It argues that the end justifies the means recognizing that the end is pre-existent in the means. The means represent the ideal in making and the end in process.Martin Luther King Jr
What is the “end” that is delivered in the advisor / client relationship?
Simple questions can often lead to an important insight, especially when it uncovers something implicit that has received little attention to this point. In that vein, I have been doing a lot of thinking and reading about the advisor/client relationship.
For wealthy individuals and families, there will likely be a host of advisors that they collaborate with. Yet, the purpose of those relationships/engagements is most commonly assumed to be self-obvious and is given little, if any, thought.
The reality is that much of the focus of those relationships will be on means, rather than ends. Means, in an older sense of the term, are the actions taken to accomplish a result. Ends though are the primary thing, the actual goal we set out to achieve.
This mismatch in focus between means and ends is critical. If you do not know the end you are trying to reach, the outcome will feel unsatisfactory, even if the means have been well-taken.
Consider the most common sense reason why someone works with any advisor: Investment Performance
While this is the most common reason to engage an advisor, performance still seems to be only a piece of what is being delivered. If it was the most important thing, the client would be best served trying to find the best stock picker possible.
Yet the best stock pickers are not serving as financial advisors, choosing significantly more lucrative options like hedge fund management. Simultaneously, the massive growth in the use of index fund has not slowed the demand for financial advisors services.
That is not to say that investment performance may not occur in the course of an advisory relationship. In fact, some degree of investment performance is table stakes to being in business. It is just that performance is an instrumental ends, but not the ultimate end.
This is reflected in industry surveys of why clients choose to leave their financial advisor. These surveys consistently indicated that majority of reasons why clients change advisor are tied to issues on communication, not performance. Yet the majority of meetings with advisors are focused on reviewing investment performance. Fee structures in the industry are based off assets under management (implicitly a reflection of performance). Press attention and growth are often directed to the firms with the strongest run of recent performance.
This creates a fundamental degree of cognitive dissonance between the end the client is seeking and what the advisor is delivering. This disconnect I would argue is why when you search for lists of companies with the best reputations for client service – there are few, if any, financial services businesses on those lists.
To begin to rectify this dynamic requires a re-centering of the core purpose of the advisor-client relationship.
I would offer that the end of the advisor / client relationship is tied more fundamentally to the ultimate purpose of wealth – namely the support of eudaimonia aka human flourishing.
More to follow on the Purpose of Wealth in the next post.