Displaying items by tag: client management

Many financial advisors are understandably uneasy about artificial intelligence (AI). Like any new technology, there will be considerable opportunities for those who can properly leverage and implement it. 

However, it’s also important to understand its limitations, as it lacks human intuition and the ability to understand and respond to a client's deeper, emotional needs. Instead, AI can be thought of as a way to enhance an advisors' capabilities and can be quite useful in areas such as fraud detection, estate planning, and tax strategies. Additionally, many advisors are already using technology that has elements of AI, especially for making forecasts and future projections. 

AI excels at tasks that require pattern recognition, optimization, and identifying trends. This means that it has applications in multiple areas such as prospecting, marketing, and planning. For example, estate planning is an area where AI is having a positive impact, as documents can be more quickly and easily understood by advisors and clients. It can also be used to streamline the process of updating documents based on notes taken from previous client interactions. 

Overall, AI is like previous technologies in that it can potentially help advisors gain more leverage, increase productivity, and result in more time spent on value-added activities. With financial advice, it can be particularly useful in terms of increasing responsiveness and personalization on a larger scale. 

Finsum: Artificial intelligence will affect nearly every industry and change how businesses operate. Here is how financial advisors should be thinking about this technology. 

It’s an opportune time for younger financial advisors. Many older advisors are nearing retirement, and we are on the precipice of a generational wealth transfer from baby boomers to millennials. However, this doesn’t negate the significant challenges and obstacles faced by new advisors, given their high failure rates. Here are three tips from established advisors to increase the odds of success.

According to Timothy Smith, the founder and CEO of Aurora Private Wealth, rookie advisors need to get used to rejection. He believes that advisors need to develop intangible qualities like perseverance, determination, and discipline in order to successfully build a practice. Further, advisors should have a genuine desire to help people feel in control of their financial lives.

Tammy Haygood, a private wealth advisor at RBC, is an advocate for not using jargon and believes that advisors should be able to explain concepts in clear and simple language. This can only be achieved by having a comprehensive understanding of the material and concepts. She also insists that authenticity is key in order to build trust and form long-term relationships with clients.

Nate Lenz, the co-founder and CEO of Concurrent, believes that younger advisors should seek out mentors. He sees financial advice as an ‘apprenticeship’ business. With the right mentor, advisors can quickly become competent and knowledgeable in multiple areas, such as planning, investments, closing deals, and client service. In this vein, he strongly believes that younger advisors should prioritize experience over other factors like compensation.

Finsum: There’s a lot of difficulty and struggle for advisors at the beginning of their careers. Here are some tips from established, successful advisors on how rookie advisors can maximize their chances of success. 

J.P. Morgan Advisors is empowering brokers with increased autonomy over unified managed accounts (UMAs), enabling independent investment selection without explicit client approval, in line with industry shifts. 

Marc Turansky, head of advisory programs, highlights this as a response to evolving standards and client preferences for advisor autonomy. Similarly, Janney Montgomery Scott introduces full discretion options for UMAs, echoing broader industry trends. Janney's advisory accounts hold $73 billion, while J.P. Morgan Securities manages $212 billion.

 UMAs have surged to $2.1 trillion in client assets industry-wide, outpacing other advisory programs. J.P. Morgan Wealth Management, says this change reflects an evolving industry standard and caters to clients who trust their advisors' understanding of their financial objectives, thus comfortable delegating decision-making. 

Finsum: UMAs are giving advisors more flexibility than other accounts, which can translate to meeting clients needs more effectively.

Human capital is the ability to use your skills and experience to generate income. Younger people have ample time to improve their human capital and earn paychecks to fund their lifestyle. However, as we age, the time and opportunities we have to develop and utilize our human capital decline.

People know that if they suffer an investment loss early in their career, they can make up for that loss by working longer or searching for a higher-paying job. Yet, this ability decreases as we near retirement. Whether we realize it or not, declining human capital makes us less risk-tolerant with our financial capital.

For retirees, most, if not all, of their income must come from their portfolio rather than paychecks, which often causes them to be overly protective of their financial capital and invest it more conservatively than they need to.

One solution to helping them take more investment risk while still feeling that their financial capital is protected is a fixed indexed annuity. These products typically provide downside protection, a steady income, and participation in a portion of the market gains of the underlying equity index.

Finsum: As human capital decreases, investors become more protective of their financial assets, but that doesn’t mean they can’t participate in equity growth. Find out how in this article.

While portfolio construction is crucial for achieving client investment goals, it's merely one facet of a successful financial advisor-client relationship. A deeper understanding of the client's life circumstances and how their investment objectives fit into their overall financial picture is equally important for fostering trust and long-term engagement.

Time constraints often lead advisors to outsource portfolio construction, allowing them to dedicate more time to relationship building. Delegating this task can prove to be a win-win for both parties. The client gets professional investment management from an entity whose sole job it is to maintain their portfolio. And the advisor has more time to be there for their clients when they truly need them.

However, even with outsourcing, advisors must understand the client's portfolio construction and ongoing management comprehensively. Overreliance on outsourced services can lead to losing track of the intricate details of the investment process.

Ultimately, the client relies on the advisor to bridge the knowledge gap between their financial goals and the details of portfolio implementation. By remaining knowledgeable and engaged, advisors can effectively represent their client's best interests and build a robust and enduring partnership.

Finsum: Advisors outsourcing portfolio construction benefit from more time to build client relationships, but they still need to keep up with the details of the investment management of client accounts.