Have the Rules Changed?
Recently Advisor Perspectives posted an advice column by Beverly Flaxington, a practice management consultant who helps financial advisors. In this particular column, she was presented with a query from an advisor, H.D., who objected to the idea that advisors must understand their clients’ goals and values to best help them achieve their financial goals:
I’m a finance guy. I have a master’s in finance, I’m a CFA® and spent years working toward my CPA. I value my education and I am not trained to get people to open up and to get clients to talk about their values in a manner that correlates to good investment decisions.
Isn’t there a place for good, old-fashioned investment advice and creating portfolios to meet target rates to ensure clients have enough money for retirement and beyond?
Is there a place for old-fashioned investment advice? Probably. Is there enough demand for that to sustain a practice? The answer may not be a simple one.
Even in the best of times, it’s necessary to cultivate curiosity and a desire to continue learning in order to stay competitive within one’s chosen profession. Times change and client needs change along with them; understanding those needs is key to serving them.
These, however, are not the best of times. We live in unprecedented times, in fact; so much so that it seems like we hear that phrase on a weekly, if not daily, basis. One of the unprecedented events financial advisors must keep abreast of is the Great Resignation. More than 40 million Americans quit their jobs last year. Whether these were people leaving jobs for better ones, retiring early, or pursuing other pastimes entirely, drilling down into the reasons people are leaving their jobs is becoming increasingly important for financial advisors.
As David Dubofsky and Lyle Sussman on WealthManagement.com put it:
The impact of clients’ resignations on their financial plans and life plans depends on their vision for the future. It’s one thing to quit because a client has, or anticipates quickly having, a new job. It’s another thing to quit for an extended period. Also, advising a client who quits a job at age 35 will entail very different planning than advising a client who quits a few years before receiving Social Security.
Ultimately, the Great Resignation requires financial planners to hit a moving target. Financial plans reflect a time horizon and assumptions about a projected income stream. A client who quits a job severely tests these assumptions.
It is impractical to try to help a client plan their future without taking into account their vision of that future. Technically, an advisor’s responsibility is to advise their client on financial matters to the best of their ability. But how does one do that when looking at a client’s finances in a vacuum? How does one help a client prepare for retirement without knowing what they want to be capable of in retirement, and what their financial goals are?
As client needs change, so too does the definition of a financial advisor. As a client’s life becomes more inextricably tangled with their finances, the responsibility of the financial advisor to pay attention to that entanglement and account for it becomes more necessary.
The Great Resignation, along with Covid-19, has shifted the goalposts. People have re-evaluated many of their priorities, their financial priorities not the least among them. More people are coming to the conclusion that the money their jobs give them isn’t enough to keep them there, and money is becoming much less a motivating factor than living.
A strictly accumulation-based mindset isn’t enough for many clients these days; they want to know how to retire when they want to and live how they want to in retirement. A financial advisor who wishes to stick to what they know, advise on only purely financial matters, and manage their clients’ portfolios is certainly within their rights to do so. But, as with any profession, an unwillingness to adapt to an ever-changing world may wind up leaving such advisors without clients to advise.
