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Love Is Inefficient
When your client relationships are on the line , don ’ t let cost-consciousness get out of hand .
By Philip Palaveev
AS THE SONG GOES , “ LOVE IS A MANYsplendored thing .” But it ’ s not efficient . Dorothy Parker did not write , “ My love , he ’ s cost efficient , my love he is scalable .” Emily Brontë did not write “ Love is like a 1-800 number .”
The human relationships we cherish are not measured by their efficiency , but instead by the way they make us feel and what they mean to us . And even though 1-800 numbers and customer service chatbots make us cut to the chase , we hate them with passion that deserves its own poetry . She talks so flat , so plain , robotic of endless labyrinths of Nines . She is so terse and non-melodic , And all she knows is fees and fines . ( My own verse here is inspired by Byron .) Most advisors would agree financial advice is about relationships , yet every business plan I read talks about efficacy first . It ’ s a goal I struggle to understand . For one thing , it ’ s self-defeating . It ’ s like bragging that you ’ re “ commoditizing yourself .” The more efficient you are , in fact , the more generic ( and thus easier to replace ).
Efficiency is a game best played by the biggest players . Amazon is an incredibly efficient retailer — would you dare try to compete with it on scale and productivity if you ’ re a small , boutique retailer ? McDonald ’ s has the same advantage — do you want to compete with it on price as a mom-and-pop operation ? And any smaller independent advisory firms squaring off against the likes of Vanguard , Schwab , Fisher Investments or the robo-advisors on productivity metrics are likely bringing a knife to a gunfight .
The real advantage small shops offer is actually their ability to create trusted , close relationships with their clients . So they should be using different words to measure success — words like “ trust ,” “ depth ,” “ quality ,” “ closeness ” and “ durability .”
Now let ’ s go down the other road , and see how seeking efficiency at all costs perhaps goes too far :
• Think of the emails that start , “ Happy birthday , dear client ” and are automatically generated by your sophisticated marketing software . Even if the software is smart enough to add a name , everybody knows the message is automated . The outcome is quite different if you write a personal note saying : “ I hope you are on your favorite beach ” ( especially if you know my favorite beach ).
• Think of an advisor being assigned 400 clients , which leaves her with no chance of ever remembering any birthdays or grandmothers ’ names .
• Think about the obsession with client segmentation . It ’ s worked so well for the airlines that now even cell phone companies are making fun of them .
MARCH 2024 | FINANCIAL ADVISOR MAGAZINE | 23