What three consumer-investors told CEOs at the Tiburon conference in New York

Brooke’s Note: The best consumer panel I’ve ever seen, hands down, was one assembled by Loring Ward in Monterey, Calif., last year. See: Loring Ward tells a focus group to let loose on advisors — and it does. What it had going for it was a big number of consumers, paid well for their services and quizzed quite masterfully. What it didn’t have was an audience full of the people who most need to hear what consumers have to say — the CEOs of large companies who are supposedly in business to ultimately serve their needs. At that panel, two CEOs, Alex Potts of Loring Ward and Eduardo Repetto, CEO of Dimensional Fund Advisors, were on hand and most of the rest were advisors. So I am pleased to see that Chip Roame continues to pull together a consumer panel doggedly for his CEO event and that I got Potts to serve as the reviewer of Chip’s panel last week.

Every year, a prominent feature of the Tiburon CEO Summit is the “Ask the Consumer” panel, featuring ordinary investors sharing their candid thoughts on their financial services experiences. See: From a Wall Street perch, Chip Roame imparts wry skepticism anaerobically at Tiburon CEO Summit of 2013, spring edition.

The very title of the panel epitomizes why so many investors are wary of the financial industry. Individuals and investors shouldn’t be seen as consumers! See: A conversation between a wirehouse advisor and a senior citizen who seeks trust.

They don’t need and — as they expressed on the panel — don’t want to be sold products. They simply want advice and advice in their best interests, not in the interests of a financial firm trying to drive sales.

There were about 125 folks in the audience this year in New York, including me, as CEO of Loring Ward intently listening to the three consumers. I like hearing disparate ideas and out-of-the-box thinking, however it tends to be rare that the dialogue allows for it. In the end, I hope for one idea, or concept, to arise and challenge my thinking.

A VA and a see ya later

The questions from the audience varied from how the panelists found their advisor to what they were looking for in an advisor. The theme was similar with that addressed by the consumer panel organized by my company. Most investors (consumers) initially thought they wanted a good “investment person” — someone who can bring investment performance.

Consumers got their New York minutes
at the Tiburon CEO Summit last
week.

However, as the two panelists at that event noted, their advisors managed their relationship by learning about them first, setting proper goals and realistic expectations around investment performance. Their advisors used simple, but not condescending, language. The positive experience “consumers” learned was to consume advice, not returns from a trusted professional.

There were three people on this year’s panel — a sophisticated investor, an inexperienced investor and a woman who manages her family finances, but isn’t sophisticated from an investment standpoint. Craig Gordon, a business head at RBC Capital Markets LLC, moderated.

The experienced investor, Tomas, was in the investment technology field. His first professional investment experience came through a broker working with his wife and investing with her trust. Tomas bitterly and incredulously explained: “As a 26-year-old, the broker sold my wife a variable annuity. They subsequently had no contact for nearly three years and then the broker called for an appointment with a 'new and improved’ annuity. Not once were they asked about their goals, needs or aspirations, Tomas said. See: How Glenn Neasham lost his house, was forced to go on food stamps and faces jail time after selling a senior an indexed annuity.

Gestalt advising

The other two panelists had more-positive experiences. They mentioned that they trusted the advisors they worked with.

Victor, a successful businessman with admittedly no interest in investments, happily hired his first advisor, who happened to be a trusted friend. He claimed his investment experience was nothing like Tomas’, meaning, he liked and trusted his advisor. He felt his needs were looked after first. He smiled in recalling his experiences.

The third panelist, Joan, owned her own business and worked with two advisors, one with a large wirehouse (Smith Barney), the other with an independent advisor from Michigan. She has moved the majority of her investments to the firm in Michigan. Joan happily said: “They took the time to learn about me, my family and my situation. They got to know me, took pride in what they did, spoke to me in simple and meaningful ways.” They definitely have a happy and satisfied client on their hands.

The common thread among all the positive advisor experiences: They took time to learn the client’s situation, were really good at what they did, built a plan and then recommended investments that made sense. The two positive investor experience panelists are in contact with their advisor “on a frequent basis” and genuinely like them as people and professionals.

What matters

Neither mentioned investment returns. And both said their advisors did a good job of explaining the strategy behind their plans, keeping things at a “high level,” That, Joan explained, gave her the confidence that she could get more information if needed.

Once again I was reminded that what most investors are looking for from financial firms and advisors isn’t complicated. Transparency, regular communications, long-term planning, education and putting the client’s best interests first — none of this is difficult.

It is what we expect from most of the professionals we work with. But too many financial firms have yet to master these all-important basics. Unfortunately, it is investors who usually end up paying the price for this failure.