Joe Durans 6 Rules to Succeed in the Age of Vanguard

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According to United Capital’s Joe Duran, Vanguard has quickly become the Amazon and Netflix of the financial advice industry.

“In every industry, whether it’s the movie business where Netflix completely took out Blockbuster and every other video chain, to Amazon that’s doing the same for retail, [to financial services where] our big bad monster is Vanguard,” Duran said.

During a presentation at the Schwab Impact conference in Chicago, Duran gave the audience concrete ideas to help advisors successfully deliver financial advice in a world of disruption. Duran founded United Capital in 2005 and today the financial life management firm has more than 80 offices nationwide and more than $20.4 billion in assets under management.

Duran said that most people don’t realize how big Vanguard is.

In the last four years, $1 trillion has gone to ETFs – of which $900 billion of it went to Vanguard.

“They were late entrants into the business and in the last four years they’ve taken 90% of the money that has gone into ETFs,” Duran said. Vanguard’s Personal Advisor Services offering began providing investment advice and financial planning for a 0.30% annual fee in 2014.

In the past three years, $823 billion went to Vanguard funds, which Duran said is 8.5 times as much as all of its competitors (4,000 firms took in $97 billion). In addition, according to Duran, nine out of every 10 net dollars invested in mutual funds or ETFs was absorbed by Vanguard.

According to Duran, Vanguard has fundamentally, by themselves, completely changed the value of what the industry can charge for investing.

“[Vanguard Personal Advisor Services is] already the largest wealth management firm in the country and they started three years ago,” Duran said. “They have already surpassed $100 billion in wealth management assets and they charge 30 basis points. Thirty basis points to give you a dedicated planner who will run a plan whenever you want, invest your assets and give you a very nice mobile experience.”

This is why Duran calls Vanguard “our Amazon.”

“It’s digital and it’s really comfortable and it’s really cheap,” he added. “What it’s going to do is open the eyes of the world to the future, and how we’re going to have to compete with something that is incredibly compelling; really, really cheap; and really, really good for consumers.

In order to compete, advisors are going to have to change the way they work. To help them do so, Duran shared what he called his “playbook” with the six rules that advisors need to be confident they’re going to win against Vanguard or any other direct-to-consumer player.

Duran said that United Capital itself is investing $35 million a year to build this playbook out because it believes this is what it takes to win.

1. You have to be where your clients are.

And clients are on their phone. Duran pointed out that the average human being spends about 3.36 hours per day on their cell phone.

“We pay more attention to our phone than we do our wives, our children, and anyone we work with,” Duran said. “We spend more time glued to our phone, and why? … The phone is not a communication medium. A phone is your portal to the rest of the world. It’s how the rest of the world interacts with you and it’s how you interact with the rest of the world.”

Advisors must get digital, Duran stressed.

“There is nothing more important for your future survivability than being on that phone as a point of contact,” he said. Adding later, “Because here’s what’s happening: every consumer, every single consumer is interacting with the world through their phone. It has made office hours obsolete, and it has made geography obsolete.”

2. You must live where your clients’ lives and money intersect.

According to Duran, the industry can be obsessed with helping make sure people always have lots and lots of money so that they are never in a position to run out of money.

“Our industry still believes that’s its primary responsibility – but it’s not,” he said. “A machine could do that for people.”

Rather, an advisor’s job is to help people live richly. This means understanding what clients want their life to be like and what purpose money has in their lives. Most importantly, Duran said it means measuring and tracking if the clients are doing with their money the things they say they want to do.

“Our job is to help people live richly – not die rich,” he said.

According to Duran, every single human has a once-in-a-lifetime experience, which means that no client cannot envision or imagine what that one human is going to want, what mistakes they’re going to make, what things are going to happen in their life.

“The reality is, we cannot predict the human’s life or the market’s life,” Duran explained. “Given that, the obvious question is, ‘Why do we plan?’ What are [advisors] in fact getting paid for?”

As a response to this, Duran urged the audience to tell their clients, “You’re not paying me to build a plan, you’re paying me to change the plan. You’re in fact paying me to correct this plan over time … Because your life will be a once-in-a-lifetime experience filled with things that neither of us can imagine and you’re going to need me to make the changes right for you.

3. Understand your clients better than anyone in the industry.

According to Duran, the secret sauce to winning is to “understand your clients better than anyone else.”

What’s the one thing I have to get right? The number one thing is to know your clients better than anyone else. There is only one question everyone has and it’s the same question you all have, ‘If the markets go down, yes they want to know how much they lost. But that’s not what they care about. If the markets go up, yes they want to know what they got. But that’s not what they care about.

Duran said that all humans have one simple question: “Am I OK?” And what that really means is, “Can I live the life I want?”

“If you don’t know the life your clients want, it is impossible for you to beat a firm like ours,” Duran told the audience at Schwab Impact. “And I don’t say it because I want to take your business. I want you to win. If you want to win, you must know what your clients want their life to be like.”

For example is it more important for the clients to educate their kids or send them to private school or buy a house? Is it more important for them to retire sooner or to take great vacations with their family? Is it more important to them to spend time with the people they love or that they are able to spend guilt-free?

According to Duran, advisors should be able to know their clients’ answers to the following three questions: “What do I want my life to be like?” “Will I have the resources I need?” “Am I prepared for life’s surprises?”

“If you can answer these three questions for every one of your clients, then you will never lose them,” Duran said.

4. Be a guide plus coach for your clients.

According to Duran, “your job as an advisor is no longer to be a teacher [and] your job is no longer to tell them it’s going to be OK. Your job is actually to be a coach.”

The role of the advisor is now to help people understand their choices and the consequences of their decisions. This means having tools that are much more collaborative and engaging. It also means running financial plans with the advisor’s clients next to then, and it means including the clients in the discussion.

“Most clients equate going to a financial advisor like going to the dentist,” Duran said. “It doesn’t have to be that way. It shouldn’t be a dreadful dreary experience. It can actually be life-affirming and wonderful and exciting.”

5. Practice at the top of your license.

To be competitive, advisors must practice at the top of their license. What Duran means by this is advisors too often do work that they’re “not very valuable at.”

“You are really valuable when you’re sitting in front of the client,” he explained. “You are not that valuable figuring out what technology you should use. You’re not that valuable figuring out what compliance system you should be on. You’re not that valuable choosing who should get a bonus or not.”

Yet, according to Duran, most advisors – once they reach a certain point and size – do nothing to change their work day.

“Very quickly, 60% of their time is spent on low-value work,” he said, adding that, “We’re incredibly unproductive with our time.”

Duran suggested that advisors think about how they stack their work day and how can they shift tasks so that they’re doing what they’re great at and other people are doing the things they’re not great at.

“Ask yourself what’s the one thing you’re really great at and then outsource everything else,” Duran said. “I can tell you, we use Salesforce, we use Schwab, we use BofA, we use Blackrock … because frankly, we want to be brilliant at understanding our clients and delivering them an incredible experience.”

6. Charge for what clients value.

“You must charge for advice,” Duran said.

If advisors do not charge for advice, their clients will think they’re paying them for investments and they will find better investment solutions.

According to Duran, if advisors want to win, they must charge for what the clients value.

“If you ask your clients, if you do a survey, what they will tell you is they value [your advice], they understand you, they’ve been with you for 20 years,” Duran said. “That is what you need to charge for.”

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