With technology ubiquitous and remote work the norm, wealth management firms are focusing on helping FAs drive deeper client relationships as planners and coaches
Wealth management firms feel the acceleration of changes ushered in by global uncertainty due to the continued pandemic and the need to rapidly adopt technology to serve clients under current circumstances.
Remote client service and engagement became the new norm. Yet, the very tech tools that made it possible to stay connected have increasingly led to impersonal relationships.
And one thing is clear: Financial advisors who choose to restrict their scope of client work to just technical areas – say, one-dimensional, numbers-based planning or as a de facto client asset manager via the “Rep as PM” model – might be reducing their client service and business growth potential.
So, here are the key questions that face firms and advisors today that are worth addressing in depth here:
First, how have advisors adapted to best serve and connect with their clients?
And next, what do financial advisors need from their firms and other industry partners to empower them to move beyond technical expertise so they can build deeper, more meaningful relationships with clients via planning and coaching?
This Month’s Dialogue Partners: Financial Advocates and Facet Wealth
For this month’s Human Capital Roundtable dialogue partners, I sought answers on this question from two successful firms on the front lines to gain insight from their respective leaders, who bring their own unique perspectives and approach.
I spoke with the executives at Financial Advocates, LLC, a hybrid RIA group whose RIA entity is Financial Advocates Investment Management. Based in the Pacific Northwest with a home office staff of 50, the hybrid RIA group supports 300 independent financial advisors across the country, with total assets of $20 billion.
Representing the broader Financial Advocates organization are Gary Campbell, Founder and Chief Strategy Officer; Angela Vlach, President and Chief Executive Officer; and Elvis Medica, EVP, Chief Growth Officer.
I also connected with Facet Wealth, an independent wealth management firm headquartered in Baltimore with over $1 billion in client assets and 120 financial advisors. The firm is in the enviable position of having quadrupled in size in 2020, and the Facet Wealth team is on track to meet or exceed those numbers by the end of this year.
Brent Weiss, Co-Founder and Chief Evangelist of Facet Wealth, served as the firm’s dialogue partner for this month’s Human Capital Corner. He brings perspective from the new breed of wealth managers, who are effectively driving growth and change across our industry.
Muñoz: The personal finance industry has increasingly emphasized a stronger connection to what matters most to a client. Despite this evolution, we still largely focus more on technical training for financial advisors, versus relationship management. How do you shift from the role of technical expert to planner and coach to help clients navigate and take action to achieve their life goals?
Elvis Medica, Financial Advocates: The most successful advisors we work with use planning, both financial and other tools, as the foundation of their relationship with their client. When advisors engage with their clients on financial planning, they build deeper, longer-lasting relationships and capture a much greater wallet share of assets, in most cases all the client’s assets.
Shifting from a technical expert to planner and coach can be challenging, but quickly facilitated when adopting a goals-based planning approach with clients, where the discussion is not just about numbers and portfolios, but instead about goals, dreams and aspirations. We pair great technology from our broker-dealer, with one of our trained business consultants to help advisors very quickly make this change.
Brent Weiss, Facet Wealth: Financial planning, when done right, is a balance between technical expertise, life planning and coaching. This is how Facet has operated from Day One, so we didn’t have to make a shift in our service to clients.
We developed proprietary technology to help our planners be better at their jobs, to lower the time it takes to do their job, and to dramatically lower the cost to deliver true financial planning. We believe that the business model of the future in financial services is human and planning first. Technology and investments matter, but they aren’t the starting point. Our technology allows our planners to spend their time where it matters most, and that is with our clients.
As someone working toward my Financial Fitness Coach certification, the fundamental difference I see is that financial advice, which is just investment advice in disguise for most advisors, is about power over someone.
The advisor has special knowledge that is kept from the client. They have power and choose to charge based on it. Coaching, which is just a foundational element of financial planning done right, is about power with the client.
We need to educate our clients. Help them make smarter, more informed decisions. Guide them through life with clarity and confidence. It’s about giving them the power to be in control of the life they want to live.
Muñoz: $68 trillion in intergenerational asset transfer is anticipated in the next 25 years, with an estimated $30-40 trillion in assets from the Boomer generation alone. Will establishing the process and tools to serve as a financial coach help an advisor extend the relationship to the next generation?
