P is for aligning products to meet each client’s unique goals, circumstances and preferences.
What takes longer? An hour spent waiting in the doctor’s office, or an hour in the company of friends, doing an activity you really enjoy? We all know that time is relative. One minute to complete an examination seems a lot shorter than a minute left on the clock in a tightly fought basketball game.
But while time may be relative, it’s also precious and these days, it seems limited. All of us have growing demands on our time: We are all trying to squeeze in work commitments, family time, recreational activities, fitness, shopping and other duties into too-short days.
As financial advisors focus more on providing holistic wealth management services to their clients, time has become yet one more thing for you to manage. Selecting core investments for a group of investors with a similar amount of assets is one thing. Conducting a discovery process with each client to identify their individual goals, preferences and circumstances, then determining the ideal mix of investments to help them achieve those goals, is another. The latter takes much more time, but it also has greater value.
Our annual Value of Advisor study looks closely at the various services that advisors provide and consistently finds that those services are far more valuable than the average fee charged. In earlier blogs, we discussed the value of actively rebalancing a portfolio, of managing investors’ behavior to keep them invested through challenging markets and of providing a customized experience for clients.
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While our long-standing formula remains the same – A+B+C+P+T – we have changed the value of P from the cost of producing an investment plan to focus on the value that advisors can potentially provide by aligning the investment products they choose to the client’s individual goals, preferences and circumstances. By doing so, we are recognizing that providing the C of our formula (a customized client experience) leads to the P of our formula (products aligned to the client’s goals). That’s how holistic wealth management works: Everything is interconnected with the ultimate aim of helping each client feel financially secure through each stage of their lives.
A one-size-fits-all solution might apply to other areas of our lives but when it comes to our finances, our goals, circumstances and preferences will be very different than anyone else’s.
Generally there are two broad goals: growth and income, with most investors requiring some combination of both. But everyone’s circumstances are different: taxable vs tax-exempt; young vs. not so young; employed, self-employed, nearing retirement, retired—all of these must be considered to find the best investment fit for an individual client. Finally, we all have our own preferences: Conservative, moderate, aggressive and various stances in-between.
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We also have differing opinions on the types of investments we own and of course, on fees.
And that brings us to the concept of time being money. With clients expecting individualized service, and with each having a specific set of goals, needs and circumstances—how do advisors provide the best experience possible and determine the best combination of products in the time they have available?
Leveraging model portfolio options provides increased choice and greater flexibility on how you deliver value to your clients. They allow you to focus more on what your clients value most—the relationship. Indeed, a recent study showed that a typical advisor could gain back almost an entire day per week by outsourcing between 50% and 89% of investment management to a model strategy provider.1 The time you would have spent researching stocks, meeting portfolio managers and analysts, tracking those stocks, documenting trades and conducting ongoing research is now available for you to spend with your top clients—giving them the personalized experience they crave.
Let’s consider an advisor who has outsourced their firm’s investment management to a model strategy provider. The client meetings no longer revolve around the specific assets or funds in the client’s portfolio, but more about their life plan—their careers and work, their family and the goals they have for each member, their leisure activities, their community, their health now and their potential health concerns for the future. This deep discovery process includes asking the right questions and carefully listening to the answers—it can’t and shouldn’t be rushed.
With this kind of background information, the advisor has a better understanding of the client’s goals, circumstances and preferences and can then create a more detailed investment plan and select the model strategies that are most aligned to that plan. This process also makes it easier to adjust the plan when any of those goals, circumstances or preferences changes. And it’s especially valuable when market turmoil puts investors on edge. The more connected clients feel to you and to your process, the less likely it is that market volatility will cause those investors to leave you or the market.
The bottom line
The best investment strategy for any investor is the one that gets them to their destination. As an advisor, you can be the guide to ensure the investment strategy is aligned to help your clients along their journey. From a practice perspective, it’s just as important, though, that the process is manageable for you and for your team.
By gaining back hours in your week and aligning that time to the service your clients most care about, your value will likely be enhanced. Investors whose investment strategies fit their risk profile and align with their values, hold the highest probability of reaching their long-term goals and sleeping better at night. These clients are typically more satisfied with the advice they have received, and they are more likely to confidently refer their advisor to others. After all, financial advice is a relationship business: Clients refer you not for what you do, but how you make them feel.
In our increasingly complex world, this can be more important than ever.
To learn more about the 2021 Value of an Advisor Study, click here.