Financial advisors may be the victims of their own success.
Being really good at advising clients on their financial needs and goals may leave little time for them to actually run the business of a firm, according to Mary Mock, senior vice president and head of distribution at Touchstone Investments.
“Advisors usually are not trained in organizing and running a business,” Mock said in an interview. As they become more successful at being advisors and attract more clients, they may have little time or talent left over to actually run a growing business that is part of a constantly evolving industry, she added.
Mock has been involved in the financial industry for more than 20 years and has held leadership roles in the male-dominated industry at wirehouses, at banks, and in the independent RIA channel. As director of recruiting for Touchstone’s parent company, Western & Southern Financial Group, she has searched for new talent and helped to build the next generation of financial leaders.
She also advises firms on how to oversee the operation of a growing business.
“Running a business boils down to time constraints,” Mock said. “Advisors can be delivering a great experience to clients but fail to devote enough time to the business itself.” This is an error advisors have to be aware of and fight against in order to be successful.
“At the same time, the advisors have to make time to have proactive conversations with clients, especially when the market is misbehaving,” she said.
The next part of success for the firm and its clients is to make sure both are focused on the long term. “Advisors can be so busy getting through their ‘punch list’ for the day that they forget about the long term for themselves. They are not thinking five years down the road,” Mock said.
“Advisors have to be thoughtful about how they grow and not just add clients and advisors for the sake of growth alone,” she added. In some cases, she said, a firm may want to shrink in order to concentrate on its core clients and services, which can promote growth in the long term. “The firm owners should ask themselves where they want to be in five years.”
Bad times in the market, whether it’s 2008’s market or today’s, can present unique opportunities for advisors to obtain new clients. Clients may be discouraged about the market or frightened. By having proactive conversations with them and revisiting their portfolios, advisors can offer reassurance and make the clients more loyal.
Mock said now is a good time to review clients’ risk tolerance and reassure them that there is a place for all types of financial products and both active and passive management “to cope with different market stages.”
“There also are dangers to an up-market,” she added, “because both advisors and clients can get complacent and not take an active enough role in managing the portfolio.”
Touchstone has introduced six active ETFs and will soon introduce a seventh to take advantage of current market opportunities.
Touchstone’s outlook is that the economy will enjoy a soft landing rather than a recession, and the firm says advisors and investors should align their portfolios accordingly. Mock said portfolios should take into account increased risks from global turmoil and interest rates.
“Clients are reducing risk, and firms should also. We are focusing on the opportunities that exist,” Mock said. “A successful practice will focus on their overall long-term strategy and vision, as well as the opportunities presented in the short term.”