Unless you are performing your own investment research and purchasing shares directly from the companies you select, you will be using a middleman when making a financial transaction. Almost all of these people get paid for being part of the process. So, it is not beyond reason to think that each person has a vested interest in getting you to purchase something through them.
This is part of life. We all know that Hallmark helps to “create” holidays and social norms so you buy more cards. Supermarkets strategically place the most expensive cereal at kids’ eye level to encourage additional purchases. And, the guy at the car lot, well, we know that he’d rather sell you the loaded model rather than the stripped-down version which probably would have met the majority of your needs.
There is always an angle. Those in the financial services industry have had vested interests in placing certain products for a long time. The plaid jacket with elbow pad wearing insurance salesman was an icon for decades. He was replaced in the eighties by the (we’ll say) high energy phone jockey with the can’t miss stock pick. More recently, there have been an abundance of people trying to win your business with eye-catching cufflinks, non-applicable degrees on their walls, and a bunch of questions designed to make you feel like you are being heard.
Regulatory organizations and government agencies have been doing their part to clean up the industry. But, with 850,000 people calling themselves some version of “Financial Advisor,” how is it possible to tell if you have found someone who truly aligns with your ideals and objectives? There are myriad ways to do so but, I have found it usually starts with determining if someone is pushing something on you or pulling you toward them. Pushing a specific product, a timetable, or exacerbating fears, would be something to avoid. By contrast: An advisor with professional gravitas, helpful information beyond what makes the investment decision, and a great deskside manner is someone who, rightfully, pulls you toward them.
It’s likely you’ve met both types in your search for financial advice.
The Pusher is much more prevalent in the financial services industry.
Has someone ever introduced the idea of an annuity to you? … an annuity with a bonus which may or may not be around if you think about it for a few days/weeks? You’ve met a pusher. I’ll go deeper into the appropriate applications of annuities in a future post as they do have their uses but, it seems as though insurance salespeople make liberal application of this product. If you’ve been working with me for a while, you’ve probably heard me say, “If all you have is a hammer, everything looks like a nail.” Many “Pushers” are only licensed to sell one thing and, of course, it must be a panacea! Be cautious with those who cannot make recommendations on both securities and insurance products.
What about investment advisors? If they give me a diverse portfolio, they must have my best interests at heart! While nobody can tell what’s truly inside one’s soul, the design of the products one represents is a clear indication if they’ve sold out on some level. Many investment advisors have designed generic portfolios to provide their clients with a wide-reaching asset allocation. The value these portfolios have will be addressed in the future but, one-size fits all investing doesn’t allow much input from the investor. Therefore, it is being pushed on you.
“But, my advisor has asked me a ton of questions to make sure she knows what to recommend!” That is a wonderful indication she knows how to pull you closer. But, your connection to the advice may still be at arm’s length. There are two learned behaviors advisors have begun mastering to try to break down the walls consumers rightfully put up in a sales situation: The Data Gathering Trap and Consultative Selling.
Simply put, Data Gathering (also called Fact Finding) demonstrates that the advisor is interested in what brought you to the table and, even more valuable, elicits conversations about goals (expenses, etc.) which may have never come to mind to that point. The Data Gathering Trap becomes evident when the result of all of the work is the same for the person she saw before you as the one she will after … just shades of gray different in some cases: 50% stock instead of 60% but all the same investments, just different proportions. A ‘financial plan’ of sorts may even be put together from the data collected. Notice that the plan focuses on the product being pushed; all other questions are referred out to an attorney, a CPA, or your benefits person at work.
Does the advisor set up an education plan regarding your current financial position and how to comprehensively meet all goals? This is an example of pulling. Or, does she meet with you every six months to provide excuses for returns on the portfolio you were sold? This is hardcore pushing. Obviously, an advisor should help you close the info gap in your financial education. But, for pushers, an educated client may mean a former client.
Consultative Selling can be a worthwhile endeavor for all involved, when done without malice. But, like every other workplace self-help idea or book, it has been co-opted by people who only care about the end-result and look at the client as a means to that end. Have you ever had someone from your workplace, usually a supervisor, suggest you read the latest corporate mumbo jumbo? “Who Moved My Cheese?” “The Seven Habits of Highly Effective People?” Then they start trying to manipulate you, supposedly for your own benefit, through use of lingo. “You have to seek first to understand, grasshopper,” they lob at you. Those in-the-know will parry with, “I would, if you could just extend your bridge a little.” Well, there are plenty of self-help books for those who want to get better at sales.
Fledgling advisors are usually introduced to books which espouse “consultative selling” approaches. If all a salesperson takes away from these missives is that he/she should ask open-ended questions to further discussion, then they are improving the client experience and collecting valuable information. However, most of these books move beyond active listening skills and confirming what’s important. They delve into the psychology of getting people to say “yes” to simple questions so they’ll be set up to automatically reply “yes” to more difficult inquiries … like whether they want to get started. These books aren’t about unearthing useful data from the client. Rather, they teach their readers how to use language to manipulate their subjects into making a purchase. Typically, it’s those who represent a product without evident value who must keep confirming you see the benefits of their product or service throughout the presentation.
That brings us to another push … The Script. Again, a topic for much deeper exploration at a later date but, if your advisor is making a presentation and not holding a fluid conversation with you, you are being sold something which may not fit your exact situation.
The Puller shouldn’t even be aware of the strategy he/she engages to make you a client. It should be a combination of making the correct inquiries to determine how best to increase education and comprehension, representing him/herself as a comprehensive expert by never putting sole focus on what pays him/her, providing deliverables, and answering questions at the time they are posed. Recommendations should be organic, not canned.
To be clear … Just because someone’s a pusher doesn’t mean he doesn’t know what he’s talking about. Conversely, if an advisor has converted to pulling (almost everyone starts a pusher in this industry), it doesn’t necessarily make them a skilled industry professional.
Most likely, you have heard the term “fiduciary” associated with my industry. There is deep significance to this term and we’ll deal with it in future posts. But, for now, let’s just sum it up by saying that it should be clear if your advisor is subordinating his/her interests to yours. The Puller does just that by:
- Providing options, having extensive information on all choices (not mysteriously more about one and just a little about the others)
- Appearing not to favor any particular result
- Explaining all costs involved and, when appropriate, his/her compensation
- Enjoying the opportunity for value-added, unpaid support and guidance
I envision Pushers as generic salespeople and experienced Pullers as a Zen Yogi helping align the client’s personal universe.
Pushers, especially those who have been doing it for years, have a way of narrowing down choices until the product they represent seems like the only way to obtain what you seek. They have been guiding the conversation to their own ends. While Pullers build consensus and take the requisite time to examine the case from all angles. Pullers still get paid for being involved in your financial transaction(s) but, they don’t begin with that end in mind. They take pleasure in the journey with the client and understand that, by truly aligning with the client, the appropriate compensation will come in time. We work hard to create a gentle pull in providing our clients with the Full Picture …
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