In the world of financial services, everyone’s thinking about one thing: money. How to make it, how to grow it, how to keep from losing it.
But you don’t have to be obsessed with making money to “make it” in financial services.
In fact, you can be a successful financial advisor without focusing on this at all. Contrary to what the traditional world of financial services would tell you, you don’t have to sell products to survive. You can make a living by giving reliable, unbiased advice. Here’s how.
Focusing on the Client’s Needs with Fee-Only Planning
If you’re just starting out in the world of financial services, then there’s a good chance you’re working at a large financial firm. But if you want to hang your own shingle, you’ll have a lot more control over how you run your practice than you have at your firm job. And if you want to focus more on your client’s needs than on making sales, then there’s a perfect type of practice for you:
Fee-Only Financial Planning
Fee-only financial planning means you would charge a transparent fee for your services, but not commission from the financial products you recommend. You set the amount so you have full control over that – and you never have to worry about making a living off the sale of financial products. This type of practice also enables you to put your client’s needs at the forefront of your practice. You won’t be tempted to steer a client away from the product that’s best for them in order to make a sale. Instead, you can give totally unbiased (as “totally unbiased” as any naturally subjective human can be) advice.
So how does this type of practice compare with the others? In total, there are three types of financial advisory practices you can run:
Fee-Only Financial Advising
Fee-Based Financial Advising
Commission-Based Financial Advising
Fee-only is what we discussed above and commission-based is exactly as it sounds; commission-based advisors earn money through a commission of the sales they make to their clients. Fee-based financial planning is a bit more tricky – it’s not the same as fee-only. A fee-based financial planner charges an upfront fee (just like a fee-only planner), but can also earn commission (like a commission-based planner). In short, a fee-based planner looks like they’re free of conflicting interest, but their ability to earn through commission invalidates that idea.
When choosing a type of practice to run, just remember that if you don’t want to sell products to survive and you want to focus on your client’s needs above all else, then starting a fee-only financial practice is the way for you to go.
Building a Practice on Trust, Not Sales, Means You and Your Client Win
Besides the fact that a fee-only financial advisor doesn’t have to sell products to survive, this type of planner is also especially positioned to build a practice on trust.
If your clients know that you’re always going to meet their needs before you try to make a sale, then they’ll inherently trust your advice more. And as long as you are meeting their needs (listening carefully to their goals, recommending the right products for them, and staying on top of research and compliance), then that’s something you can build a long-term, relationship-based practice on.
Will you, as a fee-only financial advisor, earn less than a fee-based or commission-based financial advisor? Maybe. Maybe not. Will you also be able to guarantee that you’re not working on a conflict of interest to your clients? You’re definitely in a better position to do so. (You still need to actually offer the best services and not just recommend things you like or things attached to your colleagues that you’d like to offer favors to – compensation can come in more forms than income.) Will you, as a fee-only financial advisor be free of a life surviving on the sale of products? Absolutely.
At the end of the day, the choice is yours. No matter what type of practice you choose to run, make sure it’s in line with your priorities so that it will work for you now and ten, twenty, thirty years from now. And if your priorities are to not have to make sales to survive and to give as unbiased advice as you can give, then fee-only financial planning is the way to go for you.
Image Credit: Matthew Wiebe