Tag: Advisors

  • Uncommon Wealth Building Wisdom – The Benchmark

    Uncommon Wealth Building Wisdom – The Benchmark

    There is a common trait that shows up on the road to building your wealth. This trait shows up as you continue to add to your investment portfolio. You do have an investment portfolio don’t you? And don’t even start the blame game when this trait is revealed in just a moment.

    Here is what this is all about: in a word, Benchmarks. In and of itself, a benchmark would seem to be an important part of evaluating the performance of your investment portfolio. And, truth be told, if there were actually one accepted benchmark that could be universally applied, that might actually work. But the reality is that investment performance is not so simple.

    Get a better benchmark

    Instead of always trying to play catchup with an industry benchmark, there is a better strategy. A strategy that will allow you to grow and expand your portfolio over time without freaking out every time you see your portfolio statement.

    Lessons From The Diet World

    You are barely into the entryway of the store before you notice the section with the largest selection of books. Yep, it’s weight loss.

    Here’s an analogy that illustrates the point being made here. Head into any neighborhood Barnes & Noble or similar bookstore. You are barely into the entryway of the store before you notice the section with the largest selection of books. Yep, it’s weight loss. The point for you to see here is that if there were one diet that worked for everyone and every circumstance there would not be such a wide selection of diet books on those shelves.

    The exact same concept applies to the world of investing. You can prove this for yourself with a quick Google search. Search for investment benchmarks and you get something like 26 Million Search Engine result pages. Obviously there are not that many ways to measure the performance of your investments, but still, the point should be glaringly obvious.

    What “They” Say

    Now take a look at the world of investments. Suppose you have a diversified investment portfolio that you have been funding for a few years. What do “they” tell you to look at? Most often, investors are told to compare the performance of their portfolio to that of a major benchmark. You might even discover that your financial advisor is using this benchmark to demonstrate how well you are doing. Suppose your portfolio is being compared to the S&P 500.

    Actually, the S&P 500 is a commonly used portfolio performance comparison benchmark. How does this show up in the real world? Suppose you pay for the services of a personal financial advisor. Your advisor might send you a glowing report this quarter indicating that your investments outperformed the S&P 500. Wow! Your advisor is a genius. How about if you send in some more money?

    Hold on a sec! What about the other side of this equation? Suppose, the next quarter you get a different letter. This time your advisor is lamenting the fact that for some inexplicable reason your portfolio lagged the S&P 500. Now what? Is your advisor an idiot? Or is there something else happening?

    Wrong Benchmarks

    You see, the reality is that if the last scenario turned out to be true, you might not have reacted so well. In fact, you may have found your self dialing your advisor to find out what the_____ is going on here?

    What’s going on here is you are engaged in a comparison game that does not make sense over time. As you have probably noticed by now, the market goes up and the market goes down.

  • Why Staying Ahead Of Tech is More Vital than Ever

    Why Staying Ahead Of Tech is More Vital than Ever

    A growing number of them are prioritizing technology investments, which means advisors who aren’t risking falling behind the curve in productivity and quality of service. According to a recent survey by Financial Planning, zero advisors plan to cut their technology budgets and half plan to increase their spending this year.

    Advisors that are less productive and those that offer fewer features than the competition tend to lose out on business. Here’s why keeping up with technology is imperative for financial advisors.

    What Tech Will Do

    Robo-advisors have raised the bar for financial advisors. In addition to cannibalizing potential clients, the technology is rapidly changing client expectations. A recent survey found that 80% of high net worth individuals under 40 years old would leave a firm that did not integrate new technology like the automated wealth management services provided by robos. Online portals and mobile access to financial accounts and services are quickly moving from a novelty to a necessity for clients, which means advisors ignoring them could be on the chopping block.

    Many financial advisors feel that they have a lot of time to implement these solutions, but in reality, technology accelerates at exponential levels. In just three years, robo-advisor pioneer Wealthfront grew from $7.6 million to more than $2 billion in assets under management (AUM). Riskalyze, a risk alignment platform, has seen a very similar growth trajectory as an increasing number of advisors embrace tech designed to automate and improve upon tasks like assessing a client’s risk tolerance.

    Technology may be costly to implement and time consuming to learn—and that discourages many financial advisors from deploying much-needed solutions. But headline costs aren’t a complete picture when factoring in things like cost savings and opportunity costs.

    Most financial advisors charge around 1% of a client’s invested assets as a fee, which means that someone with $1 million in assets would pay $10,000 per year. With the vast majority of clients willing to leave a firm that’s lagging in technology, advisors risk losing tens of thousands of dollars per year in revenue by avoiding these investments. The technologies themselves often cost much less than opportunity costs and potential lost business without it.

