[Many mass-affluent clients are proud, but confused owners of a lot of “financial stuff.” Having been sold a collection of financial products over time through various advisors, they can be distracted by all these moveable pieces in their financial picture. Their financial portfolio can seem disparate and all over the place. The current standard experience in financial services for many of them is one of mass accumulation, not strategic integration.
This end result can be explained by the fact that most mass affluent clients have a number of different trusted advisors (accountant, lawyer, insurance agent, etc.) who rarely, or never, speak with one another. Consequently, the mass affluent may not receive the same attention to detail that high-net-worth (HNW) clients get. These advisors are not all on the same page in addressing client challenges and goals. There is a big need for someone to be the financial quarterback of the family.
The truth is the financial needs of the mass affluent family are not that different from a HNW family — just maybe a lesser degree of complexity and scale — and can be offered as a differentiated and valuable service by advisors in the form of a family office offering. As a strategic practice management decision, the family office offering structurally positions you as a central and most valued trusted advisor. But the million-dollar question is how do you do that? What steps do you take to position and implement this structure into your business? What strategic business model and tech choices do you make to quickly and efficiently adjust to this more competitive positioning?
This led us to new Institute member Russell Dow, a financial advisor and president of Dow Software LLC who innovated a way to address this need by creating a comprehensive software platform, Strad Professional 2.0—bringing the exclusive services of a traditional family office into financial professionals’ offices. The software provides a comprehensive view into a family’s financial picture and changing circumstances, allowing for greater strategic insight and collaborative decision making with the client’s other trusted advisors. Most importantly, this positions the financial advisor to become indispensable to clients by taking a more holistic approach with deeper engagement.]
Bill Hortz: As a financial advisor and a fintech entrepreneur, can you share with us your perspectives on the current advisor challenges you are focused on with your technology?
Russell Dow: Financial advisors face unrelenting competition from do-it-yourself (DIY) or robo offerings and discounters. Many of the new technologies and services for investors are aimed at displacing the advisor. Unfortunately, that can deprive the expanding number of mass affluent investors from a wealth of experience that capable advisors bring to the table.
By providing family office services, financial advisors can reposition themselves in the marketplace, significantly differentiating their practices from other offerings. Their value-add to clients is, then, much more focused on areas of expertise not well addressed by a robo platform or a discounter’s call center.
Hortz: What did you feel would be the most important components that had to be part of this software solution?
Dow: Optimal client outcomes typically require a comprehensive understanding of their circumstances, particularly as they change, and the coordination among various professionals such as the financial advisor and CPA or estate planning attorney. That is what ultra-wealthy families enjoy with their dedicated family offices. Addressing those communication and collaboration needs in a cost-effective, integrated, virtual family office platform was paramount in my tech design decisions.
The software gives advisors a better perspective of what is happening, can help discover unmet needs, and provide the potential for thoughtful integration of financial tools and strategies. This provides benefits not just to clients, but to all their advisors who can, by working together, now “see” family issues more clearly and have a deeper understanding of their challenges. Most importantly, there is a better ability of being more proactive versus reactive.
Hortz: Can you give us a few examples of how being a financial quarterback uniting a client’s team of advisors can be beneficial to your clients?
Dow: There are discrete life events in which, if a client receives comprehensive and timely advice, there can be opportunities for significantly improved outcomes. These might be the purchase or sale of a large asset, a house, for example, how best to pay or finance it? Or dealing with the sale of a closely held business. Knowing about a serious illness of a client that might lead to a death can highlight needs to shift assets to receive a step-up in cost basis, realize losses, and make IRA to Roth conversions. Knowing about the summer house, in whose name it is titled, its cost and likely disposition can be consequential. Those are all issues well outside the scope of simple portfolio management. They are events on which advisors can provide valuable input and bring in the attorney or tax advisor as appropriate.
Then there are persistent issues that, like a leaky faucet, are an unnecessary expense over time: a bad investment that should have been sold long ago or an unnecessary insurance policy, high interest costs on a loan or uncompetitive insurance premiums. If the advisor can see the whole picture, he can bring a second set of eyes to question issues that, otherwise, might go overlooked for too long.