What are the primary concerns of investors today and what type of support are they looking for from financial advisors? These are critical questions for advisors, and the answers can guide how they promote their capabilities and guide client conversations. Fortunately, a survey that Russell Investments conducts every year provides valuable insights into these issues. After its latest survey, Russell identified four essential services that advisors should be promoting to meet investors where they are today. Russell put them together in an easy-to-remember formula: A+B+C+T.
1. Active rebalancing. The varying performance of different asset classes such as stocks and bonds can throw investors’ portfolio allocations considerably out of whack over time. An investor with a 60/40 portfolio could find themselves with an 85/15 allocation after just a few years of rallying equity markets and flat or down bond markets. Many investors don’t recognize the importance of rebalancing regularly or the considerable risk posed to their portfolios if they don’t. Advisors have a great opportunity to promote the value of professional advice by explaining what rebalancing is and how they implement it. At a time when investors are increasingly concerned about risk, advisors can let clients know that rebalancing is one of the best risk management tools available to them.
Implementing this approach requires discipline and a willingness to be contrarian because rebalancing forces you to sell your winners and buy more of that year’s losers. But advisors can use past returns to demonstrate how effective this strategy has been historically. Once again, there is an opportunity to emphasize the benefits of working with an expert because many investors might not be able to adhere, on their own, to the discipline of rebalancing.
2. Behavioral coaching. The daily headlines have never stopped being alarming, but that has not prevented investors from realizing significant returns from their long-term investments. History also shows that the biggest deterrent to investors’ return often isn’t the frightening latest news about Fed decisions, Washington debates, or global political turmoil. Instead, it’s usually investor behavior. Panic selling and the wrong assumption that it is possible to time the markets are more often what causes investors’ personal long-term returns to fall well below what the financial markets have delivered. Advisors will be well served to promote the advantages of having a coach who can protect investors from common behavioral finance missteps like loss aversion, overconfidence and herd investing.
3. Customized experiences and family wealth planning. No one wants cookie-cutter solutions. To prove that you can deliver true personalization, you must demonstrate that you take into account much more than your clients’ investment objectives and risk tolerance. Show that you offer unique solutions that factor in people’s life stages, family circumstances and values. To illustrate how your services go far beyond making investment recommendations, promote how you can help clients address other critical issues like the costs of health care throughout their lives and especially in later years, when they may be living on a fixed income and perhaps even need long-term care. Show how you holistically address family wealth planning by marketing your capabilities to help families navigate transitions like marriages, divorce or family expansions. Let clients know you can help them establish a legacy for their children and grandchildren through the support you provide with estate planning. Given the great wealth transfer that is occurring, advisors also need to make sure they work from the outset to build a strong relationship with every member of a family, including spouses and adult children, and even minors who could benefit from financial literacy training. Offering services that might not generate significant revenue today could pay off in the long term by fostering loyalty across generations of families.
4. Tax-smart planning and investing. Too many investors assume the ups and downs of the financial markets are the key determinant of their returns. The impact of taxes often gets overlooked. Advisors can differentiate themselves by educating clients on the effects of taxes and the solutions they can offer, like tax-managed funds or tax-loss harvesting, that can minimize the drag of taxes on investment returns.
Get Help Where You Need it
Of course, advisors don’t have to be DIY marketers. And it is also important to stress holistic financial plans to many clients. Many of the services you offer can also get very technical very quickly, and you’re trying to connect with prospects who are already experiencing information overload. Marketing experts can help you develop compelling messages that keep things simple and direct, while cutting through the noise. Tailoring powerful messages that address investors’ top priorities will help ensure that your practice stands out from the competition.
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