Gary Campbell, Financial Advocates: The tools advisors use to manage client relationships must be developed to provide meaningful benefit through the eyes of younger clients.
Elvis Medica, Financial Advocates: Most studies suggest that 80% or more of heirs will look for a new financial advisor after inheriting their parents’ wealth. Incorporating the next generation of clients in client meetings and meeting their children and grandchildren is vital because it positions you as the expert and someone they can trust.
Brent Weiss, Facet Wealth: There are two primary challenges that traditional wealth managers face. First, the AUM model makes it very difficult to properly serve the next generation of families and their wealth. Second, focusing on investments and retirement doesn’t speak to the 20-, 30-, and 40-somethings that want advice on more than just their assets.
A Cerulli study also showed that almost 9 out of 10 adult children will not consider working with their parents’ advisor. We are attracting the next generation of clients that other advisors want but cannot serve properly. We actually see a different situation entirely, in that our clients are referring their parents to us.
Muñoz: The best financial plan is only effective if it can withstand the emotions, beliefs and behaviors about money held by the client. How is a financial coach better prepared to help a client act on what they need to do?
Angela Vlach, Financial Advocates: Developing a deep relationship with your client built on goals-based planning can help the advisor more easily guide the client in making sometimes difficult decisions by helping them focus on the outcome or goal they are focusing on.
Gary Campbell, Financial Advocates: A coach develops processes that engage their clients (similar to guiding players on a team). Coaching is a repetitive, building process that should not just help clients reach their goals, but help them gain confidence/comfort.
Brent Weiss, Facet Wealth: We applaud the CFP® Board for adding a section about the psychology of financial planning, because that’s critically important to helping clients succeed. Understanding the psychology of financial planning, having the ability to understand our clients and having empathy are big parts of our recruiting, hiring and onboarding processes.
We just unveiled a secure communications function that makes it easy for clients to ask their planner a question or share documents as easily as sending a text. Whatever works best for each client, we have that. We meet our clients where they live.
Muñoz: How do you prepare your advisors to help clients through life’s most difficult and delicate situations?
Angela Vlach, Financial Advocates: Experience is the best teacher. At Financial Advocates, we focus very heavily on training, education and community building. We create conditions for advisor interaction and collaboration. We also host study groups, which help to facilitate the learning process.
Gary Campbell, Financial Advocates: As a part of the prospecting and client service processes, advisors ask clients about more than just their goals and risk tolerance. They ask about what a client values as it relates to their priorities, views and concerns. This data can become integral in a much more inclusive “investment policy statement,” which speaks to truly meaningful elements of a client’s life. Achieving this depth [of connection] should help transition to “the next generation.”
Brent Weiss, Facet Wealth: This is really the foundation of what an excellent financial planner should do: Connect with each client in a way that is meaningful and serves that client’s needs. We look for CFP® professionals with high emotional quotients (EQs). Technical skills aren’t enough.
Our planners have nothing to sell. There are no commissions. Part of their compensation is based on how satisfied their clients are. Our planners work together, support and educate each other. So, if a planner encounters a situation they haven’t seen before, other planners will share their experiences in similar situations and what they’ve learned.
Muñoz: Do you think the shift we are seeing from advisor as portfolio manager (PM) to planner and coach will be the norm in five years?
Campbell: Yes, we hope so! The PM role is becoming more and more commoditized. Clients and advisors can “rent” PMs. PM fees are commoditized and dropping. Direct, one-on-one coaching interactions can’t be driven by IT or by any form of virtual intelligence.
Humans want to be understood by humans and feel they’re getting attention and advice specific to them. Virtual tools are not true guides. Practicing medicine by online diagnosis is scary, as is personal financial planning online. It’s barely better than the frustrating automated voice system we all deal with when calling to get our cable fixed.
Weiss: At Facet, it is already the norm. The industry will gradually change as the next generation of clients demand better of the industry – no conflicts, fair pricing, better service. Being client-centric is a seismic shift in the industry that many firms can’t or won’t make.
Clients don’t need a salesperson or an investment manager. They need expert, unbiased, actionable advice from someone who’s dedicated to their best interests. Period.
Cecile Munoz is President of U.S. Executive Search & Consulting, an executive talent search firm that is active across the wealth management space