Financial decision-making ability peaks in middle age, according to a body of research cited by Michael Finke of Texas Tech University in his cover story for the August issue of Research magazine, “The Challenge of the Aging Brain.” Financial advisors can play a valuable role in helping clients prepare for and cope with cognitive decline. As Finke discusses, such a role requires having appropriate powers and paperwork in place, as well as recognizing that clients’ confidence in their financial skills does not decline in tandem with the skills themselves.
In “A Cool Place to Work,” Ellen Uzelac looks at how some advisors are implementing innovative policies and practices that promote employee loyalty, motivation and “buy-in.” Such approaches include more generous leave policies and bringing staffers on a “mini-sabbatical” that might involve a trek through a national park.
“Big Help for Small Business,” by Jane Wollman Rusoff, examines a program at UBS that offers free mentoring to entrepreneurs, from the firm’s advisors as well as from selected clients who have achieved success in a related field. Rusoff focuses on the story of Dr. Johnny Kwanhoom Kim, a dentist who is building a chain of dental offices with help from his UBS advisor and a real estate developer.
Other contents of the issue include Bill Good’s advice on what triggers referrals, a profile of the consultant Scott West and more.
Click through the following slides to preview the August issue of Research magazine.
A growing body of research indicates that a decline in financial skills is to be expected as people move beyond middle age. In this article, Prof. Michael Finke marshals the evidence and draws out its implications for financial advisors.
Writes Finke: “Advisors can perform a valuable role in recognizing reduced cognitive ability and preventing financial calamity if they have the tools to provide assistance.” He discusses such tools, including client engagement letters that document further steps regarding how an advisor will respond when the client’s capacity is diminished.
Another consideration: Investment options, such as annuities, that provide income without significant investment management input and lock up wealth to prevent losses from financial mistakes, can be useful in limiting the negative impact of cognitive aging.
Contributing Editor Ellen Uzelac looks at the cutting edge of building staff motivation and morale. She writes: “Advisory firms, at least the forward-thinking ones, are developing innovative, intentional—and often inexpensive—initiatives to create employee buy-in, loyalty and goodwill. One frequent result? Peak performance.”
What are these initiatives? They range from expediting time off for philanthropy or study to offering Friday chair massages in the office, from making a point of saying “please” and “thank you” to bringing the staff for an outing of white-water kayaking.
Dentist Johnny Kwanhoom Kim owns an expanding chain of dental offices in the Greater Los Angeles area, an approach that makes him both a landlord and tenant of his buildings. “It’s the best way to have a retirement plan,” says the Korean-born dentist, 54.
One advantage Dr. Kim has is that he’s getting advice on how to make his business grow, under a UBS program that mobilizes advisors and established clients to mentor rising entrepreneurs. This program is a philanthropic effort aimed at boosting job creation, and success in achieving that will also help make small clients into bigger ones.
Sales Seminar columnist Bill Good discusses how life changes—getting married or divorced, losing a job,moving, having someone leave a household and so on—promote referrals. He looks at research supporting this contention, including his own collection of narratives from financial advisors asked to discuss how referrals happened.
“In short,” writes Good, “people tend to change advisors when (a) life changes (receiving a lump sum is certainly a life change) AND (b) there is dissatisfaction with one’s advisor or lack of an advisor.”
He notes that this is good news and bad news. The life changes that bring a client to you can also bring a client of yours to another advisor. He sketches out both offensive and defensive strategies for responding.
Consultant Scott West thinks advisors are making a mistake in talking so much about risk in their opening conversations with clients. “We assume if we are excited about risk, our clients are. But when you talk to a client about risk, you may as well insert the word radioactivity. As an industry we’re a couple of years behind the investor mindset,” he says.
In a profile of West, who is managing director and co-founder of Invesco Van Kampen Consulting, Ellen Uzelac discusses the consultant’s penchant for offering creative ideas that can help advisors be persuasive. A key theme of West’s work is this motto: “If you stick to the facts, the facts don’t stick.” Advisors, West contends, should “allow themselves to think about emotion.”