What Kind of Financial Services Customer are You?


A recent edition of the State Journal has even more advertisements from financial services providers than usual, thanks to its special section on “Investing in Your Financial Future”.

Before looking over these offers of financial help, readers may first want to look at themselves. For better and for worse, each person’s attitudes and aptitudes regarding the products and services offered by financial services industry will have a major impact on their financial future.

Some financial services customers look for comprehensive “strategic” help with their total financial situation. Other customers seek help only on isolated and discreet “tactical” matters. Being aware of what attracts you can help you accentuate the strengths of that orientation – and avoid the weaknesses.

Tactical consumers

Many people approach the financial services marketplace looking primarily for tactical help. Keeping exclusive responsibility for designing their long-term financial strategies (or not), they construct their own mix of investment, tax, legal, insurance, and other financial services products and services.

Some people who relate this way to the financial services industry have a clear strategy how their financial future is going to work out. Others do not.

Those who have done the big picture planning on their own tend to want to execute their plan for the least possible cost, and thus may view financial products and services as a commodity. Being cost conscious is a worthy goal, but it can cause people to miss important tactical and strategic opportunities to improve their financial situation.

To avoid missing such opportunities, tactical consumers who have clearly articulated long-term financial strategies may want to invest occasionally in a “check-up”. Many sophisticated wealth management firms are willing to look over someone’s situation for a small charge, and sometimes for no charge, in the hopes of establishing a new client relationship. Often these reviews will help tactical customers of financial services identify new tools to advance their goals.

The tactical consumers of financial services who do not have a well-developed strategy for their financial future face a different type of challenge. These customers are often intrigued by the hot tips and sophisticated techniques that abound in the financial services industry, but have not pragmatically assessed whether the various tactics that so interest them will take care of their financial future.

To address this concern, they may want to visit some of the free or low cost online tools that can help them assess how “on track” they are to take care of their the long-term financial future. For instance, T. Rowe Price offers a free tool that helps people assess the extent to which their investment and savings tactics are going to take care of their strategic retirement concerns. These kinds of tools can help them assess whether they need to find help evaluating longer-term strategic aspects of their financial lives.

Strategic consumers

While tactical consumers may undervalue help designing their long-term financial strategy, other consumers of financial services are very open to help from financial “planners” crafting broad-based strategies to take care of their financial future.

The challenge for such people is to be a competent, informed consumer. Otherwise, they run the risk of trusting advisors who are not well-suited for the job.

At a minimum, consumers of big picture, strategic financial planning services need to acquaint themselves with basic standards for assessing the quality of the help they are getting.

For instance, even the most “hands-off” consumers of investment advice needs to know the following about their portfolios:

- estimated long-term rate of return
- potential short-term volatility
- extent and methods of diversification
- permissible and prohibited types of investments
- method and amount of fees
- what, if anything, can be done to reduce taxes

There are similarly basic standards of care in estate planning, insurance, and other areas of personal finance. Consumers who do not educate themselves about these standards have no way of evaluating the fundamental effectiveness of their financial advisor.

Standards for assessing financial help may sound technical, but competent financial advisors should be able to educate their clients as part of the professional relationship. If a financial planner cannot educate you about the standards to which he or she should be held accountable, consider looking elsewhere.

In summary, most of us tilt one way or the other when buying financial products and services. Some of us are trusting purchasers of comprehensive strategic help, while others are skeptical do-it-ourselves window shoppers. Recognizing your orientation can help you ensure that you secure the optimal combination of tactical and strategic help you need to take the best possible care of your long-term financial situation.