The most valuable thing an adviser can do for clients in 2015

As we head into 2015, advisers will have myriad opportunities to read industry pundits’ prognostications on what to expect in the coming year. Unfortunately, my own crystal ball is in the shop, so instead I’ll offer some context that I hope will help advisers benefit from whatever trends the next 12 months send our way.
The most valuable thing an adviser can do for clients in the coming 12 months will not be finding an undiscovered lever to generate alpha in their portfolios or being the first to adopt the latest technological innovation. While those things can be helpful, advisers who devote their energy and attention to understanding each individual client’s needs and connecting those needs to a well understood plan set themselves up for lasting relationships.
(Related: What’s your outlook for 2015? Take our survey and let us know!)
Advisers who establish more open and frequent communication in the New Year will build a foundation of trust with their clients. Many larger financial firms lost their clients’ trust after the 2008 financial crisis and haven’t earned it back. But it’s different for the individual adviser who has a personal relationship with their client and who has earned that client’s trust over time.
The most recent annual AssetMark Affluent Investor Risk Barometer study found that nearly two-thirds of participants described their advisers as “a person of trust.” Active and ongoing communication can allow the adviser to further strengthen those bonds through discussions about portfolio management and asset allocation, or the dynamics of risk vs. loss. The same study also found that nearly three-quarters of clients want their advisers to educate them more about risk.
(More: 5 client trust builders you might not know about)

Embrace the Changing Client Profile

As advisers solidify their focus on clients, they should also consider how their clients have changed. For many advisers, their typical client may look a lot like them — men in their 50s and 60s. Advisers who maintain this client profile may be unconsciously stamping an expiration date on their practices. If the adviser has done their job well, at the end of that client’s life a wealth transfer is likely to occur. We know this is a large opportunity, with estimates that after estate taxes and philanthropy, $36 trillion will be transferred to the heirs of 93.6 million Americans between 2007 and 2061. It’s only when an adviser has established a genuine relationship with both spouses and the next generation will the adviser get a chance to keep the relationship, and the assets.
Advisers should also look at the makeup of their practice and what it takes to attract the next generation of clients. Younger clients in their 30s and 40s, who may have built wealth through a startup or technology job, have different needs, goals and attitudes than their parents. They look at the world — and financial advice — differently. The AssetMark Affluent Investor Risk Barometer study found that younger investors see their advisers more as organizers than as a “voice of reason.” A similar study conducted by Market Strategies International also found that younger investors are more likely to spread their assets among multiple advisers than older generations.
While the generational differences are most obvious, similar shifts are occurring around gender and cultural diversity. Advisers who want to be prepared to meet the needs of new clients should strive to have a team that reflects who they want their clients to be.
In order to survive in this changing environment, advisory practices need to evolve and meet their clients on common ground.
The biggest challenge for advisers who truly want their clients to come first is finding the time to make that happen. Putting the client first doesn’t mean the adviser has to personally construct every portfolio or become proficient in every new technology. Instead, advisers need to find the right partners for their practice: partners who can best support the important details of investment selection, monitoring, reporting and compliance so the advisers can put their skills to work where they will be most valuable — helping their clients create a plan for reaching their goals and aspirations, ensuring they are delivering for the next generation, and then bringing those plans to fruition.
Charles Goldman is president and CEO of AssetMark, Inc., an independent strategic provider of innovative investment and consulting solutions serving financial advisers. Read more about his plans for AssetMark.