programs and people that fully understand the dynamics at work in the economy and markets. Additionally, I have very infrequently experienced people who truly care to learn and understand the customer’s needs and how they can help solve the customer’s issues. Why?

The salesperson or adviser is too focused on writing immediate business and moving on to the next sale. What is the result?

The relationship between adviser/salesperson and client lacks depth. The advisers have not been properly trained in assessing and managing risk. Instead of proactively growing their business, they are forced to play defense because the nature of the business has changed. Can the advisers adapt? Being forced to adapt to change creates stress for most people while it creates real opportunity for a select few.

InvestmentNews highlights the dramatic changes advisers are facing:

“They feel like they are drifting,” Mr. Gutwillig, a partner at Financial Decisions Inc., said in describing the mood among the advisers he has spoken to recently. “Some doubt every [investment] precept they’ve relied on.”

Mr. Gutwillig is not alone in noticing the fragile emotional state that many advisers are in these days.

I empathize with advisers and clients at this time; however, make no mistake, many advisers are ill equipped and improperly trained. They understand products, a commission schedule, collecting assets, and stockpiling clients. Many know precious little about service, the economy, the markets, and their customers. As a result: 

Without a doubt, financial advisers are in need of help. Many are suffering a crisis of confidence that is hurting their relationships with existing clients and hampering their abilities to recruit new clients.

The crisis of confidence has spilled over to every corner of the financial advice business — from top decision makers to lower-level advisers and support staff, experts said.

I consider myself fortunate to have received the on-the-job training that I did.  I recall showing up my first week of work on Wall Street eager to conquer the world. I cooled my jets when I was informed, “Larry, you really aren’t going to know anything for at least a year, so do what you can to help and take it from there.” Larry Fink, the current head of Blackrock, did me a huge favor by properly managing my expectations and allowing me the time to truly learn.

Meanwhile, InvestmentNews provides more color on the tales of woe besetting finacial advisers:

“It’s often challenging to separate the sadness and distress they feel for their clients from the sadness and distress they feel for themselves,” Mr. Figley said.

The mental funk is causing many advisers to avoid client contact, which is a big mistake.

Investors are looking for guidance, said consultant Matt Oechsli, president of the Oechsli Institute Inc. in Greensboro, N.C.

About 80% of affluent investors — that is, those with more than $500,000 in investible assets — are “disgusted with their adviser because their adviser is spooked,” he said.

Mr. Oechsli’s firm this year surveyed 733 advisers, and late last year surveyed 750 affluent investors as the market was falling.

Even so, only about 20% of advisers have increased their face time with clients this year, he said.

Lost confidence is also behind a virtual halt in marketing activity by advisers.     

As with any retail driven business, it is imperative to stay close to your customers, but especially during challenging times.

Again, I am fully empathetic with everybody facing challenging times. That said, I maintain that those who will succeed for the long haul are those who are always moving forward, learning, and engaging.

That, my friends, is what I am trying to achieve with my work at Sense on Cents.  I hope this site and my writing helps you navigate your economic landscape. If so, I am all for sharing so please let your friends and colleagues in on the “navigating” as well!! 

Please give me feedback and let me know how I can make Sense on Cents even better. Thanks!!


  • Wow Larry – not surprising to me, but 80% is still a big number. I had an absolutely awful experience with my Certified Financial Planner (CFP), who aggressively sold me auction rate securities and put all of the cash in my portfolio into them. He also had me in very expensive mutual funds, something I had to of course figure out on my own. I’d like to know what percentage of CFP’s recommended to their clients to get out of the stock market in late 2007 or early 2008? Did any? Mine sure as heck didn’t. I have interviewed 4 other CFP’s since that one and they all are extremely biased towards the stock market, are all negative towards CD’s, negative towards foreign currencies, and negative towards commodities, unless of course they are ETF’s. This article is not surprising and a very clear sign of the times.


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  • coe

    Several thoughts occur to me, LD – first, I absolutely agree that the advisor community is only marginally trained, geared to push products and services, and probably hasn’t been experienced enough to deal with down markets of recent magnitude (who has?) – a formula that doesn’t lend itself to creating confidence; second, though there is typically a perfunctory effort to address risk tolerance and objectives (if only in a paper trail questionnaire), many advisors really don’t spend the time to develop a relationship with their clients – a shortcoming you are spot on in identifying; third, too many of the advisors I know are quick to tout their respective firms’ biases, research, and asset allocation recommendations chapter and verse – a poor substitute for critical thinking in crafting a plan related to client specific needs. I do think they are more often than not genuinely sad to see things go wrong – partially because they actually do care on some level, and partially because it adversely affects them personally…I’m not ready to throw in the towel on the whole asset management industry – many advisors actually have what it takes and earn their commissions…but just like the old airline commercial where the sales manager hands out plane tickets for his team to go visit their clients, in times of pressure and pain, it is even more important to make the effort to engage one’s clients in a heartfelt discussion of conditions, problems, revised goals, new risk assessments, and, in so doing, create confidence – it shouldn’t be viewed as an aberration – but rather people doing their jobs!

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