One on One: "The idea of a one-size-fits-all business model [for adviser compensation] is worthless"

How did a cultural anthropologist become a hit on the financial adviser conference circuit? “I tend to be quite funny,” laughs Jennifer James, “not telling jokes, but looking at the material in ways that show people how absurd we are sometimes.”

Her popularity might also have something to do with her research into the continuing revolution in the financial planning industry.

Ms. James, a cultural anthropologist, writer and lecturer, focuses on helping professionals deal with changes in their industry. She specializes in the effect of cultural changes on businesses, and productive marketing.

Ms. James has advised and spoken at health-care and educational conventions, and to myriad business and professional groups around the world. She averages about 85 appearances per year, charging $15,000 per lecture.

For the past three years, she has concentrated on financial services, averaging 25 lectures a year to industry groups. Clients have included Allstate Corp., Morgan Stanley Dean Witter & Co., Ernst & Young LLP and UticaLife. She has also spoken at conferences held by the Financial Planning Association and the National Association of Personal Financial Advisors.

In 1998, when she first spoke to a group of financial advisers with wealthy clients, she had some concerns whether her insights would be useful.

“They loved it,” she recalls. Many attendees wrote her letters afterward, noting that “they finally understood a lot of what they were doing in the areas I speak about,” she adds.

Ms. James predicts that hers will be one of the most important professions of the future. More people than ever are interested in investing, she notes. And that is likely to grow as people live longer and need careful financial planning.

Ms. James is currently writing “Cultural Intelligence,” a book to be published by the Harvard Business Press.

Q What is your current research focus?

A Something I call adaptive strategies in investment or management. Who changes and who doesn’t. Which individuals are able to see a beat ahead what is coming down the line, or even see it when everyone else can see it – but can commit to it. And then the people who can’t.

Cultural intelligence [is what] I call the ability to see the new story forming. Take the American Medical Association, for example. Physicians are intelligent, competent professionals. But they did not see the writing on the wall, and they lost an extraordinary amount of power.

The same thing has happened to financial advisers if they did not see their industry’s extraordinary shift – which of course is obvious now.

Q What is being transformed in the world of financial planning?

A Control over information. It started with Money magazine. All of a sudden people could pick it up and get funds evaluated. I began to see women in Laundromats with Money magazine in their hands – women who would have had Good Housekeeping in their hands a few years ago.

Then the Internet provided such extraordinary access. Now you have a public that feels that it can do its own investing and get its own information. And selling information used to be a significant part of what an adviser was offering.

On the other hand, what is fading now is, thinking that you can do it all by yourself.

Q Do you think the business is likely to grow or decline over the long term?

A I think it definitely could expand. But the next thing will be a demand for competence. You used to be able to just hang out the shingle. Now you’ve got a much more sophisticated clientele, with much higher expectations.

You can meet their demands in two ways. One is competence. You will see some compensation based on whether you have successfully increased a portfolio or not. That means you’re going to have to take losses.

The other way is in the development of personal relationships. I call it rapid bonding.

It used to be that an adviser could be a relatively serious banker type. Now you have a tremendous need to develop personal skills. Now we have so many choices that we rarely will spend time with someone with whom we don’t feel comfortable. You really need competence and rapid bonding. Either one will get you by. Both will get you ahead.

Q What will drive expansion of the adviser industry?

A Money has always been important. Now it is dominant. People used to brag about their recreation room, or about the tree they planted in the yard, or their children. Now they brag about their portfolio.

Also, at the turn of the century, life expectancy for a woman in western Washington state was 47. Now we’re looking at 80 or 85. People now expect to live to be 100. And that changes their sense of responsibility for the quality of their life and the kind of money they’re going to need to support that life.

So money and the management of money have become far, far more important in these last 20 years.

We all want someone to help us do it right. And people are extraordinarily busy. The busier someone is, the more likely they are to turn it over to an adviser.

Another huge, open area for financial advisers is small business and professional partnerships. I know a number of firms that have hired a financial adviser, and it’s been extraordinarily successful. They are so busy – physicians, lawyers, dentists, even real estate [agents] – that they don’t have time to think seriously about their financial issues.

Q How will small businesses stack up as clients?

A Small businesses will be loyal. Most individual investors – because of access to technology and so much data – are not going to be loyal at all. The minute something goes wrong, they’re going to jump ship.

Q Everyone is courting high-wealth investors. Is there a market in the middle class?

A There’s a huge hunger out there, but a hatred of hustlers sending out 5-by-7 cards promising a million-dollar return.

The big market now is through the workplace. Best is to form a relationship with a business of any size, participating in their continuing-education program – as a neutral, easy-to-deal-with financial educator – then secondarily picking up what business may come your way.

Employees want help, but they do not want to jump in with both feet. And they’re afraid of being taken advantage of.

Q Do you agree with the criticism that advisers have been slow to adopt new technologies?

A The sheer speed of your feedback is important. If you don’t have your technology organized so that within seconds you can put information in front of me, I’m not interested. There soon won’t be a single client who you can wait a week to get back to.

The second thing will be the creation of reports that [are] extremely clear and direct. This means bringing someone in to design it. I don’t think any financial adviser can do it, because the way they think is complex. They’re going to include vast amounts of stuff that their client doesn’t want.

I have a wonderful banker who understands this. Once a month, she generates a single-page report for me. That’s exactly [what] people want. They would shift advisers if they could get monthly or, more frequently, a one-page, readable summary that required absolutely no translation.

Q Is fee-only the future for adviser compensation?

A Let me use the word “customization.” A group of lawyers, a single high-wealth investor or a widow all have different demands. So the idea of a one-size-fits-all business model is worthless. Sit down with clients and offer them, let’s say, five ways of compensating you. Because it’s negotiated, the client feels they’ve made the choice. And that choice can be adjusted on a yearly basis.

Let’s talk about what’s good for the adviser. If [they’ve] got a client who wants a huge amount of attention, time is money. My local utility now charges $5 if you want to talk to a human being. Everyone understands that you have to pay for service now. The adviser also has to protect [their] own time and money.

SNAP SHOT

Jennifer James, 58, cultural anthropologist, writer and lecturer

Career: Seattle Times columnist and lecturer/consultant to corporations and organizations since 1982; 1996, featured commentator, “A Workout for the Mind,” PBS/Business Channel video conference, WGBH-TV Boston; 1993, featured commentator, “Thinking in the Future Tense,” PBS special, KCTS-TV Seattle; 1983-87, commentator and host, KIRO radio and TV, Seattle; 1981-83, host, “Jennifer James Show,” KVI radio, Seattle; 1971-82, instructor, associate professor, psychiatry and behavioral sciences, University of Washington Medical School, Seattle

Education: bachelor of arts in history and psychology, Washington State University, 1965; doctorate in cultural anthropology, University of Washington, 1972

Publications: 54 academic articles and 18 book chapters. Her titles include: “Life Is a Game of Choice,” “Success Is the Quality of Your Journey,” “Defending Yourself Against Criticism,” “Windows,” “Women and the Blues,” “Visions from the Heart” and “Twenty Steps to Wisdom.”