Financial advisors may not want to admit it, but in some respects, our place in our clients’ lives is being challenged today in unprecedented ways. The Digital economy trend toward "disintermediation" is starting to take hold in our industry, with new robo-advisor offerings coming to market seemingly every other month. Meanwhile, there are signs younger investors are more likely to go the do-it-yourself route than to work with human advisors. Thus, many advisors are beginning to ask themselves a question they never thought they would encounter: What can I do that a machine can’t?
When you think about it, the answer is very powerful: Beyond the thoughtful guidance we provide our clients as they struggle with macro events like the 2008 crisis and micro-level challenges such as paying for college or retirement, flesh-and-blood financial advisors have an opportunity to help clients strengthen their lives and families by working with them to identify, reinforce and pass on the fundamental values that have helped them build their financial success.
This profound and important role goes beyond simple decisions about portfolio allocation or time horizons, and provides the clearest possible explanation for why financial advisors will continue to occupy a position of trust for clients in the years ahead.
Helping clients identify, strengthen and pass on their core values begins with the recognition that every financial decision contains teachable lessons that family members and other heirs can learn from. At my firm, one way we help clients understand and apply this concept is by walking them through what we call the “Family Quadrant” model.
The model is simple: Each quadrant represents one type of asset that we can leave behind to family members or other heirs:
1) Experience assets: These are assets that create a lasting memory or teach a guiding lesson. They can be as simple as going to a ballgame or family dinner together, or as epic as a vacation abroad.
2) Contribution assets: These are the assets and activities we allocate toward serving a greater good. These can include donations to charity, establishing a family donor-advised fund, paying taxes or pitching in at a soup kitchen or shelter.
3) Financial assets: The most obvious and talked-about asset category—but also, interestingly, the one most investors prioritize last when asked what they would like to leave to their heirs.
4) Core values: Defined as the area where all three of the other categories overlap. These are qualities, habits or aspirations that would explain, for example, what it means to be part of a client’s family, or that spell out their most cherished beliefs.
Keeping this decision-making approach simple, we tell clients that any major financial decision in their lives should contribute positively in each of these categories. Establishing a family foundation or donor-advised fund, for example, obviously qualifies as a contribution asset, but would need to be financially feasible and incorporate feedback from family members to be considered financial and experience assets.