Am I serious about this headline above... deadly!

I assure you, I ripped these quotes from the headlines of daily newspapers over the past 30 days.

The question is are you worried, or is it "no big deal" because your clients recognize the value you add to their lives and would be happy to pay you substantial annual fees rather than pay commissions or investment-managment fees of any type connected to investment products or programs?

This story is real for financial advisors in Australia.  You may "google" many related articles such as this one from The Brisbane Times.

I love the idea personally.  Imagine if financial advisors were prohibited from earning product commissions or charging fees based upon a percentage of a client's assets "under management" (which my firm does, by the way)?  Several things would immediately become a reality.  First, financial advisors offering "thin client deliverables" after a product sale would quickly have to step-up or be decimated by those few advisors offering fully comprehensive financial services to their clients.  A second reality would be that financial advisory practices with foresight will fill-up and quickly close  their doors to new clients.

Financial advisors who have already moved to a comprehensive financial services model, which makes them indespensible to their clients, are typically only willing (and able) to fully serve somewhere between 75 - 150 clients.  Therefore, open spots for Ideal Clients will quickly fill within these practices (which represent a small minority of financial advisors).

So how invaluable are your services to your clients?

Here are a few of my favorite quotes from the Australian newspapers about this very real issue.  Question: read these and think about how your practice would react to these headlines?

"The Securities Commission has proposed that up-front and trail commissions, volume-based bonuses, soft-dollar and fees based on a percentage of funds under management all be banned."

Your Reaction:
A. No biggie       or...        
B. "OUCH!!!"

"Current financial advisor conflicts of interest  and their impact are not transparent to the consumer"

- From the Australian Securities and Investment Commission's
submission to the federal parliamentary inquiry
into financial services and products.

Your Reaction:
A. The U.S. Government would never insert itself in private industry in this way        or...        
B. "OUCH!!!"

"This is the Berlin Wall. People thought it would never come down. The ramification for consumers will be wonderful"

- Policy advocate quoted in a "front-page' piece in an Australian daily

Your Reaction:
A. Our clients recognize we have no conflicts of interest, and know that we always find for them the best products and servcies at the lowest costs to them.         or...        
B. "OUCH!!!"

"A ban on commissions would have the most significant impact on protecting retail investors, by replacing the existing "sales culture" with a professional advice industry."

- Spokesman for the Australian Securities Commission

Your Reaction:
A. No client of ours has ever felt "sold" by us; the only thing we have to sell is our best advice.         or...        
B. "OUCH!!!"

For the record, I'm not opposed to commissions per se, and have never felt the method of compensating an advisor for exceptional advice mattered much.  When it comes to commissions, my position has always been the proverbial "Guns don't kill people... people kill people" stance.  In other words, it's not the commissions which are evil, but advisors who are swayed by higer commissions to give advice to clients which is not the best advice.  And I believe these "evil" advisors to be quite rare.

That said, it's easy to understand a regulator's feeling that it seems simpler to remove the temptation created by commissions in an admission that investor protection laws are inadequate and oversight of advisors is beyond their capacity.

My intention in this entry was not to get into the commissions versus fee-for-advice-only debate, but simply to ask this question:

"If securities regulators were to remove all ways for you to be compensated through investment products or programs, would your ideal clients be clammoring to meet with you to assure you they'll be happy to pay any reasonable fee to keep their comprehensive financial services relationship with you in place?"

Are your clients completely clear about the value you add to their lives?

What struck me was that this story was sent to me by financial advisors who we work with in Austrailia AND that most are unworried.  You see, the financial advisors we work with recognize that those of us who offer the most comprehensive services are the most valuable to their clients and are not fearful of the method in which we are compensated.

So, for those of you committed to offering even more fully comprehensive financial services to your clients.... you are the future of our industry and are the types of advisory practices the regulators envision when they describe their desire to replace "the existing 'sales culture' with a professional advice industry."