Volatile markets can leave investors worried and confused — and reaching for the phone or email to touch base with their financial advisors for guidance and reassurance.
How can advisors maximize and demonstrate their value to clients amid the market turmoil?
Betterment, an online financial advisor platform that also offers products and services for financial advisors, hosted a webcast Tuesday with Devon Klumb, strategic sales manager for Betterment for Advisors, and Eric Bronnenkant, Betterment's tax head, to discuss moves advisors can make to strengthen their value to clients.
Here are six tips from their talk.
1. Recognize the evolved advisor value proposition.
Klumb noted the "advisor value proposition" has evolved over the past 50 years, with advisors transitioning from essentially stockbrokers to professionals offering investment advice.
With the advent of passive index investing, advisors had to pivot and expand into retirement, risk management, estate and tax considerations and investment management, which have become "equally relevant pillars" in advisory practices, he said.
This evolution is a net positive for many reasons, but the modern advisor is now giving more advice on a much broader range of topics than ever and being asked to do so for diminishing compensation compared with their counterparts in past generations, according to Klumb.
"Basically, you're doing more for less and that's a trend that is likely going to continue," he said. So advisors need to identify the value of their work, he added. Klumb said it's important to ask what your clients would say is your primary value.
2. Focus on relationships.
Klumb cited a quote from financial planning consultant Michael Kitces, who has said advisors can differentiate themselves by offering services beyond portfolio management and a relationship that consumers can't get from a robo-advisor or do-it-yourself platform.
"The modern advisor is paid to make complicated things less complicated. The value proposition is really simplification, it's helping clients to connect the dots and build a comprehensive, customized plan that's specific to their unique situation and their needs," Klumb said.
"In other words, clients want to experience a relationship with someone, someone that knows them deeply, someone who can offer counsel on every aspect of their financial situation."
3. Identify high-value and low-value work.
Advisors need to identify the most effective ways to deliver their service and should ask what work they're doing is commoditized and what, on the other hand, amplifies their value proposition "and makes our relationships sticky," Klumb said.
He suggested identifying high-value and low-value work, with the high-value activities requiring a human touch and low-value tasks including administrative work that can be automated. Advisors should spend less time and energy on the tasks that don't add value to the clients and more on the relationship side, he suggested.
Klumb identified low-value work as activity that falls outside the core service offering, can be standardized among all clients and can be outsourced or automated, such as billing, bookkeeping, scheduling, sending email reminders and collecting client information.
High-value work requires more advisor expertise, more tailoring to individual client needs and a comprehensive and personal relationship, according to Klumb.
"We've got to get this right if we're going to scale and serve our clients in the right way," he said.
This can be as simple as sitting down and listing everything the advisor does for clients and grouping these tasks into two categories.
