Financial advisors have a new tool to help them assess their practices and to find ways to make improvements, according to Envestnet.
The Envestnet Intelligent Financial Life Advisor Practice test consists of a series of self-directed questions designed to show how involved advisors are with their clients and how effective they are at crafting services and products. The questions and white paper are free of charge.
“The assessment yields insights on how an advisor can deliver even greater value and achieve higher levels of client satisfaction to help them grow their practice,” said Envestnet, a wealth management technology company empowering advisors and financial services providers with solutions and intelligence to help them make financial wellness a reality for their clients.
Advisors who score well on the test questions “significantly outperform low-scoring peers in total client assets managed.” The test was developed because “clients increasingly seek holistic advice.”
“This is the first-ever interactive tool that connects the daily lives of advisors and their practices with the future lives of their clients,” Mary Ellen Dugan, chief marketing officer for Envestnet, said in an interview. “The scorecard let’s advisors see where they are performing well and where they might want to make improvements.”
The test was developed through a partnership with the financial services research and advisory firm Aite-Novarica Group. It asks a series of questions about the advisor’s practice and the services he or she provides. The test is accompanied by a white paper that suggests best practices and ways to make improvements.
“Our mission has always been to help advisors make sense of their clients’ overall financial picture and empower them to take the advice they give, and their practice to the next level,” Dugan said. “This assessment provides advisors with a way to understand how well they’re positioned to help clients navigate their complex financial lives through their day-to-day and more long-term financial decisions. By expanding their planning approach, advisors can help clients feel more secure in their ability to meet current and future financial obligations."
The white paper, “Taking the Measure of Advice: The Intelligent Financial Life Advisor Practice Score and How it Benefits Advisors’ Practices,” analyzes a range of advisor behaviors.
Envestnet said the questions and areas explored in the whitepaper include the following:
• Breadth of financial advice provided: Advisors who advise on a wide range of topics, including wealth transfer, tax planning, insurance planning, debt advisory, and cash-flow planning and budgeting, in addition to investing and retirement readiness, produced better outcomes for their clients than advisors whose advice was more narrowly focused.
• Frequency of multi-goal financial plans: The creation and implementation of comprehensive or multi-goal financial plans for their clients produced better outcomes than advisors who didn’t engage in formal plans, or who delivered plans to clients that addressed only one or two goals.
• Addressing the emotional side of money: Advisors who helped clients understand how their attitudes and behaviors towards money affect their ability to reach their goals, and make these issues a standard part of their practice, produced better outcomes than their counterparts who didn’t.
• Engaging spouses and other family members: The inclusion of clients’ spouses and other family members in meetings and conversations about financial goals tended to help advisors achieve better client outcomes.
• Breadth of capabilities on platform: Even if advisors don’t utilize the full range of technology capabilities available to them for crafting and implementing financial plans, just having them at their disposal was shown to help them improve client outcomes. For advisors, there is a high correlation between achieving a top Advisor Practice Score and managing more client assets.
Advisors can use the results this year as a baseline to compare their progress to in future years, Dugan said. Advisors who scored well on a practice test given previously had a higher share of clients’ wallets and added more new clients to their practices in the past year than those who scored lower, she added.
Advisors can use the results to push harder in areas where they fall short. “For instance, if an advisor is not offering the breadth of services he or she should, the advisor might want to concentrate on expanding services during the next year,” Dugan said. “The psychology of money is important, particularly in a challenging market. People trust a person over a digital advisor, but they also want technology” and this test can show them how to blend the two.