Value of an Advisor: C is for customized experience and family wealth planning

Executive summary:

• As our lives become more complicated, our goals and needs become more unique to our particular set of circumstances
• Just as you enjoy customizing your coffee order and your television services, investors are demanding customized wealth management services 
• Advisors are offering customized holistic wealth management to their clients and their families to help ensure an orderly transition of wealth

Life certainly seems to be more complicated these days, doesn’t it? Between juggling my responsibilities at home and the office, my travel schedule, finding time to spend with my spouse and grown daughter who is no longer at home, making sure pets are taken care of and checking in on elderly relatives, as well as keeping up with my book club and ensuring that I meet my fitness goals, there doesn’t seem to be too much more time left in the day. I know I’m not alone!

But I’m lucky in a way. I have a friend who juggles all of that but also a couple of young adult children that haven’t yet been launched.

One thing both of us make time for, however, is our monthly walk and cappuccino: our time to connect and unwind. No matter what else we have going on, we keep that date.

This is a priority for me, but your priorities may be different. We all have a different concept of what is important in life.

We all have our own responsibilities and problems to solve. Each of us has our own set of goals and preferences. Everyone starts from a different set of circumstances. Depending on our experience through the pandemic, those goals, and preferences and circumstances may have changed and may be continuing to change.

There are so many aspects to our lives that are hard to prioritize. And as our lives progress, so does the complexity of our financial decisions. Each financial decision that we make – whether it relates to our debts, rates of return, savings, investment decisions, or legacy planning – impact our families.

Parents want their children to have a good education and the best start to life possible. Couples may be thinking about purchasing a home or a recreational property or planning to start their family. People with elderly parents are concerned about their care and well-being. Most people expect to stop working at one point and more fully enjoy their favorite hobbies or sports. Small business owners may want to pass on a successful legacy.

As their needs expand or change, many investors have increased expectation of individualized service. And this can become challenging for advisors who are trying to provide the best experience for every client, but are challenged with capacity and time constraints.

Just as my priority every month is a walk and a coffee with my friend, and yours is something else, what’s important to one client is not the same as what is important to another.

As well, different generations of clients have different expectations for personalized services. Advisors today need to learn how to cater to the preferences and needs of each demographic group. And advisors are also providing these holistic wealth management services against a backdrop of  a huge generational wealth transfer, the growing financial power of women, and the tsunami of baby boomers retiring.

This is why a growing number of advisors are now offering a range  of services including  insurance, legacy planning, charitable planning, trust and estate planning, tax management and more.

These ongoing changes have meant that we’ve changed how we look at  C – the third letter in our annual Value of Advisor formula. It no longer just reflects the value of a custom financial plan, but the value of customized wealth planning for investors and their families.

Our annual Value of Advisor study quantifies the value that advisors bring to their clients through the myriad of services they provide. The formula is simple:

Every year we produce a series of articles providing greater detail into how we determine our formula. We’ve already discussed the value that advisors provide by actively rebalancing portfolios – the A in the formula above – through all market environments in order to keep their investors’ risk and reward profiles on track. And we’ve written about the B in the formula – the behavioral coaching financial advisors provide that is intended to keep their clients from making emotional decisions when markets are volatile.

In this article, our focus is  the “C” in the formula – the personalized custom client experience that advisors now provide as part of the wealth management experience to investors, and often their entire family.

We continue to firmly believe that services such as asset allocation, security selection and portfolio construction are the building blocks of any successful investment strategy. All three elements are indispensable for reaching a client’s financial goals.

But we also believe that choosing investments is only one component of a comprehensive financial strategy and that advisors provide far more valuable services. They learn a great deal about their clients, including their short-term priorities and long-term goals, the life events they have faced (and should prepare for), and the investment journey they hope to have. They then take that information to craft a comprehensive, real-world financial plan that addresses the client’s unique needs.

Often this plan includes a broad range of services that may require specialized skills. Often, advisors draw on other resources such as accountants and lawyers.

Including other family members in the wealth planning has become a lot more important amid the great wealth transfer as baby boomers age. Many advisors are engaging the spouses in the planning to ensure they continue to have a relationship once the client has passed. Studies have found that most widows will switch financial advisors within a year of losing her husband—unless she already has a good relationship with that advisor.
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This is why communication is so vital. When an advisor is dealing with several members in a family, clear and consistent communication can give everyone the opportunity to voice their concerns and share their needs and priorities.

When everyone is on the same page the likelihood of preserving a legacy is greater. Studies have shown that investors are far more likely to refer an advisor to family and friends if they felt the advisor provided regular and valuable information.¹ Communication is important for your client relationships, and for your opportunities for growing your business.

Our client engagement roadmap can help you work with your client to demonstrate next steps and mutual commitments. Outsourcing some of your investment strategy can also help you carve out more time to build those customized wealth plans.  Consider model strategies for clients who only need core investment management. And you could consider Personalized Managed Accounts—a Separately Managed Account solution that can be individually customized for high net-worth clients. With each of these points of consideration, the goal is to intentionally shift focus and resources to what your clients may expect and value from your relationship. We are here to help.

The bottom line

In the equation of advisor value, the “C” signifies the pivotal role of the customized client experience you deliver. This has become crucially important as investors’ needs become more complex and their investment journey undergoes its twists and turns.  You can be their guide and their companion throughout that journey.

¹ "How can advisors better communicate with their clients”, December 2019 by YCharts. Total sample size represented 650 individuals across the U.S. https://go.ycharts.com/hubfs/YCharts_Client_Communications_Survey.pdf, Accessed Feb 3, 2021.