The financial advice industry has changed for advisors with a fiduciary financial planning emphasis in their practice. These advisors have chosen process over product for the benefit of their clients. Additionally, new regulations, technology-enabled efficiencies, and fee compressions will continue to influence the advice industry. They could ultimately lead to higher client satisfaction and asset growth through relationship management. No longer is relationship management considered merely customer service; it has evolved into a crucial element of each client’s experience.
It takes time
Relationship management takes time but is enhanced when advisors implement the latest technology to help streamline the financial planning process and asset management aspects of their business. Advisors that provide advice, transparency, and convenience along with ‘soft skills,’ such as developing deep relationships with their clients, differentiate themselves from their competitors- both human and Robo.
Although the client ultimately determines the value of the advice they receive, the advisor must decide what benefit comes from the cost of managing that relationship. Both sides of the advice relationship need to be assessed to determine the benefits to each party.
According to a research report by David M. Blanchett, Ph.D., CFA, CFP®, and head of retirement research at Morningstar Investment Management published in April 2019, advisors that provide relationship management and asset management as part of their practice produce better results for their client’s portfolios than those advisors who leave relationship management out. ‘Transactional advisors’ do not provide their clients with relationship management. In addition, they only provide advice in hopes of producing a transaction and receiving payment.
Relationship Management Value Add
Relationship management is the ‘value-add’ of the advisor-client relationship. Which, when providing behavioral coaching, can add basis points of value for the client. Working with an advisor that understands your ‘pain points’ can help divert bad financial decisions. Assisting the client when the stock market declines or talk you out of making bad investments.
Relationship management technology will continue to enhance the advisor-client relationship by reducing time spent on administrative tasks and increasing time with clients. The use of technology translates to cost-savings to the client and advisors and helps increase the value of working with a financial advisor. The relationship building, processes, and planning for the benefit of the client is the legitimate value of financial advice that can’t easily be replaced by transactional investing.
These are the opinions of the author and not necessarily those of the Registered Investment Adviser or Broker/Dealer. They are for informational purposes only. Do not be construe or act upon these opinions as individualized investment advice.
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