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.”