Three Ways To Help Your Clients Stay Financially Organized

Staying organized has many positive psychological benefits, including increased contentment and less stress. But it’s easy to overlook organizing the important things in life that we can’t see around our home, like our finances. For financial advisors, helping clients understand how their money is working for them is the key to helping them stay committed to their financial plans.

Mental Accounting Matters: Keep It Cohesive

One behavioral finance bias to consider when helping your clients get organized is investors’ inclination to rely on mental accounting when thinking about their assets. Mental accounting is the tendency to treat different groups of money differently. Like a classic envelope system, where you allocate your paycheck to “envelopes” for different budget categories, investors use mental accounting when they allocate funds to specific categories or life goals, such as saving for a child’s college, or long-term retirement income.

Goals-based financial planning can complement investors’ mental accounting bias

Because investors have a natural tendency to assign different chunks of their money to different goals, a goals-based financial planning approach can naturally complement investors’ mental accounting bias.

As investment professionals, we have the potential to deliver significant value by helping clients create a cohesive strategy for their financial future. Here are three ways you can help clients maintain an organized, comprehensive and long-term perspective on their investments:

1. Use A Segmented Or Bucket Approach To Income Planning

Manage assets in time-segmented income buckets

One approach we believe that can help keep your clients financially organized is to manage assets in time-segmented income buckets. This approach uses time as a risk management tool. Money that will be needed in one to three years stays in conservative liquid investments. Then, risk gradually increases as you move from short-term assets to long-term assets. Long-term assets may be positioned more aggressively for growth.

There are several ways to manage risk. But the key is to help clients understand that if a long- term bucket suffers a decline in value, there is time to make up for it. They may be less likely to make a panicked decision during a down market if they see that their shorter-term money has been safeguarded.

2. Incorporate Personal Benchmarks To Help Clients Stay Focused On Their Needs

Help clients identify their personal required rate of return

Personal benchmarks can help clients stay focused on their specific needs instead of arbitrary market results. Investment proposals generally only compare an investment strategy against an index benchmark such as the S&P 500.

By helping clients identify their personal required rate of return and relating that rate of return to their investment strategies via a “personal benchmark,” our industry can help clients remain focused on what’s relevant to their needs.

3. Consider UMAs And Model Portfolios To Stay Organized And Focused

Unified managed accounts (UMA) and model portfolios may help clients maintain focus and perspective on their overall investment strategy. They also can help you tailor investments to client needs while streamlining your practice.

The right investment offerings can cut down on the amount of paperwork clients receive, and it can help clients see the importance of each piece of their financial puzzle. You’ll also have the opportunity to get rid of operational headaches and free up more time to spend with clients.

Get rid of operational headaches

In April of 2023, Clark Capital’s model portfolios launched on the Morningstar Wealth platform, alongside BlackRock, Fidelity and T. Rowe Price. These strategies are designed to expand the investment options available to advisors and their clients, and to help advisors meet the unique needs of their clients.

Once clients see the benefit of organizing their investment strategies, they may see the benefit of working with one advisor instead of spreading their investments across multiple financial advisors. This can ultimately give you the opportunity to make a more positive difference in your clients’ lives.

Patty Quinn McAuley, CFP, is Head of Marketing at Clark Capital Management Group, a Philadelphia-based investment adviser registered with the SEC.

This article is part of WSR’s Sponsor Partner Content series.

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