Why? In 2005, after completing stints at several wirehouses, Cowans had started his own practice, merging it two years later with two others to form Highland Advisory Group, a boutique firm located in Chandler, Ariz. As a result, instead of mostly trying to sell products, he now provided fee-based financial planning services to clients with whom he had deep relationships. "I don't lose people if there's bad performance in the market," he says. "They know I'm with them for the long-term."

The days are gone when being a financial advisor meant pushing products. Increasingly, the way successful investment professionals differentiate themselves is by offering in-depth guidance to clients and closely monitoring those plans on an ongoing basis. And, as Cowans discovered, it's an especially important approach during these volatile times, both for advisors and clients alike. "You build a relationship that's more sustainable—and healthier for everyone concerned," says Allen Williamson, managing director of Rydex SGI, a New York City-based asset management firm.

A Win-Win for Advisor and Client

For advisors, this approach provides a myriad of benefits. For one thing, it makes for stickier client relationships. Advisors don't merely invest a client's money in a product offered by their company, with little interaction in between sales calls. Instead, they provide comprehensive financial plans created to fit clients' goals and appetite for risk—and constantly update them, usually meeting frequently throughout the year. "If there's no relationship and performance is down, that client's assets become extremely vulnerable," says Dennis Gallant, president of GDC Research in Sherborn, Mass.

Those aren't the only upsides. As trust builds, advisors tend to win a greater share of each client's wallet. Take Jon Ten Haagen, who runs Ten Haagen Financial Group in Huntington, NY. About a year ago, he started working with a $50,000 account. Since then, the client's wife has added her IRA and 401(k) rollover. Result: The account has grown to $250,000—and Ten Haagen expects to take on another $500,000 soon. What's more, in an increasingly competitive market, this approach provides a way to attract wealthier accounts.

There's also the matter of referrals. By building strong relationships, advisors are more likely to get recommendations from existing clients to obtain potential new business. In fact, such referrals are the most common way for advisors that take a consultative approach to expand their book, according to recent research by FA Insight.  

For clients, it's a method that guarantees their interests are aligned with those of their advisors. The reason: Advisors generally are compensated through a fee based on assets under management; although, like Cowans, they also may charge for providing specific planning services. As a result, the incentive is to grow assets methodically and consistently—and to do so by offering objective advice. "Clients would much rather receive counsel from someone who's on the same side of the table with them," says Williamson.

Developing the Right Process

At the same time, assuming a consultative role requires a good deal of work. "You can't just decide you're going to be more consultative and expect it to happen," says Jim Dew, who heads Dew Wealth Management in Scottsdale, Ariz. Adopting the approach successfully involves a number of steps, including:

Introducing an ongoing process. To become more consultative, you need a thorough understanding of each client's situation – and that requires implementing a comprehensive system for getting to know the person, understanding their finances and developing a plan.

Dew is a case in point. He doesn't make specific investment recommendations until the third client meeting. During the first two, he goes over the prospective account's investments and other relevant issues, from property and casualty insurance to the names of beneficiaries. If he sees a potential problem that's not an area of his expertise, he'll refer the prospect to an appropriate lawyer or accountant. It can take two months before they've agreed to a financial plan. "You have to be patient," he says.

Gathering non-financial information. Deepening the bond with clients requires more than a thorough understanding of their portfolio and goals. It also requires intelligence gathering about non-financial matters and using that information to forge more meaningful connections. During his initial session with clients, Cowans asks about matters such as their hobbies and where they grew up, then follows up during later meetings. When he comes across something that relates to an interest, he sends them an email about it. Recently, he emailed two oenophile-clients about upcoming wine tasting events.

Segmenting clients. Generally, it isn't possible to provide all clients with the same level of service profitably. For that reason, advisors often segment their accounts into categories, according to such criteria as net worth or assets under management, and then deliver a suite of services tailored to each group. Advisors typically spend about 45% of their time on client meetings and service, according to GDC Research.

The bottom line: Assuming a consultative approach requires work and planning—but the benefits for client and advisor make it well worth the effort.