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Written by: Scott Rawlins , CFP, President of HD Vest Financial Services
As we make our way through the first quarter of 2018, many independent financial advisors are understandably searching for ways to improve their businesses and help their clients address their goals this year. Ironically, the answers they are seeking can be found in practice management and service tips they’ve heard or read before, but haven’t had the time to think about in-depth.
Below are three ways that independent advisors can potentially grow their practices, and run them better:
Adopt Goals-Based Financial Planning to Strengthen Client Advice & Relationships
Advisors can help position their clients to successfully navigate the type of market volatility we witnessed in early February, while simultaneously demonstrating more value to clients, by incorporating goals-based financial planning into their practices.
Advisors can use goals-based financial planning to train their clients to view investment decisions and performance from the perspective of progress toward the goals for which they are saving money, rather than whether or not they are exceeding benchmarks like the S&P 500. In light of the market developments at the beginning of February, now is the time for advisors to double down on efforts to encourage clients to update their financial goals, and get into the habit of checking account balances to track progress towards those goals (instead of just checking account balances to track investment returns).
During market turbulence similar to what we saw in February, goals-based financial planning enables advisors to calm investors. If investors begin to panic during a downturn, advisors can reassure them by reminding them about their goals-based planning conversations, and explaining how the strategies and asset allocations they have pursued are designed to help protect portfolios from market volatility. This engagement is key for helping investors stay focused on the long term instead of focusing too much on short-term market performance. However, in order for goals-based financial planning to calm and focus investors during a downturn, the initial goals-based financial planning conversations need to be held with investors prior to any volatility, when the market waters are tranquil.
Goals-based planning consists of two broad elements—the conversations advisors have with clients to uncover their goals, and the technology advisors use to track clients ’ goals against their assets. Advisors should avoid the temptation to focus too much on the technology involved in goals-based planning, since the time they spend with clients is an important service for adding value. Before an advisor starts plugging in numbers, they need to invest all the time necessary to discuss and finalize goals with clients, and make sure that all decision-makers are in the room when the conversations take place. The biggest mistake an advisor can make is to leave a client’s spouse out of goals-based planning discussions. Advisors are doing it right when the conversation involves all parties. If the husband is talking more than the wife during the conversation, then it’s up to the advisor to address the wife and ask, “How do you feel about that?”
Since a client’s long-term financial goals will likely evolve as they and their children get older (and their account balances grow), advisors should schedule annual check-in conversations with clients to clarify whether or not circumstances and priorities have, or will soon, change—and if so, work with them to make necessary adjustments to their financial plans. Advisors who are too quick to plug balances into software and create diagrams and charts aren’t taking into account the natural evolution of client goals and priorities—and if the goals themselves are incorrect, then the subsequent calculations are meaningless.
Add Value by Incorporating Tax Management into Account Management
Every wealth management decision—indeed, every dollar a client makes or spends—has a potential tax consequence to it. If an advisor doesn’t understand or communicate that consequence, or know how to apply their understanding of the consequence, they are putting their client’s long-term financial standing at risk.
Reviewing a client’s prior-year tax return is vital for obtaining a truly holistic view of that client’s overall financial picture. The wealth management decisions an advisor helps a client make today may affect the client’s taxes both today and tomorrow. Examining a client’s prior-year tax return enables the advisor to understand the impact that wealth management decisions could have on a client’s taxes in the near and long terms, and also helps the advisor identify potential opportunities to generate tax alpha that may increase a client’s bottom line.
Furthermore, the recently passed tax reform legislation creates a new sense of urgency for investors. Advisors can step in now and demonstrate significant added value by having conversations with clients about the impact their financial decisions in calendar-year 2018 may have on the taxes they will have to pay in 2019, when the Tax Code changes go into effect.
Advisors don’t necessarily have to be tax professionals to add value by considering the impact of wealth management decisions on a client’s taxes, or helping clients take advantage of opportunities to generate short- and long-term tax alpha.
Modernize Your Online Presence & Post Client-Focused Content on Social Media
In today’s digital age , prospective customers judge every company on its Web presence. First impressions matter. If an advisor’s website looks like it was designed in the 1990s, prospects aren’t likely to form a favorable impression of the advisor and their business.
In addition to ensuring their practice websites look like they’re from 2018 and not 1998, advisors can use their online presence to grow their businesses by changing their approach to social media . Too often, advisors post content on Facebook, LinkedIn, and other social media channels which is relevant to advisors, not investors. An advisor’s social media platform tends to make a positive impression on clients and prospects if these audiences see that the posts are relevant and valuable to them, and go beyond the advisor’s purview. For example, instead of posting articles about the benefits of an RIA, advisors should post content discussing aspects of financial planning, or how to successfully navigate a market downturn.
For advisors, a beneficial social media approach is far more than just, “If my clients like my post, their friends will see it.” Your social media output should let clients know you are keeping them, and their concerns, top of mind—which gives them confidence in your expertise and abilities as a valuable, trusted advisor.
Also, be strategic with your “likes.” Your clients will not only be able to view something that you liked or commented on today, but for all eternity. During the course of their research, some prospects will go back months or years on your social media timeline.
Although no company can ever achieve absolute perfection, adopting a fresh perspective can do wonders for improving your practice. Too many advisors think they know all they need to know about planning tools, social media, and other aspects of practice management —and wind up not experiencing the practice growth they hope to achieve. The suggestions in this article have the potential to help advisors grow their practices and strengthen client relationships faster in not only 2018, but in many years to come.