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The previous article I wrote on this subject was so popular that I had to continue my tirade. Toss these six marketing buzzwords in the never-to-be-used jargon dumpster, in reverse order from the least to most offensive.
- Family CFO/personal CFO
These are not accurate. A CFO is someone who handles matters such as payroll, recordkeeping, budgeting and procurement. The CIO handles the investments.
Show me an advisor who is willing to carry out those tedious and low-margin tasks for the average client who has let’s say $1 million. Most advisors are only going to do this if acting as a family office for people with $50 million+. Are you going to send wire transfers when they’re on vacation in Europe when what you want to do is create a financial plan (for which you earn high fees) or run their portfolios (for which you earn high fees)?
Nein.
It’s a sweet idea, though.
- Boutique wealth management firm
Small advisor firms like to use the word “boutique” to convey that they serve a sophisticated clientele, but have you ever thought about what the word really means?
“Boutique” is from the Latin word “apotheca,” or storehouse (Merriam Webster, n.d.). Before the investment industry popularized its own interpretation of this word, the meaning it conveyed was that of a small shop. The original storefront meaning is what people who do not work in the investment industry think it means.
Now think about that for a moment. If most people think of a retail store selling trendy clothing and accessories when they hear this word, what is the subconscious effect you are giving them?
Exactly what I said: selling.
We are an industry that prides itself on not being salespeople, but instead being the most loving, huggable, caring people the world has ever seen. We would never dare try to sell you a whole-life insurance policy.
Boutique is for jeans and crop tops, not retirement accounts.
- Client-centric approach (also called client-centered approach)
Of course, because the client is the one paying the bill! Why shouldn’t they be the center of attention? You’re the service provider and they’re the boss!
There is not one business in the world that operates any other way. Serving the client is the definition of business. It is just so pandering.
I love you sooooo much. Now let’s smooch!
- Investment committee
This is a hoity-toity, institutional sounding word, so advisors who manage money in-house like to use it because they feel it makes them look like Goldman Sachs. It may seem like it’s lending gravitas to your operation.
But to the outsider it sounds ludicrous.
What is the first thing that comes to mind is when you hear the word “committee”? It reminds me of student council meetings in high school: riddled with bureaucracy, grandstanding and full of people speaking up who don’t know what in tarnation they are talking about.
Moreover, it’s laughable for a small firm to have an investment committee because half the firm is included. It’s preposterous to assert that the investment associate with three years of experience who has failed level two of the CFA exam twice is going to be making decisions that impact whether or not people get to retire. In reality there’s one decision maker, usually the one paying the salaries, and everyone debates back and forth but at the end they all have to agree with him or her or else they’ll get fired.
Don’t be ridiculous. It’s not a democracy, folks, this is capitalism.
- Total transparency (also called “complete transparency”)
Objection, your honor!
RIA firms love to boast about transparency. The truth is that RIA firms are fairer to the client than commission reps, but you aren’t as pure as the winter snow. For those of you claiming total transparency, let me ask you a few questions.
Have you ever furnished your clients a statement depicting the total fees they pay by employing you as their advisor? Do you inform them of the true net cost they pay including the 1% or whatever fee they pay to you, and then on top of that the fees carried by the underlying ETFs or mutual funds, as well as the trading costs?
Do you show them these numbers? Do you actually show them a sheet with these figures on it?
If you’re so transparent, then the next time you present to a prospect show them an illustration of their portfolio and the costs that they will absorb, breaking out trading commissions, mutual fund and ETF expenses. And then show them the market impact they’ll bear from trading. Oh yes, and don’t forget that they’ll probably realize some capital gains from the mutual fund shares they’ll own – realized gains from positions that the portfolio managers sold.
You’d never make a sale ever again in your life because nobody would go for that.
Total transparency? Depends what you mean by the word “total.”
- Conflict-free advice (also called “unbiased advice” or “objective advice”)
I saved the best for last, my friends. Bring it on!
Before I rip this phrase to shreds, please will somebody tell me where all the conflict-heavy, biased advisor websites can be found? I’ve never seen one. Those advisors must not have websites, because every single advisor website (even the hybrids, commission-only reps and insurance agents) are claiming to render conflict-free advice. Either that, or every single advisor in the industry renders conflict-free advice.
Let me tell you a little story. The other day I saw an advisor website with this language, “We render conflict-free advice and we do not accept commissions.”
And then, I see at the bottom of their website, “Securities offered through XYZ Broker Dealer, Member FINRA/SIPC.”
Huh? No comprendo, senor!
It makes me angry, and I actually get mad, when I see people dismissing the fact that they are broker-dealer reps just because it’s only a small percentage of the business they are doing.
FINRA, are you reading this? If not, can somebody tweet it to them? This is why FINRA should beat people up, not because some poor advisor left off disclosure #1561 from page 500 of the market outlook last year that three people read. Come on, FINRA, this garbage is hanging out on advisor websites right and left that people are reading every day – wake up and smell the coffee!
Advisors who do this are misrepresenting what they do. It comes down to two words: just and sometimes.
“I have my Series 7 license just for private placements.”
Sounds really different if you take out “just”, in fact it changes the whole cadence of the sentence.
“I have my Series 7 license for private placements.”
Or how about this?
“I sometimes charge commissions when I offer a 529 plan.”
Doesn’t sound quite as innocuous if you take out “sometimes.” The focus of the sentence then becomes the commissions.
“I charge commissions when I offer a 529 plan.”
Here’s why “just” and “sometimes” aren’t accurate. I used to be a Series 7 rep and I know how much you have to generate in commissions to sustain your license. It’s usually over $10,000 annually. Otherwise they kill your license because that’s called parking. After the global financial crisis, FINRA did away with that because there were so many unemployed reps holding their licenses without creating any revenue.
So given how much commission business you have to do to maintain your Series 7, I highly doubt that these commission trades are just for those insurance trails you don’t want to give up or the private placements you sometimes recommend.
Don’t get me wrong; I don’t have any issues with advisors being part-time fiduciaries. I am highly opposed, however, to advisors who claim to make conflict-free recommendations all the time when in reality it’s an option.
Why don’t you just tell the truth?
Although I, for the most part, choose to operate as a fiduciary and act solely in your best interest, this is not the minimum standard that I am required to uphold. I am required to make recommendations based upon suitability standards which do not require me to place my interests below yours. However, I am required by law to inform you of times when I make recommendations in this fashion.
Sara’s upshot
Now that I’ve destroyed half of your vocabulary, you may be wondering what advisors should say on their websites and in their marketing materials. Speak the language of giving. Talk less about what you are or what you do and more about what you give to the client. Couch these ideas in a well-formed brand that colorfully speaks to the salient aspects of the experience people have when working with you. Do this and you’ll find way more people will listen. If you have questions about this, you know how to reach me.
Sara Grillo, CFA, is a top financial writer with a focus on marketing and branding for investment management, financial planning, and RIA firms. Prior to launching her own firm, she was a financial advisor and worked at Lehman Brothers. Sara graduated from Harvard with a degree in English literature and has an MBA from NYU Stern in quantitative finance.
Read more articles by Sara Grillo
Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
