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A 4-Way Test on Putting the Client’s Interests First

By Mark DiGiovanni, CFP

 For more than fifteen years, I have been a Rotarian.  Rotary is a service organization with more than 1.2 million members in over 160 countries.  Because Financial Planet is an international forum, many of you may be familiar with Rotary International.  Some of you may have benefited from the work of Rotarians.  The motto of Rotary is “Service Above Self.”

THE 4-WAY TEST

I joined Rotary at about the same time I started my own financial planning practice.  Rotary has had a great influence on my professional philosophy.  The cornerstone of Rotary’s philosophy is what is known as “The 4-Way Test,” which asks of the things we think, say, and do:

  • Is it the TRUTH?
  • Is it FAIR to all concerned?
  • Will it build GOODWILL and BETTER FRIENDSHIPS?
  • Will it be BENEFICIAL to all concerned?

If the 4-way test is applied to our client relationships, the chances of creating a conflict of interests will be greatly reduced.  Let’s look at how each part of the 4-way test can be applied to putting the client’s interest first.

IS IT THE TRUTH?

Meeting this requirement is simple enough – just say what you’ll do, then do what you say.  We run into problems when we tell a client we will do something and then we don’t do it.  We can run into even bigger problems when we do something but don’t tell a client about it.  “Full Disclosure” is just a legal term for “Is it the truth?”  Lack of full disclosure and subordinated client interests tend to go hand-in-hand.  Survey after survey shows that clients consider trust to be the most important component of their relationship with a financial advisor.  Trust is based on knowing what the other person is going to do.  We can sometimes deceive ourselves into believing that our clients would rather hear a pleasant lie than an unpleasant truth.  If your clients can trust you to tell them the truth even when it might cost you, that client knows you have integrity, which is the virtue they seek most in their advisor.

IS IT FAIR TO ALL CONCERNED?

Putting the client’s interests first does not in any way mean that you let yourself be a doormat.  You are a professional, and a professional both gives and expects respect in a professional relationship.  The terms of your client-advisor relationship can be considered fair if you all agreed to them without any undue influence or adverse circumstances and if all the terms were fully disclosed.  One way to gauge if you think your relationship with a client is fair to all concerned is to ask yourself two questions – (1) How would you feel if the advisor in this relationship were your son, daughter, or spouse and if they were being treated this way by the client?; (2) How would you feel if the client in this relationship were your parents and if they were being treated this way by their advisor?

WILL IT BUILD GOODWILL AND BETTER FRIENDSHIPS?

Those surveys that tell us that trust is the most important component in a relationship also tell us that referrals are the main source of new business for financial planners.  Putting the client’s interests first is the minimum expectation the client has.  If there is any doubt that the client’s interests aren’t your number one priority, you’ll never get a single referral.  Meeting expectations creates the relationship; exceeding expectations moves the relationship forward.  Referrals rarely come because an advisor merely meets the client’s expectations.  Exceeding a client’s expectations is the best way to build goodwill and better friendships.  If referrals are the lifeblood of our business, and if referrals come primarily from clients whose expectations are exceeded, why wouldn’t you do everything in your power to build goodwill and better friendships with your clients by exceeding their expectations?

WILL IT BE BENEFICIAL TO ALL CONCERNED?

In order for a relationship to be beneficial to all parties, each party must feel that what they receive is more valuable to them than what they give up.  For us, the compensation we receive has to be more valuable to us than the time and energy expended and occasional aggravation endured in the client relationship.  For the client, the value of the financial and emotional gains they receive has to exceed the value of the compensation they pay us.  If a relationship is beneficial to all concerned, it is a “win-win” relationship.  If there is any part of a client-advisor relationship that can become a “win-lose” proposition, that part must be corrected or risk destroying the whole relationship.  Merely putting a client in a position where you might win while they might lose is the antithesis of putting the client’s interests first.  We have every right to benefit from our relationship with a client.  We have absolutely no right to benefit from the relationship at the client’s expense.

 

3 comments to A 4-Way Test on Putting the Client’s Interests First

  • Audrey

    This is why Mark DiGiovanni is “my” financial planner.
    His integrity is unquestionable, period.
    I know he is looking out for his client’s best interests and he stays apprised of the workings in the financial fields at all times. He is well educated in this field and maintains his ability to remain so.
    Please inform yourself by reading his books: Pearls Before Swine, Whip-Sawed, Money Morons and 6,000,000 Minuits on the Clock. All available at amazon.com.
    Please don’t think I am prejudiced……I just happen to know these things for a fact.

  • mike ripley

    So true. It should be applied to all areas of human activity. If only our leaders took note the world would be a better place

  • Mark

    This very well written.

    This is how we manage Better Hearing Aid Service.

    Thanks,
    Joe

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