Gather ’round, folks, and let me tell you a story of an adviser who thought he had it all figured out. A sensible guy, mind you, not one of those Wall Street hotshots. He was the kind of adviser who’d sell you on “financial planning services” and a passive asset allocation approach that promised the moon and stars.
He was a believer in the magic of tactical tilting, dimensional disparities, and all those fancy terms that make your head spin. Small cap outperforming large cap, long duration bonds beating short duration ones, and so on. He was convinced that his strategy would make his clients rich, all for a measly one-percent adviser charge.
But here’s the kicker: In the grand year of 2023, his investment strategy tanked. I mean, it didn’t just stumble; it fell flat on its face, losing the client 30% since the last review.
The client, bless his heart, loved the “financial planning service.” Who wouldn’t? That’s where the adviser’s magic was hidden, in unregulated activities like restructuring tax and other business wizardry.
But what were they thinking? Both of them?
Advisers, listen up: Clients think they’re paying for returns. When those returns don’t show up, they’re not just disappointed; they’re furious.
Now, I’m not saying that the dimensional approach is dead in the water. But why not focus on what you can control? The Vanguard Advisor’s Alpha concept has it right: Focus on relationship-oriented services like wealth management, discipline, guidance, and, for heaven’s sake, behavioural coaching.
Here’s the breakdown, plain and simple:
- Asset Allocation: Help clients with their goals and risk tolerance.
- Cost-Effective Implementation: Use products that don’t break the bank.
- Rebalancing: Keep the portfolio in line with the client’s goals.
- Behavioural Coaching: Help clients avoid emotional pitfalls.
- Wealth Management: Offer a holistic approach.
- Tax Efficiency: Minimise taxes.
- Total Return Investing: Focus on the whole picture, not just income or appreciation.
Here’s a suggestion, explain about passive globally diversified auto-rebalancing funds available direct, and direct them to the Which Money survey for the reviews.
Half of the adviser’s value is in behavioral coaching. Imagine that!
So, how did our adviser resolve the complaint? He quoted £500 per month for “financial planning services,” and the client accepted. He stood back and thought, “What if I could find more clients like that?”
What do clients really want? A Vanguard survey says empowerment. They want control, a plan, financial freedom. Deliver that!
How do you get there? Offer a non-intermediating financial planning service. Set up for £5,000, ongoing for £500 per month, and let the client choose if they want you to pick investments.
In the end, it’s about understanding what people want and delivering it without the smoke and mirrors. It’s about being real, being direct, and offering something that truly adds value.
Now, isn’t that a better way to do business?
Academy of Life Planning 