First, we in the industry talk about working with specific demographics, whether it's professors, doctors, retirees or whatever. I couldn't understand why I didn't like that idea. I struggled for years about who's my niche or whether I wanted one.
Then I realized I had always had one, but that it's a psychographic niche, not demographic. I like and attract certain types of personalities. My clients consist of executives, small-business owners, surgeons/specialists and trustees/beneficiaries-whether retired or working. All are successful decisions makers in their everyday life.
I've subsequently re-engineered how I deliver advice. I've altered my writing style and tools to help my busy, decision-making clients make better decisions and save time. For example, advice is presented in executive-summary agendas. I attach supporting documentation in recap letters and visuals so the client has the details to refer to. I give clients the option to meet by phone or online to save them time.
Secondly, I confirmed why I'm really on my clients' payroll: to provide them with principled advice in a time of need and to advise their portfolio under a model of structure and discipline. These two services are what I define-and what my clients value-as financial planning.
I am concerned that the past 12 months has inspired a possible identity crisis for advisors. Obviously the focus this past year has been on investments, but I think some advisors are letting their clients define who they are rather than advisors taking a step back and reminding them what financial planning means, which is much more than just reactive investment advice.
For example, I've read that advisors want to include alternative investments in client portfolios in response to the crisis. Others are making radical allocation shifts in their portfolio models, offering no frame of reference as to why. It seems like a lot of alternative medicine is suddenly being practiced.
I want to practice clinical medicine, based on sound academic theory. I recognize some alternative medicine ultimately becomes the standard of care in clinical medicine, but that requires clinical "trials" before that occurs. Clinical trials of alternative medicine can lead to severe side effects. My clients didn't sign up for clinical trials.
Financial planning works. We should let financial planning drive the investment management process. I think advisors have to decide whether they want to be financial planners-which requires a lot more effort and probably requires a shift in how they're paid--or do they want to be just investment advisors. Everyone should ask themselves why they are on their clients' payroll.
Ultimately, we all have to accept the fact that financial and investment planning are soft sciences. We have to be open to new insights but to couple that with experienced intuition so we can serve our clients well in any environment whether it's calm or crisis.
Jennifer Cray, partner at Investor's Capital Management LLC, Menlo Park, Calif.
Years to come, I think a lot of discussions with clients will refer back to this period as their touchstone, much like the Great Depression was. The Great Recession won't change the substance of what I say, but it will probably change what I emphasize. I haven't figured out yet what that'll be because I haven't taken on any new clients during this period-because I've been busy with my existing clients. But I think with new clients it will be a different type of first meeting in terms of what we talk about. I always ask clients during our first meeting to tell me what's on their mind, and I try not to talk about investments right away because I find other issues are more urgent, such as insurance and estate planning. But I think investments will be front and center for a very long time.