Wealth advisory value proposition

Advising on the client’s best interest

Scott Smith, CIMA®
One of the rewarding aspects of being an advisor is getting the opportunity to partner with clients and help them make good financial decisions throughout the various stages of their lives. Perhaps more than most other professions, our business is personal because it concentrates on the unique goals and challenges of each client and creates a long-term plan that brings them closer to their destination. The Wealth advisory value proposition we bring to the table as a fiduciary is directly correlated to the depth and breadth of each client relationship.

“…being a client’s trusted confidant in all respects where money and life intersect is a great responsibility we assume with diligence and care.”

Advisory Value Proposition

While creating financial plans and building efficient portfolios is a technical aspect of our profession that we all enjoy, it isn’t the source of motivation that gets us up in the morning. What does get us up in the morning is the knowledge that one of our client’s children or grandchildren will be going to college next year without having to take out any student loans because of proactive planning. It’s knowing that one of our elderly clients can move into an assisted living facility without financial worry because of the long-term care insurance policy we helped them get years before they knew they would need it. It’s knowing that we helped someone reduce their taxes while honoring the charities of their choice through a donor-advised fund.

There are many more examples, but suffice to say, being a client’s trusted confidant in all respects where money and life intersect is a great responsibility we assume with diligence and care. Seeing the real life impact of our work decisions is the source of motivation that drives us every morning. At night, we go to bed with a clear conscience because we sit on the same side of the table with the client and advise based on what is in their best interest, not ours. There are other fine advisors in our community that do the same and we commend them. Our disappointment is with those advisors who exploit client emotions so they can pocket a commission off an annuity that client’s don’t fully understand. We believe in the right client circumstance, certain types of annuities can be a smaller piece of a broader solution, but they should not be viewed or utilized as a one size fits all solution as they are often times marketed.

I say all this because there are a growing number of people who do not understand the value proposition of a professional wealth advisory relationship. This value proposition is being obscured by the growing popularity of index funds and “robo-advisors” as a way to replace a traditional advisor.

We find that robo advisors are particularly appealing for millennial investors who are in an asset accumulation phase and can set their savings and investing on auto-pilot and who prefer engagement with technology instead of humans. Both index funds and robo-advisors represent the commoditized aspects of our industry and how technology is improving the efficiency and lowering the cost of investing.

We welcome that development of improved simplicity, efficiency, and cost. What remains to be seen is how those investors respond in a period of market volatility and whether technology adequately incorporates the tenets of behavioral finance so investors think twice before acting on emotional impulses. Mistakes are usually much more expensive than fees.

Advisory Value Proposition blackboardWhile we do have a few millennials, most of our clients are working professionals nearing retirement or those who are already retired. For both groups, sequence of return risk, volatility management, and tax efficient retirement income distributions are all critical aspects that cannot be serviced by a robo advisor invested in index funds. Index funds are excellent for young professionals in an asset accumulation phase with long time horizons, but they are the last place we’d choose for someone approaching or already in retirement, particularly in light of current elevated equity market valuations. We are fortunate to have a client base that recognizes the advisory value proposition of preserving and growing their wealth in a prudent, risk conscious manner, particularly against the backdrop of today’s uncertain political and economic environment.

Given the real life implications of planning and investment decisions, we define our value by how we help a client improve their return on life. Return on life is just a fancy way of assessing how well we are getting clients closer to their goals. Return on life reaches well beyond investment returns, encompassing the following advisory value propositions clients should expect from a relationship.

Organization: We work with clients to help them simplify their financial life (saving, investing, insurance, taxes, & estate) and organize it into a cohesive plan. Organization matters because many people don’t know what they own, why they own it, or how it fits into their overall financial plan.

Accountability: We help clients follow through with their financial commitments by working with them to prioritize goals, guide them in the steps they need to take, and regularly review their progress towards achieving them. We also bring accountability by helping clients stay the course during periods of market volatility. Accountability matters because we are all prone to procrastinate and we are all prone to act on impulse. Sometimes we need a trusted partner that keeps us focused and committed so we don’t lose sight of the bigger picture.

Objectivity & Perspective: We provide objective advice and perspective based upon facts and research, not speculation and feelings. Objectivity and perspective matters because there is a lot of noise in the media and financial markets that can create confusion for investors. Our job is to filter through the noise and provide perspective and clarity amidst confusion.

Education: After thoroughly understanding the client’s situation and what they are trying to achieve, we educate clients on the rationales behind our recommendations so that they fully understand how they fit their particular situation and plans. Education matters because we want clients informed, comfortable, and committed to their financial plans.

Transparency: Clients should expect transparency, full disclosure of fees, and full disclosure of any potential conflicts of interests. Transparency matters because clients should know what they are paying for.

Experience & Expertise: From social security claiming strategies, to keeping up to date on tax law changes, to understanding asset class correlations and building efficient portfolios, clients expect advisors to know their stuff and to stay abreast of strategies and solutions that can be used to improve client outcomes. Experience and expertise from credentialed advisors matters because there are many well dressed, well-spoken advisors that don’t have them.

These are the qualities we believe bring value to an advisory relationship. Do you know of a friend or colleague that could benefit from these services? If so, we would welcome an introduction. Even if they are currently managing it themselves or already working with another trusted advisor, a second opinion couldn’t hurt.