In recent years, by providing clients with the tools and research that make them feel they have complete control over their own financial planning, online brokerage firms have been winning greater wallet-share. Supported by combined advertising budgets in the billion dollar range, the message that wealth management is so easy that “a baby can do it” is increasingly striking a nerve with investors.
The strategy that self-directed platforms are using is clear: devalue the advisor and create the illusion that investors can achieve financial goals on their own without paying an advisor. In essence, these platforms claim that technology can do all the heavy-lifting. Because fee-conscious investors find such a prospect quite seductive, advisors must now act decisively to protect the economic health of their practices.
Advisors manage more than wealth; they manage relationships. Relationships they have built on a foundation of trust and accountability, not on a self-directed Web site. Indeed, the information made available by online brokerage firms is meaningless without the rich context and extensive knowledge experienced advisors can provide.
Accordingly, such advisors must find ways to authenticate and demonstrate their value so that their clients feel good about the fees they pay for services that a self-directed investment platform cannot supply. Advisors must point to the advantages they offer, stressing and demonstrating how they interpret research in light of specific clients’ goals and risk tolerance, examine and evaluate financial alternatives, and guide the decision-making process.
An advisor’s real value simply cannot be expressed in a one-dimensional fee structure. With decades of experience guiding hundreds of clients through all market cycles, including things like the dot-com bubble, real estate market swings, inflation and fluctuating interest rates, a seasoned advisor (the average age of a financial advisor is 57) is perfectly positioned to explain how these market shifts affect a client’s financial goals and keep that client focused on the long-term financial picture.
Experienced advisors can also analyze trends, decisions and family experiences of a broad range of clients to apply their collective knowledge to each individual client’s portfolio. Clients using a self-directed platform to view their portfolios do not have this wide-angle lens.
Advisors who also combine digital engagement with personal service have a special advantage. By providing clients with technology that allows them to learn, and to test and validate their assumptions, thereby gaining more control in their financial lives, the advisor increases clients’ confidence and secures their loyalty.
The fact remains: Investors are increasingly questioning the expense of working with an experienced financial advisor when a cheaper alternative looks available. Advisors must aggressively refute the notion that achieving financial goals is as simple as “following a green line.” Indeed, once the road starts twisting, clients need an advisor to whom they can turn for help. Clients seek skilled service and personalized perspective on their financial goals---comprehensive and experienced advice that they simply cannot get anywhere else. Advisors’ credibility ---and their prosperity--- will be threatened if they allow clients to embrace the superficial notion that cheaper is better in the long run.
Edmond Walters was a financial advisor for 18 years before founding eMoney Advisor, where he serves as chief executive officer. eMoney is the only wealth-planning system for financial advisors that offers transparency, security, mobile access and superior organization for everything that impacts their clients’ financial lives.