The Holistic Advisor Advantage

Discussions about holistic financial advice have been on the rise in recent years as the industry has come to recognize that it takes more than investment management to help clients get where they want to go.

Yet, despite this growing recognition, comprehensive financial advice isn’t widespread. There’s a clear gap between what is being discussed at industry conferences and what investors are experiencing.

According to J.D. Power, only 14% of investors using “full-service” advisors are getting comprehensive financial advice.

Why hasn’t holistic advice become more widespread?

For many, it’s inertia.

Evolving an investment practice that in most respects is humming along requires a long-term vision, a willingness to embrace change, and an orientation toward growth.

There’s also a structural issue in that many practices generate revenue from assets under management.

Advisors who have built their practices around that model may not feel incentivized to diversify into other areas.

Additionally, lack of expertise is a barrier, and it certainly can feel safer for an advisor to stay in their lane.

For those unsure if “the juice is worth the squeeze” when it comes to transforming their practices to offer more comprehensive advice, it’s worth laying out the competitive advantages — advantages that are particularly tangible in bear market environments like we’re living through now.

Here are three key advantages holistic advisors have over those focused solely on investments.

1. A Smoother Ride

Practices that revolve around investment portfolios feel the fluctuations of the markets deeply, making periods like we’re in today even more stressful.

Advisors aren’t just managing client fears in a bear market, they are watching their own revenue decline as AUM dips.

Holistic advisors have multiple revenue streams from a range of offerings that can include fee-only planning, business and estate planning, risk and insurance products, education planning, charitable giving and more, making down periods for stocks less jolting.

2. Fewer Distractions

Holistic advisors focus on long-term value.

They address the risk side of the equation as well as the growth side for their clients with time-tested strategies and products.

A long-term, disciplined approach and commitment to proven offerings means advisors are less likely to chase fads that require a lot of energy to incorporate into a client’s portfolio and may not deliver the desired results over time.

3. Stickier Relationships

By its very nature, holistic advice means getting to know clients on a much deeper level.

The J.D. Power study found that among investors receiving comprehensive advice, three-quarters say they will definitely not switch investment firms in the next year.

When clients feel their advisor’s investment in their personal goals and concerns, a powerful level of trust develops and clients are much more likely to stick with that advisor through their wealth journey rather than turning to someone else when life circumstances change or markets turn.

At Northwestern Mutual, our commitment to comprehensive financial planning has been steadfast — and growing — for decades.

We know from experience and from research that the most effective approach to building financial security involves more than investments alone.

A holistic financial plan that combines permanent life insurance with investments and annuities has been proven by EY to deliver better retirement outcomes for clients more often.

This approach helps clients protect what they’ve already built while creating future prosperity.

Change is difficult, but as professionals, it’s essential for each of us to continue growing and evolving to remain relevant.

This is an opportune moment with significant white space for advisors who are considering evolving their practices to address client needs beyond investment management.

I encourage advisors who are ready to take their practices to the next level to find a role model.

Learning from people who’ve built successful integrated planning practices is one of the best ways to move forward.

At a time when investment advice is increasingly commoditized, holistic advisors who broaden their offerings and think of the whole client will be best positioned for sustained growth.

Tim Gerend is the chief distribution officer at Northwestern Mutual.

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(Image: iStock)