“Twas in the darkest depths of Mordor, I met a girl so fair.
But Gollum, and the evil one crept up and slipped away with her.”
— Led Zeppelin, Ramble On
As a big fan of The Lord of the Rings, I always thought it was cool that Robert Plant wrote these lines into one of their greatest hits. But I also think there are a lot of useful metaphors in Tolkien’s literary masterpiece that can be useful in business, in general, and financial advisors, specifically.
There are some advisors with a vision to change the industry. Some want to revolutionize financial planning. Some want to upend portfolio management to help clients better care for their families. And some just want to conquer and rule all of Middle Earth. Well, not exactly. And while having powerful technology and strong leadership is an important part of any advisory firm’s success, it won’t get you all the way to Mordor and back without some help from your friends.
Empowered clients are more engaged and more loyal to their financial advisor, yet many advisors don’t prioritize customer empowerment when considering their technology choices and business model. Increasing customer retention rates by 5% can increase profits by 25% to 95%. At the AdviceTech Live conference panel entitled ‘What Can Firms Do to Drive Customer Empowerment?’ Lazetta Rainey Braxton, founder and CEO of Lazetta & Associates spoke with Manish Khatta, President of Potomac Fund Management about how companies can empower employees and customers, resulting in improved client outcomes and financial returns across the board.
This article focuses on Khatta’s input from the session, where he highlighted the value of clear communication and transparency, employee benefits and support, simple technology, and keeping scalability in mind at every turn. He explained why giving clients the tools to understand and engage with their financial plan should be central to an advisor’s focus and the ways that empowered customers can buoy the success of a firm.
You can have the best resources and technology in the world, but if it only serves the customer’s assets without actually serving them, your success will be stunted. In The Lord of The Rings, Sauron (the evil Lord of the Rings) might have been unmatched in his abilities and his ambition, but he feared his subjects and his supporters and he used his Rings of Power to hold them down rather than lifting them up. In the end, he lost to a couple of hobbits. Don’t lose to the hobbits.
Be Thoughtful in How You Reveal Your Plans
“One Ring to rule them all, One Ring to find them, One Ring to bring them all and in the darkness bind them.”
— J. R. R. Tolkien, The Fellowship of the Ring
When Sauron first crafted his rings, he tried to trick the Elves into using them by promising them incredible power and vitality — while hiding the fact that their rings were actually controlled by his One Ring. This deception failed and the Elves removed their rings and successfully hid three of the other more powerful ones.
While advisors are fiduciaries and responsible for working in their client’s best interest, financial information is still often confusing and not designed to help people understand the process. This lack of clarity goes against Khatta’s philosophy that empowerment starts with education and transparency. Khatta tells all of his employees to answer client questions as clearly, honestly, and transparently as possible because the basis of empowerment is understanding the topic at hand.
If people think they’ll look stupid if they ask a question, they won’t ask and then will never feel empowered to make their own choices. Most clients don’t care as much about returns as much as how they’re treated and how comfortable they feel. 75% of consumers say they will spend more with a company that treats them well.
Even if the financial returns aren’t what a client wants them to be, Khatta encourages advisors to sit down with them and go over the numbers directly. “You’re better off telling them and making sure that they understand the position they’re in, versus the smoke and mirrors that much of Wall Street has been raised to do for years,” he cautioned. “It’s permeated our industry where you can see people saying something without saying anything, it’s just blank commentary.” Maybe if Sauron had been more upfront with his nefarious plans, he could have found other foul-hearted leaders with similar dark motivations to do his bidding in exchange for power.
Don’t Neglect Your Employees
Khatta advocates making a priority out of taking care of your employees. Companies who invest in their employees see higher rates of customer satisfaction– which leads to increased customer loyalty and financial returns.
He also recommends posting a values page on your website to show how you support your employees with benefits and to show transparency from the top down that people are being taken care of.
