What is a ‘Perfect’ Financial Advisor?

Inspired by Vince Lombardi, AI and decades of industry experience, our columnist offers his own take.

By David I. Leo
David Leo
David Leo

Legendary football coach Vince Lombardi said, “Perfection is not attainable, but if we chase perfection, we can catch excellence.” While this quote may not suffice for perfectionists, it is worth remembering. It’s something I think about when considering which attributes define a perfect financial advisor.

One way to start a definition is to ask an “unbiased” source. I used ChatGPT, an artificial-intelligence chatbot. Some may argue against ChatGPT, so I started by also asking it, “Should I trust ChatGPT replies?”

ChatGPT replied, “As an AI language model, my responses are generated based on patterns and relationships observed in large amounts of data. While I strive to provide accurate and helpful information, my responses may not always be perfect or applicable to every situation. Responses are generated by an algorithm and do not represent the opinion or advice of a human expert. Therefore, it’s always a good idea to double-check the information I provide and consult with a qualified professional when making important decisions. While I aim to be helpful and informative, it’s up to you to evaluate the information and determine whether it’s trustworthy or not.”

With 40 years or so in the financial services industry (and my 85 years on this earth), I’ve decided I’m a qualified professional. As such, I believe the seven characteristics I’ve expanded below (to supplement ChatGPT’s definition of a perfect financial advisor) are valid and should be used to set base guidelines or principles for your financial advisory practice.

Some perspective

Before I begin, it’s important to note that one can always add to this list. Remember, too, that even the Bible and the United States Constitution have been subject to change and multiple interpretations over time.

For example, the Bible is not a single book but a complex arrangement of at least 66 books (Roman Catholic bibles include another seven books) written over many years by multiple authors. So, the question concerning which version is accurate can be complicated. The entire Bible has been translated into more than 700 languages. As for the Constitution, it has had more than 11,000 proposed amendments although only 27 have been ratified.

The point is, I encourage you to continue to think about what the financial advisory profession means to you and how you can improve upon it. (Plus, I hope you find the above information I came across while searching the Internet as fascinating as I do.)

ChatGPT’s response and my expansion

ChatGPT said, “A perfect financial advisor is someone who provides their clients with personalized financial advice and services to help them achieve their financial goals. Here are seven characteristics of a perfect financial advisor … ” These characteristics, noted in the subheads below, are accompanied by ChatGPT’s brief descriptions in bold. My more detailed explanation of what each characteristic means from my perspective follows in plain text.

1. Ethical and trustworthy

A perfect financial advisor always operates with integrity and transparency and is focused on their clients’ best interests.

One would expect that acting as a fiduciary is the first and most important standard for a financial advisor. “A fiduciary is a person or organization that acts on behalf of another person or persons, putting their clients’ interests ahead of their own, with a duty to preserve good faith and trust. Being a fiduciary thus requires being bound both legally and ethically to act in the other’s best interests.” While definitions are easy, the question is how do you act?

Are your fees transparent? Is your client communications proactive, consistent and straight-forward? Do you take the high road whenever possible? How well do you really know your client and their wants and needs?

Additional Reading: Planning for Four Thousand Weeks

2. Experienced and knowledgeable

They have a deep understanding of various financial products and markets, as well as experience in creating financial plans and helping clients make informed decisions.

This is partly personal and partly professional. Is five years long enough? How do you compensate for limited experience and knowledge? Who’s on your bench?

Some people don’t believe in or have designations. I believe that’s a mistake. There are more than 200 designations available to financial professionals, all with varying requirements and degrees of industry reputation. The top-three financial advisor credentials are shown as CFP (Certified Financial Planner), CFA (Chartered Financial Analyst, and PFS (Personal Financial Specialist). Other key designations include CPA (Certified Public Accountant), ChFC (Chartered Financial Consultant, RICP (Retirement Income Certified Professional), and CPWA (Certified Private Wealth Advisor).

