What value do you add? Start by communicating

Advisers not only need to do a great job at financial planning, tax mitigation and behavioral finance, they need to let their clients know that this is what they're paying for

Oct 29, 2019 @ 12:42 pm

By Scott Hanson

Our industry is changing. Asset allocation is now a commodity, investors are flocking to passive investments and the historical discount brokerages are offering financial planning.

So the question independent advisers should be asking themselves right now is: What value do I add?

If you can't clearly articulate your answer, you may find yourself running an ever-shrinking business.

I've been at this for nearly three decades and I see that there are really three key areas where we earn more than our fee: Financial planning, tax mitigation and behavioral finance (keeping people from making mistakes from which they can't recover).

But if you ask the typical investor what value financial advisers add, they'll tell you our job is to pick good investments, monitor the markets and make strategic moves so that they make money when the markets go up and avoid losses when they go down.

As advisers, most of us understand that we can't outsmart the markets, yet that's not how many of us act. We discuss our brilliant portfolio strategies, spend time talking about the economy and analyze last quarter's winners and losers.

[Recommended video: Financial planning wasn't even a thing 50 years ago]

If you are serious about growing your firm, not only do you need to do a great job of financial planning, tax mitigation and behavioral finance, you need to be great at communicating to your clients that this is what they are paying for.

Granted, most advisers understand how important financial planning is. With tools such as eMoney, MoneyGuidePro and others, there's no reason not to do it.

Taking it a step further, the more an adviser focuses on planning issues with clients — say, paying off a mortgage with saved investments or determining realistic withdrawal strategies — the more the client will view the adviser as a professional who can help them with all areas of finance.

Then there's taxes. The more assets someone has, the more opportunity there is to structure the portfolio to reduce their tax burden.

Using strategies such as which assets to hold in qualified versus nonqualified accounts, Roth conversions and tax-loss harvesting, I've worked with clients who were able to add almost 2% in annual returns.

Lastly, there's behavioral finance, which I believe is where a good adviser really makes an impact.

I've guided clients through both the tech bubble bear market and the financial crisis, and I've learned how valuable it is to be the calming influence that keeps a client invested. Over the decades, the clients who followed my advice and stayed in the market have done much better than those few clients who didn't listen and sold near the bottom.

Remember, your job is to make your clients great investors — not by beating the markets, but by guiding them through the highs and lows.

Want to stay professionally relevant? Think about the value you add.

Then make certain you're not only in fact adding that value, but that you are able to clearly articulate to your clients what you are doing and why.

[More: When your growth stalls]

Scott Hanson is co-founder of Allworth Financial, formerly Hanson McClain Advisors, a fee-based RIA with $4.5 billion in AUM.


What do you think?

View comments

Recommended next


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print