GRATEFUL for the past 20 years

Executive summary:

  • One of our veteran regional directors shares his thoughts about what makes a great advisor
  • He sums up the key attributes using the acronym GRATEFUL
  • Many of these attributes also provide substantial value to investors, as detailed in our annual Value of an Advisor study

Has it really been 20 years already?

I have been looking forward to writing this blog for a long time. I joined Russell Investments on July 12, 2004 and now that it is my 20th anniversary, I feel it’s the right moment to share some of what I have learned along the way.

I am so incredibly lucky to work at a firm that encourages their employees to express their opinions. It’s crazy to think about how young and naïve I was when I started here. Since I have been at Russell Investments, I have seen four U.S. presidents elected, the launch of the iPhone, Hurricane Katrina, the Great Financial Crisis and the Covid pandemic.

On the personal side I have become a father during this time and my hairline has drastically changed. My son reminds me regularly that my stadium (bald spot) is getting bigger every day.

One of the best parts of getting older is the wisdom you accumulate. I am extremely grateful for the journey I have been on these past 20 years. As a gift to the new generation of advisors, and as a follow up to the annual update of our Value of Advisor study (VOA), I thought I would share some attributes that I think all great advisors have.

You might be asking: ”Tim, what makes you an expert on the financial advisor business?” Over the past 20 years I have had somewhere around 14,000 discussions with advisors. It could be more except I like taking my vacations! That being said, anyone who knows me knows how many miles I have put on my car and how many shoes I have worn out. They know I how passionate I am about my work. When I think about my career and what makes a great advisor, the first word that comes to my mind is GRATEFUL.

Guidance is the key

Rely on referrals

Activity is always rewarded

Taxes matter

Establish an investment philosophy

Forecasts are unreliable

Understand your clients better than anyone else

Love your job

Guidance is the key

I am still shocked by how many advisors believe their main value to clients is portfolio construction. I am not saying that portfolio construction is not important, but in my opinion, it pales in importance to helping a client improve their “behavior”.

According to the most recent VOA study, the greatest value that advisors provide their clients is through their behavioral guidance. Financial consultant Nick Murray notes that “the biggest detriment to a client’s return is not the investment they are in, but their own behavior.” I totally agree. You could have created the most elegant portfolio, but if the client gets nervous and sells out, you have failed that client. That is why every client needs some sort of touchstone (Financial Plan) to come back to when things get hard. If you take one idea away from this blog, this is the one I want you to take away.

Another great line from Nick Murray is: ”The bridge between a client’s plan and a client’s behavior is the advisor’s perspective.”

Rely on referrals

The hardest part of being an advisor is not managing the money. It is getting in front of the right clients.

I know advisors try all sorts of seminars and marketing to reach an audience, but the best client acquisition tool I have ever seen is a good referral. This is because that new client is going to be similar to a client you already have. We all know that not every investor is going to be a fit, so if a current client gives you a referral, there is a pretty good chance that the potential client has some similarities to your current client. Therefore, the chance of them becoming a client is much higher.

If you struggle with getting referrals try this: Grab one of your ideal clients and just ask them: ”If you were me, how would you go about getting in front of more clients like yourself?” This is a much better way of getting ideas than just asking for names. Set yourself a target for the number of referrals you want to get every month and go from there. I try to get two a week. Pick whatever number you want but stick to it.

Activity is always rewarded

This one is hard, because it is hard. You may feel overwhelmed at times, but successful advisors are busy. If you want new clients or better clients, you have to constantly ask for referrals. You also have to run your business. I heard a quote one time: “If you do the activity numbers, the numbers will take care of you.” This is a version of “just keep working”. There is also this fallacy that things get easier after five years. In my experience, this business never gets easier. Maybe as you build out your advisory practice, some aspects get a little easier, because you have steady income, but other parts of the business continue to get more difficult. (Think Compliance, think about the costs of running the business.) You also should make sure you are doing the right activities at the right time.

But for your business to grow you can’t stand still.

