Before financial products became a massive business, financial advice – and the advisor who granted it – had a very different role. Working in small communities or big cities, they were up there with your doctor and your lawyer as part of your trusted team, planning for and celebrating the good times with you and helping through the bad times.
In the 20th century, as the “pay for product” model took root and flourished, financial advice became all about asset selection, except for the very wealthy with enough assets to command personalized, holistic advice as an additional service. With the rise of the fiduciary, fee-only model, a new wave of service offerings and client relationships in the financial advice industry are focused on a more holistic approach – and they are available to everyone.
In today’s complicated world, the total value that financial advisors can bring to the table is significant. Financial advice expands beyond selecting products for an asset allocation and can include assistance with tax planning, insurance reviews, goal setting and prioritization, and cash flow management. On the investment side, advisors can now build portfolios across a much broader spectrum of assets.
In this article, we break down a few ways this new style of advice brings value to clients at all stages of life.
A Prioritization of Personalization
The advent of consumer-centered technology has changed everything about our lives. Shopping, eating in or out, consuming media, dating, travel — all the big things we do in life – have been rebuilt from the ground up, and the new model is better. Money has not been left out, from the rise of robo-advisors to the mortgage and insurance industries. But the problem with money is that it remains very personal and individualized attention is critical to getting a good outcome.
The new model for financial advisors is incorporating technology to provide more personalized advice. Advisors can leverage tech to put money to work cost-effectively. They can build allocations that work for clients’ personal situations and risk tolerances, whether they use active or passive investments. Using this technology to streamline formerly very labor-intensive work means that advisors can provide a broad range of advice – to investors across the income and asset value spectrum. Great, holistic financial advice is no longer the province of the very rich.
The independent, fiduciary, fee-only model means that advisors can once again take on the role of a trusted ally. New tools let advisors keep client portfolios updated in real-time for changing situations. This allows advisors to provide more contextual, human-centered advice across the whole of client’s financial plan – which is really a life plan when it comes down to it.
Technology solutions can help new, young investors get started on their financial journey, but as life gets more complicated, so do the decisions and implications of those decisions. This is where the true value of an advisor begins to come to light. Since personal finance runs deeper than surface-level numbers, working one-on-one with an advisor allows you to share your life goals, your financial fears, and more, allowing them to provide better, more customized advice.
More Than Just Investments
A recent study found that 51% of respondents saw their advisor as a life coach.1
Outside of investments, many people find comfort in the fact that more advisors are providing advice in regard to their full financial picture. Whether it’s planning around how to save for your children’s education, planning for travel, or figuring out how to fund a new business venture, financial advisors can help you build a plan to get you where you want to be. In times of financial stress, an advisor can help talk through concerns and ultimately find the necessary solutions and provide a clear path forward. Financial advisors are well-equipped to provide advice in many areas of personal finance, ranging from the basics of investing to tax planning and cash flow management,
A Focus on Education
It’s no longer enough for an advisor to simply state the best financial decision in a situation. It’s becoming more important to provide the “why” and explain what led to making that decision. This creates confidence and an overall sense of knowledge around decisions being made.
A perfect example of a financial advisor leading with education is during the pandemic-fueled market crash in March 2020. Many investors sold off their investments when the S&P 500 dropped around 33%. However, those who stayed the course and remained invested would have seen the market bounce back by ~17% in the following few days. The market then returned a substantial 18% by the end of the year.
The Takeaway
As we begin to make the transition into post-COVID life, there’s an increasing need for financial advice. And as client needs become less investment-focused and more life-focused, financial advice has begun to evolve and take on a new form. A lot has changed over the past couple of years, and working with an advisor to re-focus your finances can help bring clarity and confidence to some of life’s most important decisions.
1. Accenture. Wealth Management Consumer Report. The New State of Advice. 2021. Accenture.
