Ockham CEO Published in Forbes

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Client Therapy
The iTunes Financial Adviser
Christian Ward 02.11.09, 10:45 AM ET

If anything is clear from the current financial crisis, it is that financial advisers need to become adaptive. Servicing investors’ financial wealth solely using a monthly statement will not suffice much longer. Clients deserve and demand a more interactive experience. Hand holding becomes archaic when information is everywhere.

So how should a financial adviser go about empowering their client base while maintaining a key position in each client’s investing value chain? The answer lies in the adviser recognizing that there is a new way to do business and that their own clients are driving this change.

Perhaps a look at digital music can be informative. While seemingly disruptive to music labels and software providers upon its launch, Apple’s iTunes quickly became the most dominant music outlet by allowing customers to have an interactive “dialogue” with their media and media providers on their own terms. Customers said things like, “I don’t want the whole CD,” and “I want to try a song before I buy it.” They also said, “Don’t tell me how great something is unless I ask, and don’t push products on me. Give me great access to my media from anywhere and give me human contact when I want answers fast.”

The success of Apple and iTunes is that they heard these demands and answered them. The iTunes model empowers each client by putting the best tools and information at their fingertips, while leaving the door open to additional services many don’t even realize exist. In return, iTunes has the most loyal client base in the highly aggressive world of online music and software distribution. (Remember, we are discussing items with a $0.99 price point.)

By empowering consumers and clients to interact with information and products on their own, iTunes created a bridge between old concepts and new demands. The sheer volume of shoppers on iTunes that desired a better alternative was almost unimaginable, and today’s financial crisis and resulting crisis of confidence have created a similar volume of investors seeking a better financial advisory model. We are entering the age of the iTunes investor-enabled, interactive and informed.

Of course tracks from the Rolling Stones are not Dow stocks and ETFs will never be as original as Bob Dylan, but financial advisers must recognize that personal tastes are at the heart of any purchase or investment. Despite the best of intentions, an adviser cannot choose the music on a client’s iPod better than he can choose it himself.

Now I recognize that you may say, “My clients aren’t that sophisticated,” or “Picking music isn’t like picking stocks and funds.” To you, I offer two observations. First, there are more than 10 million songs on iTunes, and there have been over 6 billion downloads as of January 2009. Searching, sampling, reviewing, purchasing and installing these songs and applications from such a massive library has remarkable similarities to investments. Second, if your clients weren’t that sophisticated before October of 2008, they are learning that sophistication right now and searching for the tools to help them achieve that knowledge.

The iTunes investor has two options. Build the knowledge base necessary to go it alone, or work with a trusted adviser who will help him build that knowledge base. Either way, he is going to build his own knowledge base. The question is whether a financial adviser will be involved.

Einstein said, “Information is not knowledge.” Professional advisers know that this statement carries particular weight in their business. As information overload (or TMI in texting parlance) cuts into interaction with every client, it becomes increasingly important to help clients slice through information to get to what is necessary. The same way iTunes can whittle down 10 million song choices in three clicks, so too must a financial adviser. That is where you earn loyalty and provide value for your clients.

Investment advisers need to share their knowledge base with their clients. Advisers must cite and direct clients to informational tools that they respect and utilize so that a dialogue can be achieved. This will allow for more efficient communication for both of you by broadening the base of knowledge.

You must empower them to watch their portfolios and news pertinent to those holdings and be available when things don’t go as planned. Just because they will occasionally download a song they don’t like, doesn’t mean they’ll cancel their iTunes subscription. It just means that they may want to try another song from a different artist. They will seek counsel from their trusted ally and idea supplier, their adviser.

ITunes investors will value relationships that keep them enabled and informed. They will rely on those who share knowledge openly with them. They will demand an informed dialogue about their wealth and financial goals.

Keep your clients informed and your clients will keep you.

Christian J. Ward is CEO of Ockham Research, an information, content and financial research firm in Atlanta. Visit www.ockhamresearch.com for more information.

Ockham Research Staff @ February 11, 2009

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