One Stop Financial Shopping?
When we think of one stop shopping it seems like a great idea. The execution of the idea is the problem. We hear of CPA firms buying Broker dealers and insurance companies. They do this to achieve “stickiness” with their clients. In other words, trying to prevent the client from talking to other advisors. In theory, these firms feel like they see a “need” that the client has, and they are able to use one of their vetted advisors to fix that need. For example, if the client needs college planning, then they have an advisor help implement a college plan. Sounds like a great idea. Even if the client gets the best college plan in the world, it still may not be in the client’s overall best interest. For example: what if the client’s child does not go to college? Maybe they opened a business at 18 years old, and they are killing it. Now the 529 college plan has some issues. This is called microplanning. No one at the firm took an overall approach to what the client is doing, only looking for a “need.” You may think you will need something in 10 years, but then the rules change, or the client doesn’t have that need anymore. This goes for the same with retirement planning, life insurance planning, and all other Mico needs that one may have. I am not saying one stop shopping cannot be a good thing, but IS this planning or product selling?
When these situations occur, the client is usually asked to fork over some money to cover this need. If you were building a football team and you needed a punter, you would go out and buy one. What if the punter could also be the kicker? Now, I just freed up the kicker money to be used somewhere else.
A man walks into a tire store and tells the tire store salesman “I want the best tires that you have.” The salesman goes in the back, and comes out with 4 tires, and begins his pitch. “These tires have the specs of 15 inches in diameter, that fit rims 10 inches. The Goodyear Eagle race tires are spec 28/10-15 and slick. They weigh a mere 24 pounds and have a tread thickness of only 1/8 inch. The cost of the tires is about $500 each and are good for about 100 miles. These are the best tires man can make. Pull around and I will put them on.”
The man immediately says, “Wait just a minute! That is not what I am looking for. That will not even fit my truck! I am looking for something else. You must be crazy or something!”
The tire salesman replies, “you said you wanted the best tires that I have. Man, this is what every NASCAR driver on the planet is using. They do not make a better college plan! oops! I mean they don’t make a better tire.”
You see, the man didn’t take a look at the whole picture. He just took the information he was given and came back with a product. This is what happens in your “one stop shops.” It is not planning. It is multi-product selling in one location.
We use a model so we can see how one decision could affect something else. Then we, as a group, can make an educated decision on how we want our life to look. What if things change? How much risk am I taking? These are the “what-if’s” in life and business. What if my kicker could be my punter and my quarterback? Making money work for you is the same thing. How do we make 1 dollar do the job of another?
