Displaying items by tag: clients

Artificial intelligence is becoming crucial in financial advisory operations, automating tasks and enhancing efficiency. This allows advisors to focus more on client interaction and strategic work.

 AI leverages big data and advanced analytics to identify patterns, detect market trends, and anticipate client needs with greater precision. Consequently, clients receive more personalized advice and recommendations. 

Additionally, integrating various financial technologies enhances client engagement and produces better outcomes. The rise of open architecture ecosystems enables the integration of best-of-breed solutions tailored to a firm’s specific needs.

Finsum: AI tools can be used for simpler tasks like client outreach and personalization but also for more advanced tasks like portfolio construction. 

The nature of being a financial advisor has shifted significantly over the past decade. It’s gone from being centered around selecting investments and managing portfolios to financial planning and client service. Model portfolios have been ascending along with this evolution and are forecast to exceed $1 trillion in assets over the next decade.

According to surveys, clients invested in model portfolios are more likely to have higher levels of trust with their financial advisors and believe that volatility is an opportunity to grow assets. Additionally, they are more likely to be interested in other services offered by an advisor. They can also help in terms of aligning the interests of advisors, the firm, and clients. They also free up time and energy for advisors to spend on factors that ultimately drive success for advisors, like client service and prospecting. 

Another benefit is that model portfolios provide an extra layer of due diligence, with 77% of advisors saying that they help with managing risk. In essence, it gives clients access to a higher quality of investment management and a more comprehensive relationship with an advisor.

Models also mean that advisors’ services become more scalable, enabling growth and expansion. In recent years, models have expanded to include offerings from third parties and a wider array strategies, which means there are possibilities for endless customization to fit clients’ unique needs and goals.

Finsum: Model portfolios bring the promise of a win-win for clients and advisors. Clients invested in model portfolios report higher levels of confidence with their advisor and don’t fear volatility. For advisors, they offer the ability to decrease time spent on investment management and focus more on client service and prospecting.

Herbers & Co. conducted a survey of investors with more than $250,000 in assets and advisors to identify whether advisors’ offerings are effectively meeting clients’ needs. Among the findings, the biggest takeaway is that there is some misalignment between advisors and clients in certain areas. 

One change from the survey, compared to previous years, is that 90% of clients said effective tax planning is their highest priority. Previously, clients cited retirement, investment management, and cash flow as top concerns. Currently, only 73% of wealth management firms offer tax planning services. For advisors, it’s an opportunity to offer more comprehensive planning solutions that encompass cash flow, education, estate planning, investments, retirement planning, and tax management. 

Many wealth management firms self-identify as offering comprehensive planning, yet only 31% actually do so. This means planning for a client’s specific needs, such as business planning for business owners. 

The survey also revealed that a portion of clients are interested in alternative investments, including cryptocurrencies. The challenge for advisors is that most firms currently don’t offer advice in these areas. However, they are likely to get questions from clients, especially with the introduction of crypto ETFs backed by asset managers like Blackrock and Fidelity. Advisors should proactively prepare for these conversations. 

Finsum: A survey of clients and wealth management firms found that there are some areas in which advisors can do a better job of understanding and meeting client needs.

Unified managed accounts (UMAs) are professionally managed accounts that allow for the use of multiple investment strategies. This makes it a more comprehensive approach than a separately managed account (SMA) which is typically used for a single, targeted strategy. 

As of the end of last year, UMAs accounted for 26% of assets in managed accounts. Growth in UMAs is due to multiple factors; however, two recent factors are improved pricing and an increase in the number of investment options. 

With UMAs, different strategies can be used to construct a customized client portfolio that leverages the best strategies across different asset classes and investment managers. This allows advisors to optimize portfolios by blending various strategies and selecting managers with the proper expertise. 

This means that an advisor could use different managers for different asset classes, such as domestic equities, foreign stocks, and fixed income. UMAs can also allow for more granularity, such as having one manager for a core equity position and another for dividend stocks. 

UMAs also provide a comprehensive view of a client's finances, which means that rebalancing strategies are more effective, and there is more potential for personalization. This includes the ability to add custom models to a portfolio along with third-party ones. 

Finsum: Unified managed accounts are experiencing rapid growth and provide advisors with a more holistic and comprehensive view of a client's finances. 

Summit Financial was founded in 1982 as an independent firm. Over the last 4 years, assets under management grew from $3 billion to over $10 billion as it aggressively recruited talent from wirehouses and other firms. Ed Friedman, the director of business development and growth at Summit, shared some insights on what has driven the firm’s recent success.

The biggest factor is creating a culture that allows advisors to be fiduciaries, grow their own businesses, and have a meaningful stake in the firm’s long-term success. Friedman stresses that clients are ultimately loyal to an advisor and not a company. 

Additionally, advisors at independent firms have more control over their destinies. In contrast, an advisor's fate at a wirehouse or larger institution can be affected by unrelated factors. For instance, many brokers at Merrill Lynch had their equity wiped out in 2008 when it had to be bailed out by Bank of America. Similarly, advisors at First Republic were impacted by the crisis last year, despite the wealth management unit’s strength. 

Friedman also attributes the acceleration in growth to bringing in professional management. This has allowed advisors to focus on clients, prospecting, and financial planning, while other matters such as compliance, backoffice tasks, and administration are handled by the firm. 

Finsum: Summit Financial is more than 40 years old. Yet, the RIA’s growth has exploded in recent years as it has brought in professional management and found success with its independent-hybrid model.