    Cost savings is another key area where technology shines. With the average financial advisor earning more than $80,000 per year according to U.S. News & World Report, is his or her time really best spent doing things that could be automated with a $10,000 software application? It’s time that could instead be spent on more impactful tasks that truly set an advisor apart from the competition.

    Researching Tech in Advance

    Planning in advance is the best way to mitigate the costs and learning curves uncertainties associated with technology. By comparing various technologies well ahead of implementation, advisors can ensure that they’re selecting the right tools for their needs at a reasonable price. Another benefit is being able to take the time to implement these solutions and properly train staff on how to use them rather than haphazardly throwing the systems into a live environment.

    Some major areas to consider investing in include:

    • Portfolio management and rebalancing
    • Customer relationship management (CRM)
    • Document management and compliance
    • Online portals and mobile access
    • Client risk assessments and onboarding

    The Bottom Line

    The financial advisor industry is becoming much more competitive thanks to the rise in technology. Enabling the ability to streamline operations and improve client services, these technologies have raised the bar for advisors in a number of ways. Advisors who aren’t investing in tech risk falling behind the curve and losing out on business.

  • Advisors: Top Ways to Find Your First Clients and Grow

    Advisors: Top Ways to Find Your First Clients and Grow

    Becoming a financial advisor is a challenging endeavor with many requirements. Beyond potential education courses, you may also need to become certified as a certified financial planner (CFP) or chartered financial analyst (CFA) to set yourself apart.

    This is not to mention the competition in the field. The United States Department of Labor reports there were 249,000 financial advisors in 2014 and that they are expected to occupy one of the fastest growing sectors of the labor force over the next decade. While the pay can be good, getting those clients and building a solid book of business can be a challenge. If you’re a new financial advisor, consider some of the following methods to secure your first clients.

    Cultivate Your Influence

    As a new financial advisor, you need to get outside your inner circle. This allows you to build a growing network that can provide ongoing referrals to the services you provide.

    You can either do this through social media marketing or through personal relationships though the latter tends to be the most effective.

    Don’t limit yourself in growing your network. “My advice to any new financial advisor just starting out is to try to employ ‘leverage’ through the use of centers of influence such as accountants, attorneys, HR directors, business roundtables, as well as through social media. Such relationships with various accounts and attorneys take a lot of time, and, therefore, should be cultivated early in one’s career,” says Donald Reichert, Partner at Capital Design Associates Group, LLC. Reichert’s advice to cultivate that network early in your career is important because you never know who you will meet through networking and making connections earlier spurs career growth sooner.

    Serve the Underserved

    Retirees, or those near retirement, can be a great source of clientele for many financial advisors. That will only increase as the number of those over 65 is set to double over the next few decades. While that number provides a lot of opportunity for financial advisors, it also provides a challenge – increased competition.

    Instead of focusing on the clientele that is over served, consider focusing on demographics that are underserved. “Most advisors work with individuals in or nearing retirement with lush portfolios, but I’m focusing on serving the underserved young professional space. I’ve spent some time focusing on getting in front of advisors to tell our story and how we can help clients,” says Matt Cosgriff, CFP, founder of Lifewise Advisors.

    By networking with other advisors, he’s able to not only target those who might be underserved but also breed awareness among the advisor community of how he can help those in need.

    Become Involved in the Community

    One of the best ways to get your first clients as an advisor is to become involved in your community. Whereas traditional marketing methods require money, community involvement largely requires only time. You may not realize it, but community involvement provides a natural avenue to network with those around you.

    Find an organization you support, or an event you enjoy and become involved. This will connect you with like-minded individuals that can potentially turn into clients for your practice. Like the networking mentioned prior, you never know who someone may know, and community involvement is a great way to grow and develop that sphere of influence.

    What Provides Little Return

    Getting clients as a new financial advisor is a numbers game. You’ve likely heard of, or done some of the following things to get new clients:

    • Cold calling
    • Providing free meals to encourage attendance at a presentation
    • Knocking on doors
    • Fish bowls with business cards at trade shows

    Those practices, and many others, will provide numbers. However, they can be difficult to build a solid network of clients. “For the first ten years as an advisor, I struggled with the client acquisition process. Cold calling, door knocking, seminars and hoping for referrals were my only solutions. While these methods worked, they were painfully slow, says Devin Carroll, founder of Social Security Intelligence.

    This isn’t to say the above-mentioned tactics won’t work. They will work, to a certain extent, but advisors who focus on relationship building and becoming involved in the community can build an organic book of business that spurs the growth your business over the long haul.

    The Bottom Line

    When people hire a financial advisor they often look to those they see as credible and that can be done best through forming relationships. Through getting out into the community and networking, you can build a firm that will grow with you for years.