Are you a peace-time consultant or a war-time lieutenant for your customers?

 

As financial planners/advisors, one of our enduring efforts is to build recognition for our vocation as a mainstream profession, and to get ourselves recognized as “professionals”. One of the reasons why I believe they’re still exists a gap in the perception of our profession as compared to “nobler” ones, is because we are not seen by customers as “war-time” lieutenants. I am not questioning the intent of our vocation, I am only pointing to the general perception that people have about it. We are seen more as peace-time consultants, rather than war-time consiglieres and I explain below why I think so.

 

A recent article of mine was about being prepared financially for the wars in our lives. As part of the research for the article, I referred to a comparison between peace-time managers and war-time managers. If you think about it, this applies everywhere, including ourselves and our relationships. How do we react when a “war” hits us? Or when it hits our customers? Are we adequately prepared for it?

 

Some simple comparatives between peacetime and wartime situations

 

  • When life is fine, we prepare plans and keep fine-tuning them. Until we get blind-sided by events that were not planned, which will
  • In peaceful situations, measurements (our performance) are process-driven. In crises situations, measurements are output driven. Remember that half-serious joke “operation successful but patient dead?”
  • In peace we prepare plans basis the last wars faced. A war is a new crisis, which usually hasn’t been faced before.
  • Civilians have a peacetime job and do it all the time. People in the military largely spend time not on their main purpose – war – since it is rare and intermittent. But a military is judged by their war-time results, not their peace-time processes. When a war comes, they will have to deliver to be seen as a “good” or “successful” military person.
The last example above so clearly tells us that our jobs are more wartime jobs. We are more like military folks – spend a lot of time preparing plans in peacetime, but its when wartime strikes that our true measures of success come forth.

 

Some qualities that differentiate peacetime & wartime people (which we should learn from)

 

  • Processes are defined in and focused on in peace time. But when there is need to act decisively during crises, processes may not exist for that, and can end up making us look like deer trapped in headlights.
  • Success in war requires an ability to adapt to the enemy. And when we don’t, we fail. But curiously, until war strikes, we don’t know what to adapt to, since the enemy isn’t there to observe.
  • Peacetime gives you the comfort of excesses or buffers. Wartime doesn’t have any such luxury. So, wartime preparation requires you to be paranoid, and differentiate small things to get odds better in our favor.
  • Peacetime people build skills to satisfy and grow. Wartime people build additional skills to survive.
  • Peacetime people keep communicating in situations when less is more (peacetime) but stop/reduce communicating, when more is less (wartime). Wartime people over-communicate during war, and always keep communication crisp and clear.
  • Peacetime people keep looking for 100% information or perfection. Wartime people have to work with 70% information, sometimes even 50%, else you might miss the bus.
  • Peace-time people follow process & seek permission. Wartime people act first and seek forgiveness.

 

So, if you think about our practice this way, how many of our customers (currently) think about us as their war-time lieutenants?
The logical next step is to ask what we can do to change the way our profession is perceived by our customers. The answer/s to this “million-dollar” question lie again in who we are comparing ourselves with. What do the military bring to the table that makes us (as citizens) feel we are safe when they are around us? I can think of three things that give me comfort and confidence when I see military people, that he/she will do the job they need to do.

 

  1. TRAINING
  2. WEAPONRY
  3. READINESS
TRAINING

 

Partly, our problem is that our profession is widely spread across qualifications, experience and economic strata. The existing entry barriers that have been set currently are unfortunately so low, that any meaningful differentiation basis those barriers is not possible. An average customer is unable to differentiate between a bank RM, an insurance agent, a mutual fund distributor and an RIA.
That said, the sanctity for existing professional qualifications is high among the same customers and they look upon qualifications such as Chartered Accountant, Lawyer, MBA, CFA, Engineer, etc. with respect and in some cases, even awe. Hence in such a situation, it is our ability to “add” some additional qualifications to the current entry standards, and our ability to showcase this adequately, that will help build significant credibility in the eyes of customers and prospects, that we are “professionals”.
Even if we cannot add graduate/PG level professional qualifications as above, we should build and show a continuous stream of additional certifications in our space and adjacencies, like, Estate Planning, Family Office, Alternate Investments, Investment Research, etc.
In the eyes of our customers, it is our ability to build and project these “professional qualifications” that will act as an equivalent to the training that the military possesses.

 

WEAPONRY

 

Even the most well-trained military man may not be able to win a battle if he or she still works with obsolete weapons. In our profession, our weapons are the bouquet of services, products and experiences that we will provide to our customers. While some are timeless (eg. financial plans, mutual funds), we also need to evolve, basis what changes are happening in the external environment, whether it is the market, technology or customer profile/need.
Our ability to keep this bouquet fresh, in step with the times, and constantly expanding it to incorporate new ideas, which will be of value to our customers, while keeping in mind our core focus on protecting the customers interests, through appropriate risk profiling and adequate asset allocation, is key to giving them a sense that we are equipped with the latest as well as what they specifically need, and hence can appropriately “fight” on their behalf.
Additionally, putting in place a set of standards that can differentiate our practice and “professionalize” it, and sharing it with them repeatedly, through our customer experiences, is something that will again give customers that sense of credibility to think that they are dealing with “professionals”. A good example of this is The BAM Alliance in the US.

 

READINESS

 

The military is needed when there is a crisis for their speed, the ability to assess quickly, take decisions and execute rapidly. Doctors essentially r needed when you are ill. You will reach a lawyer when you need legal help. All this because the cost of DIY being incorrect is too high for you to undertake the risk alone. Similarly, we need people to think that we are required by their side when they are in a financial crisis.
When the military is not at war, which is literally all the time, they are still preparing for crisis situations through war-games and simulations. The benefit of these is that it allows them to evaluate scenarios, assess probable impacts, identify high risk areas, and accordingly allocate resources. In our practice, while we do robust planning, once the customer has spent some time in our system, we increasingly move towards become their “investment managers”.
Of course, we review their financial plans, and tell them if they are on course or not, but these are more peace-time reviews. Stress-testing their plans by building crisis simulations and assessing how the plan holds up is something that can give the customer the confidence that their plans are war-ready. Some immediate examples that come to my mind that we can share during plan reviews (some of us might be doing this)

 

  • Impact of a 25% market drop that takes at least 2 years to recover – how does it impact long-term goals if it happens at various points over the next few years
  • A 20% increase in cost of a goal (eg. sudden rupee depreciation) – how does it impact
  • Loss of an income earner – while there may be adequate insurance / assets, are they in available form? Are there any operational risks?
  • Incorporating a 15-20% standard deviation into returns on the overall portfolio – how does it impact portfolio growth and goals?
The military are constantly watching when you are not. Professional services (military, doctor, lawyer, etc) command their values because their customers believe that they are worth it. And they believe that because they know that they are the best people to manage their crises. What we should remember is that the ability to command a suitable value or a perception/aura, is a consequence, not a right. Simply put, in any professional field, peacetime services are free. In the long run, people will pay us only for our wartime successes.
A wonderful Bruce Lee quote that’s apt here is “It is better to be a warrior in a garden than a gardener in war”.  Warriors don’t predict war, they prepare for it. Our customers also need to get the same perception that we are warriors, and are ready for crises, if they need to see us as their war-time lieutenants.

 

References
  1. The Hard Thing About Hard Things – Ben Horowitz
  2. Why Militaries mess up so often – Megan McArdle, Bloomberg