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Financial Planning > College Planning

What clients need and what advisors aren't doing

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Liz Davidson, the founder and CEO of financial wellness company Financial Finesse, says more than 50 percent of the advisors who take the firm’s financial planning test, which is required in order to be hired, fail. That may not seem so unbelievable if it weren’t for the fact that only certified financial planners with at least 10 years’ experience are eligible to take the test.

“The reality is that they are not staying current on all aspects of financial planning,” says Davidson who talked to our sister site, ThinkAdvisor, just as her new book, “What Your Financial Advisor Isn’t Telling You,” went on sale.

In a long-ranging interview with ThinkAdvisor and in her book, Davidson offered some pointers on what financial advisors should do to attract and retain clients and where she thinks the business is heading.

Look at your client’s situation holistically

Advisors should provide a lot more than asset allocation and investment management, says Davidson, whose book is directed at the general public.

“When an advisor looks at your finances, he or she sees your investable assets (money outside of what you are already investing or spending) and how those assets could grow over time,” Davidson writes, [but] at the end of the day investable assets are a very small piece of the financial picture for most Americans.”

Advisors should also help clients negotiate with creditors to reduce debt, find scholarships and other ways to help fund college costs, navigate their employee benefits including health insurance options, understand the right time to buy a home they can afford, find affordable long-term care options for themselves or their parents and develop financially lucrative partnerships with their spouses.

On the investment side, advisors should make sure clients are minimizing taxes, have a diversified portfolio and don’t make emotionally driven decisions about their portfolios.

“Differentiate yourself as an advisor,” says Davidson. “Really get to know your clients well.” The most successful advisors will be “those who have a long-term approach,” says Davidson.

One of the biggest mistakes an advisor can make is to operate in the short term, trying to make money too quickly and coming across as “too salesy or too pushy because they need that income.” Davidson says she understands that advisors have their own families to feed, but in the current environment “where consumers are more aware,” it’s important to “build a long-term book of business.”

Consider going into the workplace

“We’re seeing a lot of advisors going into the workplace, running workshops and educational sessions,” says Davidson. An employee can contact the advisors later to develop a relationship, but Davidson stresses that advisors who work for her firm visit workplaces to provide only financial education.

”Employers really expect that with we’re coming for an education, independent point of view…. [with] no with references to purchase specific services or ‘here’s my business card.’ That establishes credibility and trust.”

Davidson says her company has seen a big increase in the number of inquiries from employers seeking financial education programs for their employees as part of a broader focus on wellness.

“We’re seeing companies focusing on physical and financial wellness and employee training,” says Davidson, noting that these programs are not as expensive as employer-subsidized benefits but show employees that their employers are invested in them. Such programs, says Davidson, are especially useful at a time when employee wages are stagnating but they’re required to make decisions about health care and other benefits.

Health care, manufacturing and consumer product companies are the most receptive to employee wellness programs, says Davidson.

Don’t fight the DOL’s proposed fiduciary rule

“It’s going to happen, so you might as well go with it,” says Davidson, who is a big supporter of the Labor Department’s rule and RIAs. Advisors who oppose the rule will appear to be behind the times and risk putting off current or potential clients who don’t enjoy hearing that the advisor opposes a rule that puts clients first.

Addressing the consumers who are the target audience for her book, Davidson writes, “No one cares more about your money than you do… You should have an advisor who approaches your situation with your best interest in mind and works with you holistically to address your needs and goals on an ongoing basis.”

Rethink your compensation model

Davidson favors the fee-only business model for advisors, whereby advisors charge only for the financial planning services they provide and the time they spend with clients and don’t collect fees or commissions based on how a client’s money is invested.

These advisors align their interests with the clients’ interests and have the time to spend on a client’s “entire financial life, not just the products and services he or she needs to sell to collect a commission,” writes Davidson, noting they can provide a “more customized approach to achieving true financial wellness.”

Alas, Davidson notes few such advisors can survive in the current market. “I do not personally know one fee-only planner who has been able to stay in business longer than seven years without reverting to a different model or joining a financial services firm where they are paid in more traditional ways.” Given that reality, Davidson favors the RIA model where advisors are paid as a percentage of assets under management and have no incentive to promote a specific investment, as well as hybrid models where only a portion of compensation is commission-based.


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