The Rise of Non-Traditional Advice
Erin Colledge – 06/03/2021
Giving holistic and high-quality advice is both difficult and time-consuming. Plus, the next generation of investors are more in tune with their finances and the availability of investment options. This means G2 advisors are also faced with increased expectations. Fortunately, help is here.
There’s an ongoing debate on whether financial advisors should act more like life coaches and psychologists. From my perspective, it is much easier to be a financial advisor if the client first grounds themselves in who they are and what really matters to them. At the onset of a relationship, deep conversation that surfaces values, habits, and goals will help shape a conscious client who realizes that most of the responsibility and pressure is on them, not the advisor. Yes, this is a bigger time investment upfront, but it can put the rest of the relationship on autopilot.
One of my favorite questions an advisor can ask before providing financial advice is, “out of all the spending you do, what categories give you the most happiness?” The response can be revealing when travel, entertainment, and food are cited; however, in actuality, the bulk of their spending is on cars, boats, country club memberships, landscaping, watches, and clothes. Many people don’t consciously realize what a large percentage of their income is spent trying to impress other people, and it’s often something they reflect on with regret later in life. Helping someone become more self-aware of this can be a great gift.
Most people also have certain hang-ups that are standing in the way, or slowing down, their progress towards financial stability. We’ve all heard, and maybe even made, blanket statements in a family discussion around the dinner table. And, financial advisors know these misconceptions all too well. The examples are abundant:
- “I will never lease a car again.”
- “As long as I keep my credit card debt under $15k I should be fine.”
- “I need to pay off my mortgage by the time I’m 60.”
- “Pre-paid college is a rip-off.”
- “ARMs are way too risky.”
- “I’m not buying anything that I will owe more taxes on.”
Traditional investment strategies - focusing on risk, low expenses, and tax implications - are becoming easier and more automated every day. The real risks, of course, lie in client behavior. Whether the client is acting on misconceptions or is out of tune with what success looks like for them, it will lead to poor choices. However, some may ask whether misinformed conviction is better than having no absolutes at all. A pragmatic advisor would likely say that a false sense of security is no security at all. A psychologist may not always agree.
Income-producing investments such as rental property or business ownership are interesting non-traditional verticals. These areas of interest for end clients can be blind spots for advisors. How does the ROI compare to things like annuities or municipal bonds? The risk profile is likely different, but maybe there is also some personal fulfillment value related to business ownership? Running a side business can also be a great transition from full-time work into retirement. Qualified advice can be critical here, but often hard to value under a traditional model.
Getting clarity on these topics takes time and effort. Financial advisors need to take misguided emotion out of the equation and replace it with constructive emotion. A great coach knows how to turn constant worry into small accomplishments and wins that gradually lead to more confidence and stability. I believe in establishing and committing to an ongoing process where many micro-decisions lead to macro success. The problem is time.
How will the G2 advisor have time to really get to know each new client, while also keeping up with all the changes in the lives of current clients? It’s a huge ask. Technology has to help here. A doctor can’t test someone’s blood sugar every day, so a wearable monitor with alert capability was invented. Similarly, technology can help the advisor keep up and be proactive by educating, reminding, exciting, reinforcing - or even preventing behaviors in some cases.
That’s why the Black Diamond® Wealth Platform equips advisors with the tools needed to provide clients with holistic advice – at scale. By leveraging the Client Experience portal, advisors can offer clients anytime access to a comprehensive and personalized financial hub. While traditional portfolio investing metrics are on prominent display, the portal is also designed to help showcase the total value of the advisor with features like:
- An interactive web feed, called Timeline, where a client and their entire financial team can create a personal, ongoing dialogue around financial plans, goal progress, news articles, and more.
- A collaborative account-aggregated balance sheet that unites all assets and liabilities so clients can clearly see net worth – often revealing a value-add opportunity for advisors to help more and deepen the relationship.
- Outside aggregation that empowers clients to add and manage all of their accounts in one place.
- Advisor-managed alternative investments shown through an easy-to-read card and featured in advisor-generated reports.
Black Diamond also provides advisors direct, integrated access to the Advent Insurance Marketplace Powered by DPL where they can present clients with beneficial commission-free annuities and insurance products. It includes discovery tools, comparison calculators, and native reporting capabilities that help incorporate the policies into clients’ financial reports.
Looking forward, the Black Diamond team will continue to expand by diving into non-traditional concepts that elevate an advisor’s total offering without added workflow complexity. This way, advisors can easily leverage tools that support the many avenues of holistic wealth advice.
Black Diamond’s enhancement approach is driven by direct input from the advisor community, and we’d love to hear from you. We invite you to learn more, and provide your input by requesting a personalized demo today.