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Wall Street Steward Blog

Salesman or Consultant: Make Your Choice

You know that feeling you get when some aggressive salesperson is pushing you to buy something that you KNOW you DO NOT want?

You know the one…the one that causes you to think “I don’t need this, it is too much $money$, this person is annoying, I don’t even like them, I am not buying this, and they are W-A-S-T-I-N-G my time….”

Ultimately, these thoughts usually collect into an objection like:  “I’m not interested.”

As soon as this phrase is uttered, the salesman tries to hide a devious grin as he flips through his mental rolodex looking for “overcoming objections.”  The person reels off some old, tired, cheesy phrase that makes you want to roll your eyes. 

Let the cycle begin…you sir/ma’am are being S O L D.

What this game really proves is that the salesperson is either (1) deaf or (2) doesn’t believe that you do not care what he has to say.  Rather than just BELIEVING that the prospect is not interested, they insist on a ridiculous sparring match that will only irritate the customer and prevent a sale.

DOES THIS SOUND FAMILIAR?

When it comes to your money, would you rather have a salesman pushing you to make decisions or a consultant that will listen to your needs and advise you prudently?  Make your choice.

I thought so.

If you prefer the high pressure, “you cannot afford NOT to buy this” approach, then please find another motivational seminar to attend. 

For the other 98% of you….READ ON.

WHICH APPROACH ARE YOU PAYING FOR?
Many people are currently working with advisors that charged them a large, UP-FRONT fee.  This fee was associated with a certain type of investment, and may or may not have been visible to the client. 

That’s right…the broker got paid whether or not you actually saw the fee.  Nice, right?

“He gave us a lot of attention in the beginning, but once we opened an account and started dealing with him, it was difficult to get him to return our phone calls.  It was like he was done with us once we became a client.”

That is an exact quote that I have heard dozens of times over the years.  Consider the following scenario:  if your company paid you 5 years of salary in the first year and nothing for the next 4 years…would you work harder in year 1 or years 2-5?  How hard WOULD you work after that first year?  Would you still CARE after that first year?  You already received the money, so why should you work hard?  

That could be what is happening in this case.

Car Salesman ApproachThank you for buying this car Mrs. Jones.  I get a $1,000 commission for this sale, but I need to go find someone else that needs a new car so that I can make a commission on their sale.  So, if this vehicle gives you any problems, please contact the service department.  Only call me back when you are looking to purchase another car.

Is this what your broker is doing to you?  After all, if you paid an up-front fee to them, they will likely not make any more money off of your account unless you purchase more products from them.  That is probably why they are harder to get on the phone or why they do not treat you as well as they did before you invested.

WHAT IS THE ALTERNATIVE?
If the approach above rang true for your situation, then you must be wondering how it could have been structured differently.  I am sure you did not walk in asking for the rep to charge you an up-front fee.  Chances are, either you were not given all of the options, didn’t know the fee you were paying, or the rep is not licensed to form a “fee-based” relationship with you.   

With an Advisory Account (fee-based) approach, you pay as you go….1 year of salary (or fees) for 1 year worth of work.  If you are unhappy, you have the right to walk away.  You have the freedom to transfer to another institution if the advisor does not return your calls, etc.   Furthermore, normally the fee is a percentage of your account balance, so the advisor has a vested interest in seeing your account grow. 

Example:
$100,000 account
1.5% annual fee
$1,500 total fees per year

If your account were to increase to $125,000, then the fee-based advisor would get a pay raise to $1,875 (1.5% of the $125,000 balance).  If your account were to drop to $80,000, then the advisor gets a pay cut to only $1,200. 

“They share in your gain and they share in your pain.”

Contrast that to the broker who collected a 5% fee up front.  He/she got paid $5,000 the day you invested your $100,000.  What vested interest do they have in the account going up or down?  They received their check…why should they care?

Consultant ApproachThank you for your business and trust Mr. Roberts.  I will work just as hard next year to try to grow your account as I did this year, because I realize that you have the freedom to walk away at anytime.  I am at your service, and I will help you any way that I can.

NOT FOR EVERYONE
I realize that the Advisory Account (fee-based) approach is not for everyone.  There are situations where it would NOT make sense to pay an annual fee on your account.   An example would be if you intend to hold your investments static and make very few (if any) changes over time.  In that case, obviously you would not want to be paying a fee each and every year. 

YOUR CHOICE
One approach is not BETTER than the other.  It is all about which approach the CLIENT prefers as they choose an advisor to help them reach their goals.  I can tell you from experience though, for me, the Advisory Account (fee-based) approach has built stronger relationships with clients and has promoted a better client service model. 

Salesman or Consultant….your choice.

Creative Commons License photo credit: hahatango