While the financial services industry seems hyper-focused on the definition of a fiduciary and what an advisor can and cannot do when communicating to investors, the concept of coaching is starting to gain traction.
Just as Don Trone, the father of fiduciary in the DC world, is trying to move the discussion from just obeying the rules to leadership and stewardship, a few advisors are realizing the power of coaching.
There’s a proverb that if you give a man a fish, you feed him for a day; teach a man to fish and you feed him for a lifetime. According to Terri Levine, a professional coach:
Advising is something that consultants do, and in asking a Consultant for advice, you are asking for answers and solutions and action steps you should take to reach a certain result. A coach helps you find the answers to your issues yourself, and in so doing, you learn more…
No doubt many plan participants not only want to be told what to do but want others to do it for them. While the “ideal plan” inspired by behavioral finance professor Shlomo Benartzi is effective is garnering significant results with minimal work, no one is suggesting that we should give up on working with participants, especially when it comes to the distribution phase. Even Benartzi admits that in retirement, or preparing for that next phase, engagement is important.
Coaching is a co-creative process. Most advisors either serve as coaches themselves or see the power of coaching for their children when it comes to sports, education or other activities. While most advisors, especially those who grew up in the wealth management world, sell their ability to tell investors what to do to achieve the desired results, investors within DC plans are different. They have relatively small amounts of assets and cannot afford constant handholding. Even plan advisors who conduct one-on-one meetings are rarely able to meet with individual participants more often than once a year. Technology and imbedded robo advice will help, but not as much as coaching, which enables people to take some action, with guidelines and protection, on their own.
Our industry is loaded with archaic language, with many people regularly quoting terms like 12b-1 fees and expecting plan sponsors and participants to understand them. At a recent TPSU program, the lecturer and industry experts kept mentioning “The Committee.” I saw one plan sponsor write down: “What is a Committee? They keep mentioning it so it seems important.”
Sometimes I think we make things complicated so that people will ask us to do it for them or because we want to look like experts. To be a coach, however, you need to understand the student’s level of sophistication, adapt accordingly, make things simple (use analogies from their world, not yours), be patient and make it fun. Nobody wants to listen to a boring know-it-all who talks over their heads.
And remember the end goal: Teach them to how fish.
