With increasing competition from discount brokerages and so-called robo-advisory services, your ability to demonstrate your value is more important than ever, according to Michael Lynds, head of national investment management with Richardson GMP Ltd. in Toronto.
Lynds acknowledges that technology can be used to direct clients to sound financial advice. “So,” he says, “what are we going to do about it? That leads us to the opportunity of focusing on the service element.”
Lynds offers four ways to demonstrate your value to clients who have expressed an interest in these alternative investing models:
1. Avoid the insults
If your client is considering using a do-it-yourself (DIY) alternative, resist the urge to insult those alternatives outright. To do so would be to risk insulting the judgment of your client for considering the option.
“Try to raise the awareness of issues that aren’t solved by the robo-advisory or the [DIY] model,” Lynds says.
Talk about the extra things you do for your clients, such as meeting them in person, talking to their children about financial literacy issues and discussing their retirement goals and insurance needs.
2. Ask the right questions
Try to ensure that your clients and prospects understand their actual need for advice. Appealing to the disorganization that surrounds many clients’ finances is an effective way of demonstrating this need.
For example, you can ask clients and prospects if they have updated their will recently and if anything has occurred over the past two years that might necessitate changes to their estate plan. You can also check in by asking if they are taking full advantage of government programs such RRSPs and tax-free savings accounts.
Questions such as these remind clients of the components that may be missing from their financial plan. And these questions become the basis of a meaningful dialogue that can only occur between an advisor and a client.
Says Lynds: “It’s very hard to replicate that in the middle channel of robo-advisory and certainly in the discount channel — because they don’t care.”
3. Redefine “convenience”
Some clients might think that investing on their own is better use of their time. However, financial advisors need to reframe what an investor deems as “convenient.”
Anyone who uses these investing alternatives requires an extensive amount of discipline to stay on top of their portfolio, Lynds says. They need to follow and understand geopolitical and economic events that may affect their investments.
An advisor, on the other hand, is a convenient option because he or she will be watching for those events, Lynds says, and can provide personalized guidance when the market becomes volatile.
4. Let clients get involved
Accept that you may not be able to manage every aspect of every client’s wealth, Lynds says.
For clients who want to get personally involved in investment decisions, set aside some funds for the client to invest as he or she sees fit — but not a large enough portion to compromise the client’s financial plan.
Regardless of how that money is invested, you and your client will know his or her priorities are protected, and that you are there to help them reach their goals.