One of the biggest changes to occur in the independent advice industry over the last 35 years is that the advisors who comprise it have come to realize the importance of what they do, according to Deena Katz.
The co-chairman of Evensky & Katz/Foldes Financial and associate professor at Texas Tech University said it’s not just what the advisor does for the client, it’s the way they engage the client in the planning process.
“We now understand how valuable that process is, and how valuable it is to take people through their life issues and have them weigh in on what’s happening and be a productive part of the planning aspect,” she told Investment Advisor in a joint interview with her husband and partner, Harold Evensky, who is also featured on the 2015 IA 35 for 35.
She added that the product should not be the focus of the plan, a concept that is slowly taking root in the industry.
“I do think that the value of planning has become clear to us, or those of us who are in planning. In the early days, we charged for transactions and gave away advice. Today, we do just the opposite. We charge for advice, and the transactions are relatively low cost.”
Technology has made planning easier, but Katz remembers when it was too much of a good thing. “In the early ’90s, we actually got access to our documents on our desktop. Holy cow! We went crazy. We optimized everything because this was such an incredible gift. What we learned was that there are intelligent ways of user optimization. We didn’t have to optimize the universe to figure out what would be most appropriate.”
What Evensky calls “modular comprehensive planning,” Katz calls “holistic planning.” Whatever you call it, both approach financial planning by prioritizing small steps that a client needs to address first.
“People can’t take all the stuff in at once,” she said. “The average adult attention span is six seconds, and here we are trying to cram a big financial plan down their throat.”
Advisors who are doing a good job recognize those weaknesses and decide what needs to be done first, she said.
“We do the things that we think are most important, and then we begin to tackle the other things. We don’t ignore them, which is where a lot of the industry is now. [They say,] ‘We just do asset management.’ That really is optimizing returns, not optimizing financial life.”