By definition, thought leaders are the informed opinion forerunners and the go-to people in their fields of expertise. In financial services they are the client-centric trusted educators that inspire people with their innovative approaches, concepts and recommendations.
I am sure you have heard that financial advisors, like doctors, lawyers and other professionals, must continually prove their worth. Clients hearing about other advisor generating market-beating returns might be, to them, how they determine worth. Certainly, with some portion of your assets you may want to try to beat the market, but remember that no two people, advisor or investment are ever alike.
Behind the Scenes
Some advisors don’t communicate to their clients all that they do for them, nor do they express that they are being paid to align themselves with their clients’ needs, wants and expectations. So, you might ask, “Do clients really need to know this?” The answer is a resounding “Yes they do!”
I’ve met with enough advisors that are very good at explaining what they do to earn their fees or commissions. Others let it be assumed that their fee is strictly for investment management. Advisors probably need to talk more about it because they put in a lot of hard work for their clients in the areas of preparation and new ideas.
Of course, there are also times when we sit down with a client and recommend no changes. That is usually based on the fact that they have nothing coming up that they’ll need additional funds for. Basically, there are no changes in their overall situation because they are well allocated.
We’ll go over their tax returns, insurance coverages and their estate documents, making sure they know where they are with everything. They may have had a new grandchild since our last review and want us to do something for them. We look at all of these things prior to meeting with clients. The fee we charge is for making sure that we are prepped and nothing is overlooked.
The financial advisor is the one who digs deep to understand everything about the person, their finances and their cash needs, and makes sure the client understands how their investments are set up to meet those needs. There is no guesswork because we follow MASTERPLAN®.
One gentleman said to me recently, “When I hear the market went down today, what does that really mean to me?” I said, very tongue-in-cheek: “That means absolutely nothing. It’s kind of like me saying the sun came up today. It’s going to go one of two directions every day, isn’t it? It’s not newsworthy.”
There are advisors who view themselves as only givers of investment advice. At Hefren-Tillotson, every one of our reviews starts with: “Update On You” and “Your Questions.”
We include an update on anything going on whether investment related, family or health oriented, or anything else we need to be aware of. Basically, we talk about the questions our clients formulated knowing that we were getting together on a specific day. Clearly, financial advisors must understand their clients and how their clients like us to work with them.
To Live is To Learn
Thought leadership allows our financial advisors to provide the best and deepest answers to clients’ biggest questions, to educate them about what they do, and get them on the same page with the terms and the priorities that, together, they should have.
Educating clients is continual and spread out over time. It never happens in one sitting. Whether it is the basics or something more intricate, advisors, by and large, are educators. Most people will not understand us if we start getting into alphas, betas and sharp ratios. The advisors understand it all, but they must keep it simple with their clients.
I always say that I believe a financial advisor deserves to be in a well-paid position because he or she must have a lot of knowledge about investments and taxes, estate planning and insurance. But what good is it if they cannot communicate it in a way that people will understand?
I met with a prospective client who makes his living in the world of technology. I know some technology, but the stuff he was talking about I knew nothing about. So, after I asked him to tell me about what he did and what his company does, I still felt in the dark. It made me think about our clients. We don’t want anybody to feel they are in the dark.
It Is A Matter of Trust
At Hefren-Tillotson, we have made a point not to try and “wow” people every time we open our mouths. Others will not always know what we’re saying or what we were trying to talk to them about if it is not in clear, easy-to-understand language. When clients trust their advisor they may say, “Well, go ahead,” or “Whatever you think is best,” but it is not the same comfort level as stating it in a way where they will simply say, “I get it.”
We must build trust and help clients understand the value in what their financial advisor delivers. Thought leaders are adept at sharing a wealth of knowledge with others and have it be understood. They are experts in their world. We do not want our clients to feel they cannot act on something because they are confused. I look at it as we’re letting them down because if we can’t help them understand and take action on doing what is best for them, everybody loses.
Fear and Greed
We haven’t been in a greed-market like this since the 1990s. Back then you could ask somebody, “What’s more important: achieving your objectives or beating the market?” And because the market was doing so well, they’d say, “Beating the market!” In contrast, in a fear-driven market, people were more understanding of their objectives and what matters. It is only because of the past 20 years that people are more inclined to want to meet their objectives. So, here is a word of caution for all investors: greed-driven bitcoin is not investing. Investing is a long-term proposition. You could think of investing as being similar to real estate (only the people are nicer in real estate) because at 9:30 in the morning a market doesn’t open offering you a price for your real estate and changing second by second for the next seven hours.
I consider myself a thought leader and also our advisors at Hefren-Tillotson. We believe in knowing our clients, their goals and objectives. Our meticulous wealth planning and education helps get clients that much closer to where they want to be and where they should be. And we can do the same for you too.