Displaying items by tag: clients

The landscape for financial advisors has shifted rapidly over the last decades. And, these shifts are only accelerating in terms of frequency and impact. Thus, advisors also need to update their strategy and approach to thrive in this new environment.

A major change is that advisors have to work harder to get and keep clients, especially given that many other money managers are likely competing for clients' resources, time, and attention as well. 

For Financial Planning, John Guthery discusses why advisors should start embracing model portfolios to align their business with this new environment. Increasingly, the most value that an advisor brings is through quality time spent communicating with their clients to understand their needs and plan appropriately. This is true for both parties. 

Too many advisors are spending too much time managing portfolios and researching investment ideas, when they could instead be focused on tasks that will actually grow their business. Most long-term research shows that advisors fail to beat the market over long periods of time.

With model portfolios, this function is effectively outsourced so that advisors can spend more time on the tasks that actually move the needle in terms of building and operating a thriving practice. 

Finsum: Financial advisors tend to feel like they are not spending enough time with clients. Model portfolios are one solution as it frees up time for advisors.

For Vettafi’s ETFTrends, James Comtois shares his thoughts on the major differentiator for direct indexing vs the traditional strategy of investing in index funds. Over the last couple of decades, it’s become accepted wisdom that investing in passive funds is the best path to retirement given their diversification, history of long-term gains, and low costs and fees. 

However, there is one drawback to this strategy. Investors are unable to capitalize on tax losses to offset gains to lower their year-end tax bill. Direct indexing addresses this weakness while still retaining the major benefits of passive index investing. In addition, it also enables investors to customize their holdings to reflect their personal values and beliefs.

Still, the key advantage for direct indexing is the boost in returns due to tax-loss harvesting. This can result in additional performance between 1 and 2% and is more potent in years with greater volatility. It can be particularly beneficial for investors who have gains in other parts of their portfolio. 

With direct indexing, the portfolio is scanned regularly to sell losing positions. These are replaced with stocks that have similar factor scores to continue tracking the benchmark. 

Finsum: Direct indexing has several benefits for investors but its key advantage is that it can help them reduce their tax bills and boost performance in more volatile years. 

There’s a war for talent in the financial advisor space. It can certainly be challenging for practices that are looking to expand, but here are some tips to increase your chances of success from SmartAsset’s Rebecca Lake, CEFP.

The first focus should be on understanding your goals in order to help you evaluate candidates and make the best decision. Try to think about what key responsibilities will the new hire handle, and how will he or she be integrated into the firm. 

Next, it’s important to consider your company’s culture and assess candidate’s personalities to determine whether they would be a good fit. Then, Lake recommends creating an ideal candidate profile which can include an overview of their skills, experience, personality, and values. This will help you decide if the candidate would be accretive to thecompany’s culture. 

The next step is to invert the process and think about what a prospective candidate sees when looking at your company. These include compensation, work setup, flexibility, vacation policy, parental leave benefits, education opportunities, career training, etc. 

Once these steps are complete, it’s time to start investigating various recruitment channels. Often, the best strategy is to start with your network and professional colleagues as this can yield the best talent in the least amount of time with minimal cost. If that fails, then the other paths can be pursued. 

Finsum: For financial advisor practices that are dealing with a surge of growth, here are some tips on hiring and recruiting new advisors.

For Financial Planning, Tobias Salinger talks with Dominique Henderson, the founder of DJH Capital to share tips on growing a financial advisor brand. Henderson is a financial advisor, planner, coach, and content creator who just released an ebook on tactics to grow a financial advisor practice. 

His main advice centers around boosting leads, targeting a niche, and creating a long-term relationship. Henderson is a big believer in finding the ‘right room’ where you can be yourself. Here, your message and advise are more likely to resonate. 

Henderson also focuses on advisors who are in the early stages of their careers and shares advice on making the right connections, finding the best events to attend, and how a real practice works. Henderson sees an increase in the number of people who considering becoming financial advisors and planners. 

He believes that the initial difficulty of cold calling and taking meetings all days dissuade many from the career path. Therefore, Henderson wants to highlight alternative methods of getting started in the business. 

Rather than the focus on gathering assets, he believes that advisors should think about how thier advice and planning will help an individual and their families over the long-term in multiple facets of their life. 

Finsum: The financial advisor industry has too much of a focus on asset-gathering. Instead, there should be more focus on how the right advice can improve a client’s life trajectory

Direct indexing is gaining adherents at a rapid pace as it proliferates from solely high net worth investors to investors with much smaller sums and is now available through most wealth management platforms. Direct indexing allows investors to capture the benefits of index investing such as low costs and diversification but allows more personalization. Its most well known benefit is that it can help lower taxes due to its unique ability to harvest tax losses which can offset gains in other parts of the portfolio. 

Another is that it allows customization of indexes because many investors may want to reduce exposure to a certain stock or sector. This can be because they have substantial exposure to the stock or industry through their other holdings or because of personal preferences. 

The latter is a reflection of the rise of values-based investing which is increasingly popular among younger investors. This entails making investments that align with one’s own personal values. For instance, an investor may choose not to include fossil fuel companies in their index because of concerns around the environment. These holdings are then replaced with a different stocks that have similar factor scores. 

Prior to direct indexing, investors with strong values would be limited in terms of investment options. Now, they are able to essentially create their own fund that aligns with their values. 

Finsum: One of the major benefits of direct indexing is that investors can customize their holdings to align with their personal values.