Investors are eager to move forward toward key goals. But many remain stymied by confusion and anxiety about the “big picture” factors — such as political wrangling in Washington, global market volatility, violence overseas and at home, economic stagnation and stubbornly low interest rates — that seem to exert powerful control over their investments and financial fortune.
We have successfully escaped going over the fiscal cliff, for instance, but more risks remain.
Today, it's the spending sequester, and after that, who knows? The brinkmanship seems to recur at a fast and furious pace.
The big issues can seem intractable, but there is much that financial advisers can do to make a meaningful difference for their clients — and also deliver fresh support to the health and success of their advisory practice.
As this year proceeds, advisers would be well-advised to shift some of their clients' focus, as well as their own, away from a difficult “big picture.” Instead, it may make sense to spend more time on the “little picture” — the many individual variables of each client's unique situation and the adviser's business that the adviser has the best opportunity to direct and influence.
Advisers who take a little-picture position are, in truth, preparing their clients to handle the big picture because they will have taken control of the controllable and maintained a disciplined approach to building and monitoring portfolios.
Here are six key little-picture themes for the rest of the year:
Trust retains its enduring value. In the wake of the financial crisis, advisers still enjoy the trust of clients, but the onus remains to re-earn that trust at every chance. In this regard, a fiduciary mindset increasingly is a critical adviser attribute.
Use communications to get clients re-engaged. Every instance of personal contact with a client can be used to encourage vital re-engagement with investment strategy and markets. Advisers should review their process for client communications: Are they sharing information often enough? Is that information relevant enough? Advisers also should review their process for meetings to assess whether they are optimizing time with clients.
Take a holistic view. According to research on advisory relationships from Cerulli Associates Inc., 70% of clients allocate assets to more than one adviser, and the advisers typically aren't aware of that fact. If an adviser doesn't know where their clients' money is invested, how can they deepen their relationship? Offering a holistic view of all assets, including those that an adviser doesn't manage, provides the opportunity to demonstrate leadership and establish a position as the lead adviser.
Diversify “harder.” In a potentially volatile market environment, tapping every viable asset class is more important than ever. Advisers should ensure that their platform offers both them and their clients the requisite access to key sectors and asset classes so there is the opportunity to reduce the overall correlation of client portfolios.
Alternatives are an emerging opportunity. Alternatives, especially the liquid variety, may offer a valuable, emerging new diversification tool. Many advisers are discovering that a portfolio approach centered on client goals is the best way to put this tool to work.
Technology integration is vital. The proliferation of portfolio and practice management technologies offers incredible efficiencies, but only if systems are complementary and integrated. A truly integrated “front, middle and back office” gives an adviser even more time and flexibility for client service and prospecting.
Consider consolidation. The trend toward consolidation represents an attractive opportunity for advisers to monetize their business. Succession-planning experts agree that it takes five to 10 years to devise and execute an effective succession plan that maximizes the value of a practice and serves clients well. Advisers shouldn't neglect the need to start planning for their own future and that of their business, even if the finish line is still years away.
Bill Crager is president of Envestnet Inc.