FPA Baltimore

The Critical Error This Industry Is Making

Tim Welsh, president of Nexus Strategy, says the five mega trends impacting the advisory space are: the growth and evolution of the U.S. wealth market, the fiduciary standard, the evolution of digital advice, the aging of human advisors and the movement to independence. Many advisors fear these trends, but those who have been making a critical error should fear them the most. Advisors who spend the majority of their time managing money, rather than with clients, are making a mistake, said Kevin Knull, president of MoneyGuidePro.

“You should be spending all of your time talking with your clients,” Knull said.

Financial planning is the key to growth in this industry going forward, Knull said, speaking on a panel at the Financial Planning Association’s annual conference in Baltimore. Advisors should focus on answering such client questions as, “With the markets down, can I retire?” or “Can I send my kids to college?”

“These are the questions we’re not answering for our clients well enough,” Knull said.

One of the big mega trends discussed by the panel was the rise of robo advisors, and whether such tools as Wealthfront and Betterment will supplant flesh-and-blood advisors.

Knull admits that robo advisors have been good for this industry. “Our industry was a dinosaur, and we needed to upgrade our systems,” he said.

But, at the same time, a computer can’t provide therapy. The advisor is there to make sure the client doesn’t do anything stupid with their money and to help them through difficult financial situations.

“There’s no substitute for you talking to your clients,” he said.

Linda Ding, a financial program strategist for Laserfiche, said she understands why a robo would be appealing to millennials.  

“It’s easy, it’s successful and it’s free,” she said. “But what’s missing is the human touch.”

She cited a Gallup poll that found investors are still looking for a relationship with an advisor.

Advisors can make more time for clients to talk about their goals by automating their back-office operations, Ding added.

The Department of Labor’s recent fiduciary rule is another mega trend facing advisors. As the April 2017 implementation date draws near, many in the industry are worried about its impact on their practice. Knull has a different perspective.

“These regulations could be the greatest thing to happen to financial planners.”

The rule provides advisors with a reason to say to clients, “I need to see all your accounts.” Knull predicts that more money will move from one advisor to another in the next seven months than ever before because of the DOL rule.

“You may be the benefactor, or you may not appreciate what happens,” he said. 

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