During a panel discussion Wednesday, four industry experts explored key issues facing advisors today — from which business model to embrace to the best ways of adding new, younger clients. They also tackled the need to personalize services and the challenges of delivering advice in a pandemic. The speakers were: Christine Benz, Morningstar’s director of Personal Finance (upper left); Cathy Curtis of Curtis Financial Planning (upper right); Alan Moore, a co-founder of the fee-based XY Planning Network (lower left); and Don Phillips, a managing director of Morningstar (lower right).
1. Clients love videoconferencing. Phillips says electronic meetings are going to “become a huge part [of the business] going forward,” because they’re more convenient for both clients and advisors; plus, they let advisors host shorter, more frequent meetings, which supports their long-term relationships with clients.
Curtis agrees, stating her clients “love Zoom — even my older clients are absolutely thrilled when they figure it out …[It means] they don’t have to travel. It’s convenient, and I can share my desktop to go over documents.”
2. Find a niche and make it your model. Curtis, whose firm focuses on single women, is a “true believer in niching,” she said, noting that she’s built a business around these clients for the past 12 years: “Choose a target client and go after it. It doesn’t hurt you at all, in fact it helps you.”
Though focused, her client base also is diverse and includes “widows, divorcees, women who inherit money and working women … [all of whom] need a financial partner, as they don’t have a spouse,” Curtis explained.
Moore agrees and points to one advisor who specializes in women working for technology firms, including startups, where her knowledge of stock option plans and employee compensation is both essential and greatly appreciated. Between a more general advisor and the niche advisor, “the tech person is going to pick her,” Moore said.
3. Emphasize financial planning. “It’s really hard to add value on the investment side today,” said Phillips. However, advisors can add value by guiding clients as they make key life decisions.
Moore says its advisors are seeing “a shift to financial planning, because as you work with younger clients, their needs are different.”
4. Investors want a financial coach. A critical part of financial planning is guiding investors, which includes serving (at least some of the time) as their “life coach,” said Benz. It’s something “that people really want,” added Phillips. Their spouse or partner may not know all the details of a couple’s financial situation, “or your family doesn’t want to talk about money, so you need someone you can trust to talk about monetary decisions.”
“It’s not about saving everything you can into your 401(k), it’s not just about minimizing taxes. It’s about what you are trying to accomplish,” said Moore. “This includes understanding the value of financial planning, [which] is really around helping clients discover what it is that they want out of life.”
5. Robo-advisors definitely help advisors. “Robo-advisors can be helpful in widening the span of the audience that [advisors] service, … [which] is a big plus, and not something that threatens” advisors, Phillips explained.
Technology also makes life easier for advisors, so they can open accounts in a matter of minutes, not hours, Moore said. “It is allowing [advisors] to streamline their practices, so they can work with more clients or go deeper with clients [using] a deeper level of expertise.”
6. Hybrid business models are here to stay. “Why would an advisor be paid differently than an attorney or a CPA?” asked Phillips, referring to their fixed-rate compensation. His answer: Advisors don’t have a reason to move away from the asset-based model, which generally has a yearly fee, since clients aren’t upset with it. “And advisors love it, because the client doesn’t get a chance every quarter to think, ‘Well, do I want to continue this service?’ ” Still, the AUM-based model doesn’t work very well for clients with a relatively low level of assets or those in the ultra-high-net-worth segment, because it doesn’t make economic sense for them, Phillips said.
Curtis agrees that younger clients typically can’t afford the AUM model, so she offers them a hybrid model. “If a client really wants my services, both financial planning and investment management, I have a flat fee,” she said. She also works with another advisor to take on younger clients who may not be able to afford her services.
7. Embrace sustainable investing. With all the new sustainable investing products available today, “It’s so much easier to build an [environmental, social and governance] portfolio that is well diversified than it was years ago,” said Curtis. In fact, she is exploring making such products her core offering. “It’s well documented that women are more interested in ESG investing than men, at least at this point, and [my clients] are expressing it more to me.”