Taxes matter

The United States now has approximately $34 trillion in debt. In case you weren’t sure how much a trillion is, if you wanted to count to a trillion and you started today it would take you 32,000 years. How will we as a country pay for this debt? Taxes. If you read our VOA study, you can see the average client loses a good chunk of performance to taxes every year. This is what we call “tax drag.” Over time, tax drag can add up substantially. If you can add services or products such as tax-managed funds or direct indexing, you can help clients manage that tax drag. I know asset allocation is important, but taxes are becoming a bigger and bigger deal. There is the expense ratio of a fund and then there is the tax slippage a fund has. We have a tax impact comparison tool on our website that shows you how much each fund loses to taxes. We all know it is not what you make it is what you keep. As Mark Twain said: ”The only difference between the taxidermist and the tax man is the taxidermist leaves the skin.”

If you do not have a tax strategy, let us help you build one.

Establish an investment philosophy

One of my clients recently shared this quote with me: ”Your investment philosophy should change about as often as the personal beliefs you have in life.” I agree. Every advisor should be able to articulate their investment value in a short succinct sentence. That philosophy should rarely change. We at Russell Investments believe clients should have a globally diversified multi-manager portfolio. That philosophy has not really changed in my 20 years.

What I have noticed in my career is that some advisors have a product philosophy not an investment philosophy, so their clients end up having the “hot” product not the “right” product. The problem with that is the market goes through cycles and when that hot product underperforms (which it will), how can you as an advisor defend something that you don’t believe in or understand. I can’t tell you how many times I have been called an idiot for believing in having international investment exposure. I get it. Everyone wants outperformance all the time, but you must stay diversified. The line I love to reference about diversification is: “You know you are diversified when something in your portfolio is down.”

Forecasts are unreliable

Every year, asset management firms come out with their forecasts for the next year, us included. What I have noticed over my time in the financial services industry, is that most of those forecasts are off. It is not because economists are misguided, it is that the economy and markets are very, very, complicated. The sooner an advisor realizes that nobody knows the future, the better it is for everyone. The best chance a client has to navigating markets is to have a diversified portfolio and stick to their investment plan. Instead of trying to prognosticate where the market is going, my best advisors usually say something like this: “I have no clue what the future holds, but I will be here to guide you through it.”

It is the same advice I give to my boys. I have no clue what you will go through in life, but I will be here every step of the way.

Understand your clients

Nick Murray has one of my favorite lines on this topic: ”The best advisors know their clients better than anybody who doesn’t share their same last name.” If you look at our VOA study, you see that financial planning is a huge part of an advisor’s value. Real financial planning – things such as planning for retirement, budgeting and being the advisor for the whole family – is crucially important. To do that, you need to fully understand your clients and their family members. Think of building out a family tree, so you know everything you can about the family you are working with.

If you are wondering what kind of questions you should ask clients to please look at the blog I wrote a while ago. You can also refer to our discovery cards to guide you through the “getting to know you” process.

If you want to show your clients you care, call them on the anniversary of the day they open an account with you. Or find some other way to reach out and remind them that you are the guide on their financial journey.

Love your job

I have been truly blessed to be in this industry for as long as I have been. I have been through some of the best times in the market, such as 1999 or the last few years. I have also lived through the dot-com crash of 2001, the credit crisis in 2008 and the Covid outbreak in 2020.

What always keeps me going is the firm I work at and the advisors I am lucky enough to work with. I work with some of the most thoughtful talented people in the industry. I always say at Russell Investments we have a very low jerk factor. This means I get along with almost everyone and I love representing such a great company.

I also love my clients. As a dad and husband, I don’t have a ton of free time to make new friends, so a lot of my advisors are my friends and confidants. I sure that is not what they teach in sales school, but I don’t care. Some of the advisors I work with are the most thoughtful intelligent humans I have met. This is all to say that I love my job and if you love your job people can feel your passion and it makes the job so much easier. If you don’t love your job, do something else. Life is too short.

We at Russell Investments believe that working with a financial advisor is vital to an investor’s success. That is why our funds are only available through advisors. Hopefully this blog inspires a new advisor or is just a good reminder to a current advisor of what is important. After 20 years and 14,000 meetings I can honestly say I have never felt more grateful for the opportunity that was given to me.

If you want to read more about our 2024 VOA study, please click here.