Advisors everywhere are sitting down with their clients.  These meetings are happening in small-town living rooms like the ones where hard-working people once entrusted their life savings to my father; they are happening in gleaming skyscrapers, some newly renamed by bankruptcy or a takeover; they are happening in lavish wealth management offices, in exclusive enclaves of the very-rich; and they are happening at organizations big and small, with pension plans and endowments facing new uncertainties.

To these clients, I offer the following advice: Act like the child who keeps repeating one question over and over, and whenever your adviser makes a statement ask that simplest of questions.

“Why?”

I do not mean the angry “why” that attempts to find the politicians and CEOs we can blame for this mess, nor the cosmic “why” that wonders what kind of economic world would be better to live in, nor even the painful “why” (for all concerned) that asks how major losses might have been avoided. Each of those questions can be informative, but what’s done is done. Looking backward too much is counterproductive.

Instead, I am talking about challenging advisors on every element of what they believe about the future of the economy, the markets, and the investment business. When those fateful “why” questions are asked, advisors will need to be able to articulate their views and explain how they differ from others’.

Advisors, expect some emotional “whys” along the way, given that people often seek out advisors for the handholding that they get in return.  Many clients are finding it harder now than ever before to believe reassurances to stay the course.  Faith and trust have been lost, and they will need a reason to believe in your advice and counsel.

Related to that is the fee-related “why.”  Some argue that the business of financial advice is overbuilt, and that the environment will be increasingly competitive, creating pressures to lower or eliminate fees.  (Others say that individuals will realize how much they need help, which would have the opposite effect.)  The proliferation of vehicles for investment, many of which feature lower fees than products advisors might be using, are also a negative pressure on fees — the disparity in fees for similar products and services is amazing and is likely to narrow.

Which brings us to the active-management and relative-performance-measurement “whys.”  Investors’ affinity for each has helped build the investment business as it exists today; the question is whether the focus on actively managing and measuring performance relatively helps or hurts, under what circumstances it does so, and whether that focus is worth the costs involved.

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