A few months ago I had the privilege of attending a weekend retreat sponsored by Money Quotient (moneyquotient.org), a non-profit organization focused on assisting financial advisors to take a life-centered approach to financial planning.
My visit opened my eyes to the possibility that financial advisors don’t need to concentrate entirely on their client’s rates of return, asset allocation and retirement income targets to succeed. They can actually work with a client to discover their values and priorities and create a financial plan aligned with their life goals.
You may have noticed that a number of so-called robo-advisors are popping everywhere. They claim that they can manage your money effectively using computer algorithms. All you have to do is complete their simple questionnaire and transfer your funds to them. For a fraction of the cost of traditional advisors, firms such as Betterment (www.betterment.com) and Wealthfront (www.wealthfront.com) will select a portfolio for you and manage it daily using tax-efficient strategies with their computers.
Many of the major firms such as Schwab, Vanguard and Fidelity are now offering these low-cost services to be competitive (Schwab’s service is free).
Investment management is now becoming a commodity.
So now is the time to ask yourself a simple question, “What is your financial advisor doing for you?” Is he/she just managing your money? Or are they providing other services to meet your needs? Financial services industry consultant, Bob Veres, in his new book, The New Profession, has predicted that the traditional financial advisor who focuses his practice on building assets under management and charging a fee based on the total may soon start to lose market share.
Veres states that “Professional Financial Planning is reaching the evolutionary stage where the individuals who genuinely care for and about their clients are capturing the public’s mindshare and market share.” In the future, your financial advisor may look more like a financial coach or financial therapist.
In recent advertising, the Hartford Funds took out a two-page ad describing their support of financial therapists. They state,” A new kind of financial advisor is helping couples deal with issues that bridge the interpersonal and financial spheres.” In the ad the Hartford states that “we believe in something we call human-centric investing, an approach that seeks a deeper understanding of investors and how emotions, experiences, life stage and psychology affect their views of investing and financial advisors.”
If you are looking strictly for an investment manager, perhaps the robo-advisors will best meet your needs. Or at least you will be able to reduce the costs of your investment management fees if you approach your existing advisor. But if your are looking for a more comprehensive partner who will integrate your investments with the rest of your life, it is time to look carefully at what your advisor is doing for you.
Perhaps, as Money Quotient states, it is time to look for an advisor who is “putting money in the context of life.”