Trust is central to advice.
It acts like a road upon which all parties in an advisory relationship advance. Without the road, advisory relationships are doomed.
A trusted relationship is one where someone is trusting and someone else is being trusted. David Maister illustrates ballroom dancing as a model of trust for advisory relationships in his book, The Trusted Advisor – the trusted adviser is leading and the trusting client is following.
There are advisory relationships when goodwill alone may not sustain the advisory path needed to progress.
A client of mine recently approached me regarding a new advisory client. The client represented a significant opportunity for the firm. The job would propel the experience of team members and potentially open a new advisory niche of significant complexity and size.
The firm had a pricing precedent for the proposed work. Our discussions were based more on approach rather than price.
It was clear the precedent price was to be lifted as one of the key individuals was very busy with various interests, multiple responsibilities and constantly changing priorities. The firm had a track record managing busy individuals, but their question to me was their uncertainty over whether this was a client they wanted to work with.
We agreed to implement a ‘honeymoon’ or ‘go/no-go’ clause into the terms of engagement.
Whenever advisory teams sense that new clients might overly trust their own approach which may clash or challenge the advisory team’s proven and tested approach, the trust foundations need to be tested. The first three or six months of the engagement will either confirm or refute those suspicions.
So, establishing an upfront honeymoon or no/no-go clause into the proposed terms for these engagements provides both the client and advisory team with a formal milestone and opportunity to review, re-consider and re-plan.
Importantly, the installation of a honeymoon or go/no-go clause is not a false or test start to an advisory relationship.
Like a matrimonial honeymoon, the intent of both parties at the start of an advisory relationship is to progress for years to come. The forward engagement path for the engagement will recognise the three or six-month formal review milestone, but the scope of the engagement will start and extend beyond that date.
Our client’s quote containing the go/no-go clause was accepted, initial fees were paid and the engagement commenced.
Unfortunately, the engagement didn’t make it to the three-month go/no-go clause date.
Our advisory firm client ceased the relationship after ten weeks. The client’s distrust of the advisory team’s approach, lack of responsiveness, preferring their own which sidelined significant recommendations, while insisting on only dealing with their senior adviser, made the engagement untenable.
The basis of value engagements is value. Unlike phone contracts with lock-in periods, valuable advisory relationships are not built upon similar lock-ins.
Most advisory relationships are strengthened by the inevitable difficult times and decisions required for needed progress. However, there will be difficult times during engagements when value is less evident and both advisory teams and clients must be able to move towards a negotiated withdrawal.
What do you reckon?
ABOUT JIM STACKPOOL
For over 30 years, Jim has influenced, coached, and consulted advisory firms across Australia. His firm, Certainty Advice Group coaches, trains and is building a growing group of advisory firms delivering comprehensive, unconflicted advice, priced on value. The community of advisory firms aligns with Australia’s highest and only ACCC/IP Australia Certification Mark standard of comprehensive, unconflicted advice – Certainty Advice. He has authored three books regarding financial advisory firms and is due to release his fourth book in Spring this year – What Price Value.