Advanced certifications as a financial advisor can provide numerous benefits to clients, including increased knowledge, competence, expertise, enhanced credibility, and expanded service offerings. Most importantly, perhaps for both the client and advisor, is advanced certifications increase the confidence of the recipient.

3. Good communicator

They are able to clearly and effectively communicate complex financial concepts to their clients, in a manner that is easy to understand.

Though perhaps obvious, do you do this? Do you ask the client if they understand what you’re saying in ways that are not off putting? Do you follow the 80/20 principle? Meaning, you talk 20%, you listen 80%. Are you an active listener? Do you truly hear what people are really saying? Research suggests we pay attention to less than half of what people say. What’s your number?

4. Responsive and accessible

They are always available to answer clients’ questions and provide support, and they respond promptly to clients’ inquiries and concerns.

Note that “promptly doesn’t mean you pick up the phone when it rings. My suggestion is that an assistant answers all calls and tries to resolve the reason for the call first. For your best clients, if you are not in a meeting, your assistant can interrupt you. For all other calls I recommend call backs the same day during two preset periods such as noon and 5 p.m. Emails from clients should be responded to initially by an assistant and as needed by a financial advisor once or twice a day at preset periods unless the assistant sees an urgency.

Advisors can have a second cell phone for key clients requiring instant responsiveness.

5. Adaptable and forward-thinking

They keep up to date with changes in the financial industry and are able to adapt their strategies to best suit their clients’ changing needs and goals.

This is a huge challenge just because of volume and the pace of change. Reading of select sources is an important method along with a realization that none of us can know it all. Bob Veres and Michael Kitces are two known sources of quality information.

Ideally, a team member would review all inbound material and selectively forward items to the rest of the team. Being part of a mastermind group can be very valuable. Have other sets of eyes: your team and colleagues, your firm, a coach, and automated Google alerts.

This characteristic and most of the other elements of excellence require a tight team organization. This includes daily huddles, monthly review meetings, and annual or semi-annual strategic planning meetings.

6. Personalized approach

A perfect financial advisor takes the time to understand their clients’ unique financial situation and goals, and develops a customized financial plan tailored to their specific needs.

The theory of Dunbar’s number, 150, refers to the theoretical cognitive limit on the number of people with whom an individual can maintain stable social relationships. This number has been applied in various contexts, including business and social media, to suggest that there is a natural limit to the number of people that one can meaningfully interact with.

According to this theory, the tightest circle has just five people — these are loved ones. That’s followed by successive layers of 15 (good friends), 50 (friends), 150 (meaningful contacts), 500 (acquaintances). Rationally, one might expect that you can only personally know, with significant depth, perhaps 25 to 50 client families at most.

Knowing these families in depth would allow a level of personalization, but perhaps would not generate the amount of business you’d like. By effectively using a customer relationship management (CRM) system, you and your team can add knowledge about your clients. This is critical to personalization and would allow you and your team to engage in deeper levels of personalization for more families.

Having an excellent discovery process, continuing to discover over time, and keeping your CRM current will allow personalized service and a customized financial plan.

7. Strong track record

They have a proven track record of helping clients achieve their financial goals and can provide references and results to back up their expertise.

Certainly, time and experience affect one’s track record. To be able to illustrate and ensure a strong track record, you need to have a formal client satisfaction process. This should include outside surveys, maintenance of metrics over time, formal and informal feedback processes, and, potentially, client advisory boards.

Having written endorsements and clients who are willing to act as references can also be symbolic of solid track records. (Of course, there are also compliance considerations here.)

In summary, continue to seek perfection and operate with excellence in all you do. Know that excellence in a competitive environment is a temporary situation because it’s always moving up and to the right. Your secret can be continual learning with effective and persistent exemplary execution.

David Leo is founder of Street Smart Research Group LLC. He is an author, speaker, coach, consultant, and trainer to financial professionals. David has worked with the financial services industry for decades, originally as a consultant with IBM and then with UBS/Paine Webber before starting his own firm. If you would like more information about his services, contact him at David@CoachDavidLeo.com or visit www.CoachDavidLeo.com.


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