Wealth Management
Success for a financial advisor is dependent on attracting and retaining clients. The key is to create an incredible client service model to deliver an experience for clients that surpasses their expectations.
The client service model is your holistic plan for how you will engage with clients. It starts with the onboarding process and has to make clients feel comfortable and trust in your expertise. At all steps, advisors should constantly deliver value while fostering engagement. The latter is key to retention and can also lead to referrals down the line.
The first step is to imagine the experience through your clients’ perspective. For this, you must specify your target market and define the ideal client. Think carefully about your clients’ pain points, and what would prevent them from working with you.
Next, you need to consider the client journey. As they move through different stages of their life, their needs and goals will evolve. This will shape the advice and services you offer. Some common steps are onboarding, initial planning, regular reviews, and a consistent communication strategy.
Finally, it’s important to remain consistent in all your appearances and interactions with clients. Ultimately, the purpose of a client service model is to ensure the delivery of a meaningful experience to clients at all steps and through all channels.
Finsum: Building an effective client service model is an invaluable asset when it comes to attracting and retaining clients. Here’s some tips on getting started.
Financial advisors and investors seem to be speaking different languages when it comes to annuities. A recent survey paints a curious picture: while only 19% of financial professionals perceive client interest in guaranteed lifetime income products, nearly half of the surveyed investors nearing or in retirement express the same desire. This disconnect presents an opportunity for advisors to revisit the conversation and unlock significant value for their clients.
For investors approaching their golden years, the fear of market volatility and portfolio depletion is real. They seek peace of mind, knowing a portion of their income is secure, regardless of economic turbulence. Despite their complexities, annuities offer this very protection, guaranteeing regular payouts throughout retirement.
The conversation around annuities requires reframing. It's not about sacrificing growth for a fixed income stream, but about building a holistic retirement plan that balances potential future returns with guaranteed income that alleviates anxiety and fosters financial security. Advisors who bridge this gap and proactively discuss lifetime income options with their clients stand to forge deeper trust and build stronger, more enduring relationships.
Finsum: Financial professionals may underestimate their client’s interest in guaranteed lifetime income options.
Technology's allure is undeniable for financial advisors weighing a move to a new broker-dealer. Sleek interfaces, integrated apps, and workflow-reducing features promise efficiency and a world-class client experience. But while ease-of-use and functionality deserve scrutiny, a truly informed decision involves understanding the security, legal, and compliance capabilities of the prospective firm's tech.
Ask how client data is secured. What are the client-facing system's encryption standards, two-factor authentication, and access controls? Understand how the platform complies with industry regulations and data privacy laws. And most importantly, what happens if the lights go out? Does a comprehensive disaster recovery plan ensure business continuity and safeguard client assets even during outages or cyberattacks?
These may seem like technical minutiae, but your clients trust you've vetted these issues thoroughly when they follow you to your new professional home. Prioritizing security and compliance in your tech evaluation isn't just about ticking boxes; it's about safeguarding your practice's foundation and fostering the trust your clients deserve.
Finsum: Cybersecurity, compliance, and data privacy are key factors to consider when evaluating a potential broker-dealer’s technology.
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Over the last couple of months, there has been an increase in the enforcement of Regulation Best Interest (Reg BI). Over the last year, the number of actions taken by the SEC and FINRA have substantially increased. It’s consistent with warnings from regulators that there would be a ‘more substantive’ period of enforcement and that Reg BI will be enforced ‘to the letter’.
Regulators want to see a more robust process to ensure supervision of brokers. The ultimate goal of Reg BI is to ensure that all recommendations are made in the clients’ best interests. So far this year, there have been 22 FINRA enforcement actions after just 8 in 2022. Penalties are also growing in size as evidenced by an SEC settlement with Laidlaw and Company for $800,000.
Recent enforcement has also seen advisors having to pay back a portion of customers’ losses. This is a departure from precedent when firms were typically on the hook for compensation and indicates a serious commitment to deterring misconduct.
In 2024, even more enforcement is expected given public comments from SEC and FINRA officials. They see enforcement expanding across all 4 pillars of Reg BI which include disclosures, care obligation, conflicts of interest, and compliance.
Finsum: The SEC and FINRA are increasing enforcement of Reg BI. They are also looking to fine individual advisors and brokers for misconduct.
Schwab conducted a survey among its ETF-investing clients. Among the takeaways is that Millennial investors are quite partial to ETFs, relative to other generations. 37% of their portfolios are allocated to ETFs. 89% said ETFs were their investment vehicle of choice, while 25% of Millennials plan to increase their exposure to ETFs next year.
Another interesting finding from the survey is that Millennials also have a strong interest in more personalized investment options. 88% said that they are somewhat or very likely to personalize their portfolios. 78% want their investment to align with their personal values. This is much higher than older generations.
The survey also showed substantial interest in direct indexing among Millennials. This isn’t too surprising considering that 65% of Millennials said it’s extremely important to have more control over investments, 61% want greater ability to customize their investments, and 61% want their investment to be managed to optimize taxes.
Currently, 87% of Millennials are familiar with direct indexing, an increase from 80% in last year’s survey. Additionally, 53% of Millennials are extremely interested in learning more about direct indexing, while only 34% of Gen X and 22% of Boomers feel the same way. 69% of ETF investors, not investing with direct indexing, said that they are likely to invest in one next year. For Millennials, 80% feel this way.
Finsum: Schwab conducted a survey among its ETF-investing clients. Among the findings, Millennials are partial to the asset class and also have strong interest in direct indexing.
2023 has been a year defined by twists and turns that has defied the expectations of most market participants. Amid the tumult, alternative assets have been a source of resilience especially as the industry continues to evolve. According to Prequin’s Head of Private Equity Research Insights Cameron Joyce, the best opportunities are in private debt and secondaries.
In terms of various categories within the asset class, rising interest rates have been a major headwind for private equity. This has limited deal activity and exits, however there are indications that the climate could be improving as we head into 2024, while long-term investor demand remains strong.
Similar to private equity, venture capital has also been hamstrung by tighter monetary policy in terms of exits and valuations. Real estate has also been negatively impacted by rising rates, resulting in a weaker fundraising environment and muted deal activity. It’s also become more challenging for mid-sized and smaller funds given that many investors are gravitating towards larger funds.
Private debt has been relatively strong due to its seniority in the capital stack and floating-rate structure. This has been increasingly important for companies given that banks have raised lending standards. For investors, private debt has been effective in terms of dampening volatility while delivering above-average returns.
Finsum: Alternative assets performed quite well in 2023 amid a turbulent year for financial markets. Here’s a roundup of some of the key categories within the asset class.