Think like a contractor

The carpenter you asked to install your hardwood floors can teach you about becoming a better advisor.

She won’t start work before finding out what you want. She’ll show you photos of past installations and draw you diagrams. She might even give you a chance to speak to past clients.

After you express interest, she’ll quote the cost of labour and materials, the number of hours expected to complete the job and what she’ll do to make things right if you’re not happy. She’ll also tell you whether she expects to be paid in installments or in a lump sum.

You immediately understand her value because you can picture the finished floors.

But you’re not just paying for the tangible. You’re also paying for her ability to pick the right materials, give meticulous attention to detail and expertly manage subcontractors.

It’s the same with advisors. Your clients aren’t just seeking an end result (i.e., performance—although that’s what they’ll tell you they’re after). They also want you deliver guidance, perspective and peace of mind, even if they rarely articulate those needs.

In addition to a thorough screening and quoting process, here are three lessons from contractors:

• Be overqualified.

  You’d never let a contractor experiment with an installation technique on your time and dime. Neither should clients tolerate your reading up on an investment after suggesting it. Either be fully versed in an asset class, product or tax strategy before offering it, or have a specialist at hand to provide education and execution.

• Calculate your hourly rate (even if you don’t charge one).

  Track your hours for a few weeks and then extrapolate how many you work per year. Divide that by your annual revenue to determine your hourly rate. Then, analyze your time. Say Client X brings in $5,000 each year, but you’re logging more than $5,000 worth of hours for her. To make the relationship profitable, either deliver the same services more efficiently, or recalculate how much financial benefit she provides (perhaps she provided referrals that led to $8,000 in revenue).

• Don’t let losing a client devastate your business.

  Salaried employees’ livelihoods are tied to their jobs. Freelancers, by contrast, have a variety of income streams to help them through lean times. So choose clients from non-correlated industries or in different life stages. That way, if a downturn hits your retailers, your accountant clients can carry your book.

These mindset tweaks will improve your practice. Even better, hefty qualifications, exceeding expectations and knowing your value also let you have your pick of clients.

And, as it goes with contractors, so it goes with financial advisors: when people find a good one, they become loyal for life.

Melissa Shin

Melissa is the editorial director of Advisor.ca and leads Newcom Media Inc.’s group of financial publications. She has been with the team since 2011 and been recognized by PMAC and CFA Society Toronto for her reporting. Reach her at mshin@newcom.ca. You may also call or text 416-847-8038 to provide a confidential tip.