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“I invest on my own, so I don’t need a financial advisor.” Many financial professionals hear this from friends and acquaintances. Here is one reason: They might not see the value the advisor brings to the relationship. Another reason is they are not taking investing seriously. It is easy to make the case when the outcome is important, you want a personal relationship with the provider.
Scenarios Where a Personal Relationship is Critical
Let us look at a few examples where a rational, practical person wants a personal relationship.
1. Medical advice.
Most people have a family doctor. They tend to be loyal, not switching doctors. If they need a specialist on a regular basis, they are often loyal to that doctor too. If they are considering changing medical plans, one of their first questions is “Is my family doctor in the network?” You want your doctor to have built up knowledge of your personal medical history.
2. Legal advice.
You see this on TV dramas all the time. If the suspect is uncomfortable during the police interview, they say “I want to call my lawyer.” They are not saying “a lawyer” they are saying “my lawyer.” You want someone who has defended you before and has a track record of success.
3. Accounting advice.
The more complicated your tax situation, the greater your need for personal advice. The great fear people have is getting audited by the IRS. The IRS can generally go back three years. You want an accountant who has prepared and filed your taxes year after year, so they are in a position to defend their actions on your behalf.
4. Hair stylist.
Many people take their hair seriously. It is part of their identity. A veteran stylist knows the qualities of your hair and what styles suit you best. You take their advice seriously. You tip, often in excess of what is expected. If your hair stylist moves to another salon, good customers often follow them.
5. Auto mechanic.
If your car is out of warranty, many people bring it to an independent mechanic who they know and trust. They might specialize in German cars. When they give you advice, you accept without hesitation. You know they are keeping you safe on the road.
In all these situations, the outcome is serious enough that you want to know your provider. Ideally you want a relationship that goes beyond transactional. Trust is a ket component. Financial advice should fit into a similar category.
Scenarios Where Most People Don’t Seek Out a Personal Relationship
In the US, we live in a consumer driven economy. We spend money of many types of goods and services. Here are a few examples where having a relationship with the provider is considered unnecessary by most people.
1. Buying groceries.
You know what you like. You may (or may not) be aware of what items are on sale that week. You might not check over your receipt for accuracy or even notice how much groceries cost. You buy based on convenience. You don’t know the proprietor.
2. Buying gas.
You do this every week. You consider gasoline a commodity. Regardless of the station where it is bought, it is basically the same product. You buy on the basis of cost and convenience. Whoever has the best price is the station that gets your business. You probably have no idea who owns the station or the names of the people pumping gas.
3. Banking.
In the 1960’s there was an advertising slogan, “You have a friend at Chase Manhattan.” People got loans and mortgages through loan officers. Banks had tellers. Today, most banking is done online. Fewer people venture into a bank branch. Loan decisions might be made largely on numbers, not a personal relationship with a bank officer.
In the last three examples, the client does not see how a personal relationship would add value. The outcome would still be the same. Financial professionals need to make the case they belong in the first category, where the outcome is important.
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