How employees are cared for is central to a positive client experience, Khatta emphasized, noting that the best way to have happy clients is to have employees who care. The best way to ensure that is to take care of your staff, he said. “Don’t treat them like replaceable parts, treat them like an investment.”
While this seems straightforward in its value and enforcement, Khatta sees many companies who aren’t putting enough thought into how they treat their employees—and ruining their client experience as a result. “You can have a billion dollars and the best tech in the world, but if your employees don’t like working there or they don’t like you, the whole experience will be ruined.” If you turn your employees into soulless ring wraiths, they will not feel empowered to maintain the relationship between your firm and your clients.
Logging In Should Be As Simple As Putting On A Ring
If there’s one element Sauron understood perfectly, it was simple and effective UX design. All that’s needed is to put the ring on to access its power. No fancy spells to remember and no other accessories needed. Khatta, while certainly not a supporter of The Dark Lord, is a big believer in the all-in-one approach where clients can see all of their information, their financial plans, and their returns in one place.
Advisors often get caught up trying to create a utopia, yet clients don’t use most of the technology offered, Khatta argued. “Even if you think a system is only 50% of the ideal solution, it’s still better if it reduces the number of steps for end clients to complete a task. For him it’s about keeping clients in one environment filling in functionality gaps in the back end so clients don’t give up and stop engaging.
On a client portal, the biggest factors in user engagement are ease of navigation, organization, and simplicity. When everything is easily accessible, clients feel a sense of control and empowerment. Keeping portfolio returns displayed alongside the financial plan also reminds clients the value of the investments in their lives and the emotional connection they have to the events they’re saving for.
Know Whose Hands Your Technology Is Falling Into
Advisors should take the time to understand the technical capabilities of each client before handing them new technology they might not have the skills to engage with. Khatta described how he often sees programmers building features and just assume that end users will know how to use it. While they might get some benefit from the software, their engagement will be limited if the design is not intuitive. Around 50% of consumers say that they would stop engaging with a company if their website is frustrating to use, even if they like the company.
In Khatta’s view, the assumption that clients know how to use complicated software is what caused most robo-advisors to fail. “The consumer still needs a personal touch and hand-holding,” he emphasized. “When it comes to ‘and/or,’ it’s definitely ‘and.’” While technology is a useful support, fintech still requires the intervention of a human advisor to meet all of a client’s needs. Maybe Sauron should have employed some Ring-advisors to patch up the magic for the Dwarf kings.
Keep Your Focus on Long-Term
Empowering clients also means supporting them fully as your business grows. The best way to do that, according to Khatta, is to make every decision for your business with scalability in mind.
Khatta cautioned against considering serving your customers and scaling your business as two separate goals. The ability to scale and to grow at the same time makes you a better advisor because you can offer more services,” he explained. “So it’s that gray line. For some people, they don’t want to scale because they don’t want to stop serving their ten clients. But without scaling, you’re not making them as much money or offering them as many services.”
In order to move those two goals together in tandem, Khatta recommends reviewing every process by asking the questions, “will it still work 20 clients later? $20 million later?” Instead of only looking at what will serve the business right now, Khatta leads his company by focusing on what will help support the system five years from now.
Manual processes reduce scalability of both advisory firms and producers of mythic magical jewelry. The evil lord Sauron needed to forge his rings by hand in the depths of Mount Doom, which is not a scalable process.
Khatta emphasized that eliminating manual processes is paramount to making any business capable of growth. He often heard employees saying that it’s no big deal to do small tasks manually, but you have to nip that tendency in the bud right then and there, he insisted, “because if any process involves humans doing things manually, how is that going to change 10 clients later? It’s just a mentality of how you run a business.”
While Sauron did not have to worry about customer service when crafting his plans to take over Middle Earth, financial advisors have to be more considerate if they want to be successful. Empowering employees to make decisions, keeping client-facing technology simple and focusing on long term results are the best ways to grow and scale an RIA, according to Khatta.