You and your vendors come from different worlds. Vendors love to work with large companies that have deep pockets and teams of experts to guide the project along. When they look at financial services, they see a vast opportunity representing one-twelfth of the entire U.S. GDP. What vendors don’t realize is that they aren’t dealing with 300,000 advisors in a single market, but 300,000 small businesses, each operating in its own market. Advisors’ needs vary widely, their budgets are tightly managed, and they may not have a fully dedicated internal contact to teach vendors the ropes.

That’s why your most important goal in your due diligence and selection is to make sure your vendors understand your business. Do they know the difference between a broker and an advisor? Between fee-based and commission-based business?  Are they aware of the regulatory, sales and marketing review you are subject to? Do they even know how you get paid? If vendors don’t understand these basics, how can they possibly offer you anything useful?

I’m going to come out and say it: You should only use vendors who have worked with advisors before.

It seemed like a good idea at the time.
Sometimes advisors want a fresh perspective. You know, “world-class” ideas. So they look outside the industry, perhaps hiring a glitzy tech agency from Silicon Valley. It all sounds great, in theory. Then reality hits. Suddenly you find out that your hip young social media agency doesn’t know anything about recordkeeping or archiving. Or it decides what you really need are lots of investor testimonials.

A few years ago, I watched one vendor/client relationship fall apart quite spectacularly due to the vendor’s lack of experience with advisors. The advisor had the advantage of an unusual business model, one that targeted a specific demographic with a tailored, comprehensive offering—not just asset management, but also financial planning, budgeting, cash flow planning, and more. The firm needed help getting the word out. It hired a reputable consultant from outside the industry to create a messaging document. Unfortunately, the consultant had no experience working with advisors. He quickly burned through the first sixty percent of the retainer trying to understand what the advisors did for a living. Somehow, he could not get his head around the idea that asset management was only a portion of the offering; all he talked about was investing. With more than half the budget wasted on vendor education, the consultant had no time left for messaging. The result was a message so generic, it could’ve come from a gerontologist.

The bottom line: Never volunteer to be a vendor’s first experience working with advisors.