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Build Trust and Be Indispensable To Your Clients

Build Trust and Be Indispensable To Your Clients

Do your clients trust you? Do they think you are indispensable or an easily replaced commodity? We’re asking those questions in a spirit of helpfulness.

Trust and commoditization are among the securities industry’s greatest weaknesses and challenges. If clients do not trust you, if they think there’s nothing singular about you and your business, you have created nothing of lasting value.

No one likes discussing trust, but the issue is edging back onto the industry’s radar. Some media reports noted that Brett Kavanaugh, the president’s Supreme Court nominee, once ruled in favor of fiduciary standard for advisors. Requiring advisors to act in their client’s best interest now legally rests in peace, of course, but a Lazarus-like rebirth may be at hand.

Merrill Lynch launches fiduciary dashboard for advisers

Merrill Lynch, for example, recently launched a “Fiduciary Dashboard” for fee-based advisors. When accounts veer from the firm’s investment recommendations, advisors are electronically notified to complete a series of tasks, including contacting clients, to satisfy their fiduciary responsibility. Large cash deposits and changed market conditions also trigger electronic minders. The dashboard reportedly could be expanded to other account types.

What do successful advisors do that others don't? They build trust Click To Tweet

We’ll conjecture Merrill’s management is debating if the dashboard can ease burgeoning problems with the suitability standard that still defines most client relations. Each day, 10,000 Americans turn 65. Many people are living longer than expected. Most have saved too little for retirement, and almost no one has enough to pay for long-term healthcare. This means many people need almost anything but bonds to avoid outliving their money. Hence, the advisor community, and thus asset managers, are confronting unexpected regulatory challenges.

A Merrill broker, as we have shared in an earlier Risk & Return note, has an elderly client who is healthy and wealthy. She just deposited about $3 million into her account after selling jewelry. The broker wanted to sell puts on blue-chip stocks to buy stocks at lower prices, but he knew compliance would only approve buying bonds, which we all know is risky in a rising-rate environment. So, $3 million sits in cash, and this client, like many others in similar predicaments, is annoyed, and perhaps contemplating moving her account. To sidestep compliance issues that capture the letter of the law, but not the spirit, some older investors are adding their children to their accounts and giving them trading rights even though parents remain in charge. Brokerage leaders are likely cognizant of the paradox, for lack of a stronger word, their compliance departments have created.

Now, let us revisit issues of trust and indispensability. The obvious and natural way to build trust is doing what is right for your clients regardless of the regulatory environment. Yet, we also know clients have short memories, and that an advisor’s best ideas often become their ideas. An antidote to that predicament is using technology to show clients something they don’t know or could not access alone or with another advisor. Singular insights build and enhance trust, and also demonstrate indispensability. Risk management software, for example, helps make investing safer and less volatile, but many other technologies can help advisors address myriad needs. Find what works best for your business. If you do, you’ll be on the cutting edge of the advisory business, embracing the emerging “hybrid model” that blends digital wealth management with human advice.

To watch the panel discussion that inspired the chart, click here:

Will a hybrid make you happy?

Now, think about technology beyond functionality, and embrace your inner technologists. Think of technology as a tool that eases friction in people’s lives or businesses, while democratizing knowledge and empowering people. It has been said 10,000 hours of study or practice, or 417 days, are needed to master a skill. Few people have an extra 100 hours of free time. The pressures of life pull us in so many different directions that most of us struggle to balance work and life. And this is precisely where technology plays a pivotal role. Developments in software engineering and machine learning capture the 10,000 hours and more that is needed to master a skill and make that knowledge available to anyone. So, what do you need?

We have used technology to capture our experience to essentially create a desk-top “app” to help advisors and investors better manage risk to maximize reward. Now, non-institutional investors can manage portfolios like the market’s most sophisticated investors who watch investment risk throughout the market day. After the markets close, risk managers analyze portfolio exposures and adjust positions. This is a key reason why some institutions are consistently profitable, and many others struggle and ultimately return some or all of their unrealized profits. That eternal cycle fascinates us. You may have other interests, or pain points, so find solutions that helps you. If it doesn’t exist, create it.

To be sure, technology has closed many, if not all, of the informational gaps within markets, and now technology has begun closing the gaps between Wall Street and Main Street. This will create opportunities for some, and difficulties for many advisors who will be too slow to evolve. This story has played out again, and again, on the Street, and it always ends the same way. Anyone who shuns technology inevitably joins a long, once distinguished, ever growing line of people who were forcibly retired from the securities industry.

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Additional Advisor Resources

Bob Veres features StratiFi in ‘Inside Information’ February 2022 Edition

Bob asks, “Is it really possible that a portfolio risk assessment tool for wealth managers could be as sophisticated as the algorithms that institutional teams are using?”

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